Third, ideally Melissa would resume saving into a pension, even if she can only pay in a relatively small amount each month. These contributions could be made from the business and is a tax-efficient way for the business to pass on profits to directors. 

Depending on the terms and conditions around her legacy £5,000 workplace pot, she may be able to contribute to that plan, or it may be sensible to start a new plan. She may also look to consider the consolidation of these two plans if this was deemed suitable.

Finally, with regard to her business and how she pays herself, we’d recommend Melissa makes sure she is doing so in the most tax-efficient way. This might mean using a combination of dividends and salary, in order to use both personal allowances – that for income tax and that for dividends.

Karen Noye, mortgage expert at Quilter: 

Melissa is aiming to move up the property ladder. She currently draws a modest salary of £1,600 to £1,800 per month from her successful property matching business, living with expenses of around £1,400 monthly. 

Despite her business success, her personal take-home pay is relatively low, although this a common scenario for self-employed individuals prioritising business growth over personal income, and may also top-up income with dividends.

Melissa aims to buy a house priced between £450,000 to £500,000. Her current salary might not support the mortgage she would need to obtain that. 

However, for entrepreneurs like Melissa, some lenders consider retained profits in the business when assessing loan affordability. 

This is a relatively niche part of the market and it’s advisable that she seeks help from a mortgage adviser that specialises in self-employed applications to maximise how much she can borrow.

This is because her finances are tight, with only £3,000 in savings, alongside £30,000 of student debt and £4,000 on credit cards. These factors will be considered in her mortgage application, affecting her borrowing potential.

The key to Melissa’s property ambitions might lie in the equity of her current flat, purchased for £138,000 in 2017 with £111,000 remaining on the mortgage. If the flat’s value has increased, the equity could serve as a deposit for her next house.

The amount of equity available and Melissa’s potential borrowing capacity will be vital to her options going forward. Selling the flat, converting all the equity into a deposit for her new home, plus covering the moving costs and fees, could offer a simple solution if all the figures add up.

Another consideration, if feasible, is a let-to-buy, which is a strategy where a homeowner rents out their current property and uses the equity in the existing property to support a mortgage application and deposit requirements for a new home.

This allows the homeowner to keep their existing property as an investment while moving into a different property. 

In a let-to-buy situation, the original property becomes a source of rental income. If she opts for a let-to-buy scheme, she must ensure sufficient equity remains in the flat, bearing in mind the higher costs, such as additional stamp duty.

Regarding retirement and protection, it’s crucial for Melissa, especially as a self-employed individual, to bolster her pension contributions and ensure she has adequate financial protection in place. 

At 32, she still has plenty of time to save for retirement, but due to the magic of compounding, starting now will give her the best chance of achieving the retirement she aspires to.