Wealth Check: 'How can I live on royalties and still stabilise my life?'

Katherine Roberts says the trick to writing for children is to tell stories you would like to read yourself. "I publish for those aged nine to 12 but my aim isn't to produce a sweet little children's book," she says. She came to children's writing through science fiction and fantasy literature. "A lot of children's fiction is fantasy."

Ms Roberts's first children's novel, Song Quest, was published in 2000 and won the Branford Boase Award for outstanding first novels for children. At present, she is deep into a seven-book historical fantasy series called The Seven Fabulous Wonders, being published by HarperCollins. "The fourth instalment is out in December," she says. "It's hard work but very interesting."

It is certainly more interesting than her previous job as a computer programmer. After university, Ms Roberts, now 41, worked for GEC in Stafford which she describes as, "OK, but pretty boring". She had always written but did not think of going professional until she married Jerry Roberts in 1989. After she left programming, she worked part-time as a stable-hand while trying to interest a publisher in her work. She finally settled down to writing full time in 2001.

Ms Roberts lives in a 17th-century cottage on Ross-on-Wye, Herefordshire, with her husband who runs a racehorse transport business. They are thinking about moving to a larger house. "It's a nice cottage but now that I'm working from home, I find I need a dedicated office," Ms Roberts says.

Her income from writing fluctuates. She has royalties twice a year and gets a £4,000 advance for each book. Last year, her profits were £34,200 but the year before just £15,100. "If I have a good year, I'd like to know what to do with the excess and how best to invest it, so if I then have a lean year I can dip into it."

The author's savings include £3,000 in a Cheltenham and Gloucester savings account and £12,700 in a cash Isa. She also has £14,000 in a Chelsea Postal 60 account and £3,000 in premium bonds.

Ms Roberts started a Scottish Widows stakeholder pension last year, paying in £100 a month, but is concerned about how much provision it will provide. "I know I'm not going to get much out of my stakeholder having started it so late. I'm hoping my books will bring in royalties when I have retired."

Her goal is to be financially secure now so she can develop her career as an author. But she is not sure whether she will take on a project as large as the seven-book series again. "In a way, it's good because it provides security, but the downside is you're also tied in for about five years."

We put her case to Justin Modray, investment adviser at Bestinvest in London, Lesley-Anne Creffield, principal of Morgan Peterson in Cardiff, Ashley Clark, director of Need An Adviser.com in Staffordshire and Liz Lyke, managing director of Options for Women in Oxfordshire.

KATHERINE ROBERTS, 41, CHILDREN'S AUTHOR

Family: Married to Jerry Roberts, owner of a racehorse transport business;

Occupation: Children's author;

Education: BSc in mathematics;

Car: Renault Clio 1.4

Debts: None;

Savings: £3,000 in Cheltenham and Gloucester Branch 10 account; £12,700 in Cheltenham and Gloucester cash Isa; £14,000 Chelsea Postal 60 account;

Pension: Scottish Widows stakeholder;

Property: Two-bedroom, 17th-century cottage in Ross-on-Wye, Herefordshire;

Outgoings: £200 a month on bills and food; £200 on personal spending; £100 on pension; £1,000 a year on holidays.

Solution 1: Salary

Mr Clark says Ms Roberts should set up a current account for her bills with an initial deposit of £8,000 by transferring £3,000 from her Cheltenham & Gloucester Branch 10 account and £5,000 from her Chelsea account.

The security of having her whole year's expenses already accounted for in one "bills account", where the interest is compounded monthly, will give Ms Roberts the flexibility to manage the rest of her business and she will not need to worry about cash flow.

Mr Modray says because Ms Roberts is self-employed she does not have the safety net of employer sick pay to fall back on. She can insure against this through an income-protection policy. To provide a tax-free income of £12,000, after a period of six months of being unable to work through illness, would cost her £32 a month.

Solution 2: Savings

Mr Clark says the maximum someone can hold in premium bonds has raised from £20,000 to £30,000. They are safe because they are underwritten by the Government and they are not linked to stocks and shares. Although Ms Roberts gets no interest on the £3,000 invested, she can reclaim the funds with just a few days' notice and also has the chance of winning cash prizes each month.

Ms Creffield says Isas are the most tax-efficient way of saving. Any capital gains made within the investment and the dividend income are tax-free. For a long-term investment, equity Isas offer an alternative to dedicated equity-based investment schemes. They can also act as an alternative to pensions. Although pensions have the advantage of attracting tax relief on the investment, the annuity provided on maturity can be disappointing.

A long-term Isa investment can provide a regular income at retirement tax-free. Ms Roberts should drip-feed funds from her Chelsea Postal 60 account into an equity-based Isa to take advantage of low stock-market levels.

Mr Modray notes the bulk of Ms Roberts' savings are in her Chelsea Postal account and her Cheltenham and Gloucester cash Isa, both of which offer relatively competitive rates of interest. But she could improve these rates slightly by moving to ING Direct, which offers 4.02 per cent a year.

Solution 3: Pension

Ms Lyke says the advantage of stakeholder pensions is their flexibility. As Ms Roberts' income is spasmodic, it would be best to set aside the amount in cash she knows she needs for her monthly costs for the next six months until her royalties are paid again.

Then, depending on the level of payment received, she could pay a lump sum into her pension. With her present level of contributions, these will not be sufficient to provide a reasonable pension in retirement. She should increase these savings even if she decides to continue working until a ripe old age.

Mr Clark says if Ms Roberts wishes to invest monthly or with lump sums, she should diversify her pension portfolio. She should consider Clerical Medical or Norwich Union for a broader range of funds. If her income takes her into the highest tax bracket, her pension contributions will get relief of up to 40 per cent.

Mr Modray says Ms Roberts's Scottish Widows pension offers access to a range of investment funds. She should take a little more risk now, while time is on her side, and move towards safer funds when approaching retirement.

Solution 4: Property

Ms Lyke says as Ms Roberts has accounts that show an increasing income it should be possible for her and her husband to find a larger property and arrange a mortgage. The amount will depend on their joint income and their level of commitment, bearing in mind that their earnings fluctuate.

Ms Creffield says Ms Roberts should consider re-mortgaging her existing property and letting it. This would release her to buy a bigger property. The main attraction of investing in your property as a buy-to-let is the likelihood of capital appreciation and the generation of an income stream that should provide a higher return than could be obtained by investing an equivalent amount in a bank or building society.

Mr Modray says Ms Roberts should consider an offset account. This allows her to offset savings against the mortgage, an efficient way of reducing costs. For example, if she borrows £50,000 she can offset, say, £15,000 of her savings against this, so she will pay interest on only £35,000. Because the rate of interest on the mortgage and savings will be the same, she can enjoy a high tax-free return on her savings. Abbey, the former Abbey National, is offering an offset account paying 4 per cent.