Wealth Check

The patient

Victoria Shortt, 26, wants to take time out to go travelling, but at £18,000 in debt, she risks sinking further into the red.

Alongside £10,000 in student loans, she owes £2,000 on an Egg credit card with interest charged at 18.9 per cent; £2,000 on a Barclaycard at 14.9 per cent; and £2,000 on a Morgan Stanley credit card at 16.9 per cent. "I've tried transferring to cards with interest-free periods but my applications were turned down," she says.

She hopes to take the Trans-Siberian Railway from Moscow to Shanghai on a three- to six-month trip costing around £3,000, and admits she will probably take out another credit card to help fund this. "But I want to pay off my other debts first."

Victoria also pays £370 a month for a £2,200 personal loan with NatWest at an annual percentage rate (APR) of 8.9 per cent. "This was taken out to consolidate previous credit card debts."

A marketing consultant earning around £35,000 a year, Victoria would like to save towards getting on the property ladder, but has yet to start.

She rents a room for £540 a month in a three-bed flat in Wimbledon, south-west London. "If I bought, it would definitely be outside the city."

She is not contributing to a pension plan and has no protection policies.

The cure

She needs to slash her spending and take control of her finances, agree our panel of independent financial advisers (IFAs). Getting out of the red is the priority and travel plans should be put on hold.

Debt

Victoria should use as much of her monthly disposable income as possible to cut her debts, starting with the Egg card, which charges the most interest.

"She should cut the cards up as they are the most expensive form of borrowing, and certainly not use them to fund travelling," says Anna Bowes from IFA Chase de Vere.

Once Victoria has dealt with her card debt, she should try to clear her NatWest loan as fast as possible, says Chris Wicks from IFA Alexander Beard Group.

The rate of interest on student loans is 2.4 per cent (though it is set to rise later this year), and she can continue paying this low-cost debt off gradually.

Savings/investments

Once Victoria feels her debts are under control, she needs to start building up funds. She could look for a tax-free mini cash individual savings account (ISA) offering a competitive rate, says Ms Bowes, "but she must be tough with herself and not spend the money."

Property

When she is in a better financial position, she should look to save a deposit of at least 5 per cent of a property's purchase price, says Mr Wicks. "This will get her a far more competitive rate than if she opted for a 100 per cent mortgage."

On a £40,000 income, a 95 per cent mortgage of £160,000 could be attainable, says Simon Webster from IFA Facts and Figures Financial Planners.

She could also consider buying a home with her parents as guarantors, says Ms Bowes.

"And if she goes travelling, she may be able to rent out the property so the mortgage is always paid."

Retirement

Victoria should find out if her employer runs an occupational pension plan and if it will make contributions on her behalf, says Mr Webster. If not, she could set up her own stakeholder pension. "These have low charges, and there is usually a good range of funds."

Protection

As Victoria has no dependants, she has no need to take out life insurance.

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