To help these clients achieve their goals for retirement, we first implemented budgeting and cash flow management strategies for their personal income and for the proposed business.
Clearly, the family’s debt needed to be consolidated and a more effective repayment schedule implemented, including the use of an offset account.
Other critical elements of the financial advice we offered Brett and Sarah included an insurance review and consolidation; setting up tax effective contributions to superannuation using salary sacrificing, and maximising Brett’s entitlement through his RBF fund.
Financially, Brett and Sarah were significantly better off. They were now able to generate a cash flow surplus, which would allow them to retire debt free. They were also saving around $43,000 in interest repayments and were able to increase their expected retirement income.
Brett and Sarah came to Aequis with financial goals, but another important reason for seeking advice was so they could understand their position. Working with Aequis, they were able to establish a more disciplined approach to cash flow and budgeting which would help them to build their wealth in the years leading to their retirement.
After seeking advice, Brett and Sarah also had a clear understanding of the financial consequences of taking on a business in the tourism industry, enabling them to make an informed decision about this business.
Disclaimer: In preparing this case study Aequis has not taken into account your personal objectives, financial situation or needs. Investors should, before acting on this information, consider the appropriateness of this information with regard to their personal objectives, financial situation or needs. We recommend investors obtain financial advice specific to their situation before making any financial investment or insurance decision.
Aequis clients Sarah (46) and Brett (49) enjoyed a very comfortable lifestyle but needed guidance in planning for their future.
They wanted to retire when Brett turned 60 but without a clear picture of their superannuation savings or what they would need to live on, were confused about how to plan for their retirement.
Sarah and Brett’s priorities were centred on lifestyle, and they described themselves as ‘today people’—meaning they preferred to live in the moment and not plan too far into the future. The couple had five children aged between seven and 24 years, with the eldest completing their final year of medicine.
Because of their ‘today people’ approach, and because they didn’t want their family to miss out on any opportunities, Sarah and Brett had accumulated a relatively high level of debt. In addition to their mortgage they had credit card debts, a personal loan and store cards. They wanted to discover whether this debt would prevent them realising the retirement they wanted, and how they could repay their debt before retiring.
The couple understood that they needed to build their capital and reduce debt, but had no plan to do so and just didn’t know where to start.
Brett had recently been promoted and this had brought a significant pay rise, but both he and Sarah were concerned that the pay increase would be consumed by tax and living expenses if they didn’t manage it properly. While they lacked the time and the skill to create an adequate budget, they did have a strong desire to improve the way they managed their incomes and cash flow.
The couple’s sole retirement nest egg was Brett’s superannuation. He was a member of RBF—the government sponsored defined benefit fund. Sarah had no superannuation savings and the family had no other savings or investments.
With retirement 11 years away, Sarah and Brett wanted to make sure they achieved the best financial outcomes for each year of their remaining working lives, and took every opportunity to meet their retirement goal. When they came to Aequis, they were also considering a major investment to purchase a business.
As we explored Brett and Sarah’s situation, it was apparent that under their current circumstances, they wouldn’t be able to repay their loans by retirement. After taking into account the outstanding debt, their retirement income would only be 64 percent of their target retirement income.
