Money Makeover ‘At 29, my dream is to be free of debt. But is it possible?’

A young couple with a £500,000 mortgage and £44,000 student loan plan their financial future. By Madeleine Ross

Ahead of her 30th birthday in a few weeks’ time, Lottie Behardien has been re-evaluating her financial position. She’s recently moved into a £ 500,000 four- bedroom house with her partner. They sold their respective homes and used £75,000 as a deposit, leaving them with a nest egg of £80,000 to spend as they choose.

Currently, they have stashed £20,000 away in an Isa, but the couple are struggling to work out what to do with the rest of their money.

The couple’s monthly post- tax income works out at approximately £3,000, and because Ms Behardien ported over her 1.5pc mortgage to the new house, that rate won’t run out until October 2025.

But her mortgage payments jumped from £ 500 a month to £ 1,800 and she is worried about how much more they will rise. She said: “That’s something in the back of our minds thinking critically, how do we prepare for that?”

The couple also pay £600 a month towards their car, which they have leased as a Personal Contract Purchase ( PCP). The contract will run out in three years, with a balloon payment of £40,000 at the end.

She has £44,000 of student debt, having graduated in 2016, and doesn’t know if it would be worth paying this off. The couple are both enrolled with their employers’ pension schemes, and both of them currently work from home.

Ms Behardien said she didn’t know what to use the money for, but wanted to try to become debt-free.

She said: “Being debt-free would be fantastic. Being without a mortgage, without a student loan.

“It’s an amazing dream but I don’t feel like it’s achievable today. So for us, it’s about thinking, ‘ How do we balance these things?’”

Monthly loan for car which will run out in three years, with a final balloon payment of £40,000

The couple have this amount of cash and have put £20,000 in an Isa. However, they are unsure what to do with the rest

Edmund Hastie

Financial planner at Quilter

Lottie’s desire to achieve debt- free living is a noble goal but not all debt is made equally and it is crucial to tackle high-yield debts first and then allocate savings smartly.

Lottie’s financial journey, like many of ours, is a balance of strategic investments, timely debt repayments, and planning for the future.

While Lottie’s income is bound to rise, making her eligible for student loan repayments, addressing this debt might not be the immediate priority. Given that what you pay is charged as a percentage on what you earn over the threshold you will still not have to pay that much back each month and investments or debt repayments might offer better financial returns.

The car debt, despite its low interest, stands out as a high monthly outgoing of £ 600 per month given their joint income. However, as they are locked into a PCP loan this is likely something they are going to have to stomach for the time being.

By the end of the deal, family planning might have become a priority or reality and achieving lower monthly costs will be important. Therefore, opting for a less expensive car finance deal or getting a cheaper second-hand car may end up being their best course of action.

Their decision to invest £20,000 in an Isa is astute, but with two individuals in the picture, Lottie might consider maximising their tax benefits. She could use her partner’s £20,000 Isa allowance too, doubling their taxfree growth and income. This would mean that half of the £ 80,000 cash they have spare will be inside tax efficient wrappers.

She could of course also opt to make a large contribution to a pension but this does mean locking the money away until later in life and with a

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telegraph.co.uk/ moneynewsletter family on the horizon this may not be palatable. Similarly, given the current unpredictable market dynamics and the couple’s potential family plans, long- term investments might not be the best route.

Instead, Lottie and her partner can consider investing the remaining amount in National Savings & Investments Premium Bonds.

Lastly, as homeowners of a decent sized property, the couple might think about enhancing its value.

Strategic improvements, such as renovating the kitchen or bathroom, or redecorating and refurbishing, can boost a property’s worth and when the time comes to remortgage, they might find their monthly repayments reduced as its value has increased, freeing up funds for their burgeoning family. They could end up saving as much as £ 200 extra monthly, which might not cover all family expenses but is a step in the right direction.

Neil Rayner

Head of advice at True Potential

If Lottie wants to become debt-free, the first thing to consider would be to understand how much money she and her partner are likely to earn over the next 10 to 15 years.

If Lottie and her partner are going to become high earners, then it would be more prudent to pay off the student loan debt as the interest rate of more than 7pc would not realistically get near the savings rates offered in the short term by current cash rates on the high street.

If they are not going to become high earners, paying this from net disposable

If you’d like to be considered, please email money@ telegraph.co.uk with the subject line “Give me a Money Makeover” and provide the following information:

Your name, age and telephone number (we will not share this with anyone)

Your main financial goals (in as much detail as possible please), details of any debts (including mortgages) and how you would describe your attitude to investment risk

Current investments, including cash, property and pensions.

You must be willing to be photographed for the article. income also looks achievable with post-tax income of £3,000. However, this is dependent on their current level of expenditure, which has been potentially reduced by working from home. Saving on daily travel and expensive fuel prices would lower their outgoings.

Their current mortgage rate of 1.5pc looks extremely low now but with a renewal after two years, there is a strong likelihood that this rate will increase.

It is unlikely that mortgage rates will lower back to around 1.5pc and this could mean a substantial rise in their monthly mortgage payments.

Paying down current student loans and car debt will not only reduce outgoings but will free up more available funds for mortgage payments that are likely to increase in the future.