Wealth Check: Can a British actor pay for his American dream?

The Patient

Budding British actor Tom Shepherd wants to showcase his acting abilities before America's top casting agents during next year's "pilot season" of television shows. To do this, he must raise £1,500 to fund a business trip to the heart of the entertainment world, Los Angeles.

The 27-year-old from Great Yarmouth, Norfolk, who now lives in Streatham, south-east London, will have to cover the cost of flights, accommodation, a showreel and photographic headshots if he is to stand a chance of earning a place on the popular audition rotas that proliferate during the period of the year when US broadcast networks cast for prospective TV shows.

He may not fit the obvious thespian mould, having done his first degree in mathematics at Bristol University, but the ambitious actor has already built an impressive repertoire of acting credits as well as a postgraduate diploma in acting from the prestigious Royal Welsh College of Music and Drama. Last month he starred in the critically acclaimed production of Oliver Goldsmith's comedy of manners She Stoops to Conquer, in Hoxton Hall, London, and this year he has landed TV and commercial roles that have cut across genres from comedy to classical texts.

As a self-employed person, Mr Shepherd currently earns £19,000 per year, with £6,000 coming from acting work and the remaining £13,000 from non-acting work such as maths tuition. He rents a shared flat for £466 per month, and has outgoing expenditure of £466 covering food, travel, entertainment, bills, listing in the casting directory Spotlight and other acting-related fees.

He has £300 in savings and a £1,100 credit-card debt on top of his £17,000 student loan and £1,550 overdraft.

While Mr Shepherd has limited savings, he is fortunate in that he has no major financial commitments, with no dependents and no mortgage to repay. As the amount of money he must save is relatively small, he stands a good chance of being able to afford the potentially career-making trip that he has dreamed of.

The cure

Getting to LA

Olivia Bowen, certified financial planner at the Manchester-based Gaeia Partnership, says Mr Shepherd may have to cut back during the traditionally indulgent festive season if he is to save the requisite amount in time for February.

"Judging by Tom's outgoings it does not seem reasonable to recommend significant cost-cutting from his budget, though, perhaps, with discipline, £50 per month can be found through careful budgeting. There is still a £350 per month funding gap and this will reasonably be met only if Tom increases the hours he spends tutoring or takes on other employment to supplement his income. He can increase the size of his savings by depositing the funds in a cash ISA with interest paid monthly and a low minimum entry level. C&G currently offers one with 2.67 per cent APR."

Ms Bowen says increasing his debts should be a last resort and he should ensure he has exhausted all options before he considers this route.

"As this is an investment in Thomas's future he may feel it is appropriate to approach family for assistance, if this is an option."

Repaying loans

While it is likely Mr Shepherd will be able to accumulate enough to make his trip to California, it may take him longer to wipe out his existing debts. Ms Bowen recommends he tackles the debt with the highest rate of interest first to avoid it getting out of control.

"The debt on Tom's credit card should be prioritised, as the basic NatWest rate is 19.9 per cent APR. He should look into transferring the balance to another card which, after an initial fee – usually about 3 per cent – will give him an interest-rate holiday, typically for about 18 months, in which time he should aim to pay off this balance," she advises.

"To be debt free on his credit card and overdraft by this time next year, Tom will have to make repayments at a rate of about £250 per month. To confidently achieve this he should aim to boost his income by about £200 per month to allow for contingency in his budget."

As his student loan carries interest aligned with inflation, the value of this debt will remain in real terms. Ms Bowen says this will minimise the likelihood of him defaulting, meaning he can tackle this after the credit card and overdrafts have been cleared.

Preparing for the future

Like many people in their twenties, Mr Shepherd hasn't begun saving into a pension, but Ian Hudson, principal of Salisbury-based independent financial planning firm Hudson Green & Associates, says he will miss a trick if he ignores it any longer. "Tom is taking a big risk with his retirement plans if he does not take them seriously now," he says. "Every year that he procrastinates from making pension provision will likely mean his entire retirement will be spent making sacrifices on his comfort. The sooner Mr Shepherd takes control of his pension provision, the easier it will be to generate a retirement fund which provides a comfortable period in old age."

Mr Hudson says that if Mr Shepherd begins saving £100 per month (£80 contribution, £20 tax relief) now, his pension fund could be valued at £172,000 by the time he is aged 65, yielding a tax-free cash sum of £43,000 with an ongoing pension of nearly £11,000 per annum.

If, however, Tom were to wait five years before starting his pension, the picture will look less rosy, Mr Hudson says. "His fund would only be worth £121,000, some 30 per cent less than had he started now, impacting his tax-free cash and pension in the same proportion."

Protecting against unforeseen events

As a self-employed person, Mr Shepherd's work status could benefit from some protection in the event that he finds himself unable to work for a prolonged period. Kiran Shah, director of Stanmore-based financial planning firm Lotus Benefit Consultants, says there are various options on the plate for him.

"As a self-employed person, Tom should consider accident, sickness and unemployment (ASU) insurance which pays out a specific monthly benefit after a given deferred period, for between 12 and 24 months," says Mr Shah. "This cover is very important as Tom's employment terms are more likely to be on contract, and therefore if he is unable to earn a living due to accident or long-term sickness, he will not get paid."

Mr Shah recommends setting the default period – the period at the start of the claim for which benefit will not be paid – at four weeks, if Mr Shepherd can afford the premiums, because his savings are quite small and unlikely to cover his monthly rent and bills.

"I would suggest applying for a monthly benefit of £700 as this would be sufficient to cover Tom's rent, bills, food and acting insurance fees. This equates to approximately 65 per cent of his gross salary, which is normally the maximum benefit possible."

For his trip to Los Angeles, Mr Shah says Tom should consider purchasing travel insurance. "As Tom is on a tight budget, the main cover should include cover for sickness, hospitalisation and repatriation during his time abroad. This market has become very competitive, and he should contact his trade body to see if they have negotiated any special packages for their members. There are cash-plan policies that are also available. The main advantage is that the premiums are very low, but the draw back is that cover is limited."

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Write to Julian Knight at the Independent on Sunday, 2 Derry Street, London W8 5HF

j.knight@independent.co.uk