In the first This is Money Diaries, we speak to a 28 year old on £25k a year living in London

This is Money has launched a ‘money diaries’ series to reveal the spending habits, along with financial goals and worries, of ordinary people aged 18-35.

We will look under the financial bonnet and analyse spending habits over the course of a typical month, followed by tips on what they can do to achieve a brighter financial future.

The series is written by Grace Gausden, who offers tips and general guidance to our readers that draw on the rest of the This is Money team’s knowledge and experience. We will also speak to financial experts to ask their professional advice when we feel it is needed. 

In the first of our series, we speak to a 28-year-old from London, working as a junior specialist at an auction house, on a decent salary but struggling to save for a home.

She reveals her worries about not being able to fully enjoy living in a city, what her biggest financial fears are, and what she hopes she can achieve in the future.

It can be a challenge to save money whilst also enjoying living in a city that can cost so much

The Government promises to top up 25 per cent of whatever you put in to your Lifetime Isa, up to £4,000 per year.

So, if you put in £4,000, drip-fed over the year, you’d get a £1,000 bonus at the end of it.    

You say you can save roughly £300 a month towards buying a home – £4,000 split over 12 months is £333. 

With the savings from switching internet, cutting down on fancy cheese and diverting some of your current savings, you can hit this target. 

And your partner could use their Lifetime Isa too. So £8,000 saved between the two of you in a year turns into £10,000. Then, £16,000 saved in two years turns into £20,000. Just make sure you drip feed this accounts and stick with it. 

The Lifetime Isa comes with a caveat though, you can only withdraw the money in it with your bonus intact if you are either buying your first home, or over 60. If you don’t meet those criteria, you will lose 25 per cent of the amount you have withdrawn. 

Lifetime Isas come into two forms, cash and investment, similar to your existing stocks and shares Isa. 

Investing into one of these Isas can be a good idea if you can think long-term and already have a solid rainy day fund safe in cash savings, as the stock market has historically offered the best chance of inflation-beating returns. You must be aware though that investing involves risk and if markets fall or investments go wrong, you may end up with less than you put in.

You already have £5,600 in your savings account and £2,516 in your stocks and shares Isa so that means you already have £8,116 – nearly half of what you need for your deposit.   

Understandably, it can be difficult to save as much as you would like when living in London, as everything is so expensive, but continuing to put a portion of your monthly wage into savings is the best way to start. 

Pension

You say you pay in £50 per month into your pension, with your employer matching it.

This may not sound much, but it actually works out at £112.50 per month, as your employer matches your £50 and you get £12.50 from the 25 per cent uplift of basic rate pension tax relief. Essentially, that’s a £62.50 free money boost per month.  

Hopefully you’ll have pay rises in the near future which help boost your contributions further – time is on your side. 

It can be helpful to use our pension calculator to give you a rough indication as to how much your pot will grow over the years, allowing for inflation and wage increases, or our long-term saving and investing calculator.

It’s worth remembering that if you increase your pension contributions by just one per cent, for instance from three per cent of your salary each year to four per cent, you can expect to have a 33 per cent bigger pension pot by the time you retire, figures show.  

Savings account 

You should switch savings account – 0.1 per cent is far too low. You can get a rate of two per cent or more simply by fixing for a year, earning potentially hundreds more in interest. Even the best easy access deals pay 1.5 per cent.

Take a look at our independent best buy tables for inspiration.  

Stocks & shares Isa

Having a stocks and shares Isa with a low risk factor can be a good product to hold.

It might be worth diverting some of your savings into it, especially while your rate is just 0.1 per cent – but remember, the Lifetime Isa is essentially offering you a 25 per cent guaranteed baseline return, so as mentioned above it may be worth filling that first. 

You mention you find it difficult to understand how to use your stocks and shares Isa app.

If continuing to use this investment platform, it would be worth speaking to your investment company and ask for some advice about exactly how to navigate it so that you are completely sure what you are doing. 

You need to do some more digging to find out exactly what you are invested in and whether it suits you. 

By balancing these payments, you should find that you are saving more towards your immediate goals i.e. buying a house. 

The above is not financial advice, but some tips for what our diary writer could do to achieve the goals mentioned.