Case studies

Naturally, the personal details of the clients in these case studies have been changed to protect their privacy.

Case 1

WHO

A couple in their mid fifties with adult children

MAJOR GOALS

Pay off debts and prepare for retirement

Janine and Robert were concerned that they were inadequately prepared for retirement. They had some assets in superannuation, and Janine was working part time and Robert was working full time. Their combined income was $200,000 p.a. and they still had $200,000 to pay off their home mortgage. Both were hoping to ease back from work in the coming years, but they also hoped to be in a position to travel overseas regularly to visit their daughter who was married with a child and living in the US. They wanted to live their life in retirement in the same manner that they have lived throughout their lives. That is, they wanted to be able to eat out often, to have a holiday every year (with an overseas trip at least every three years, particularly to visit their daughter.) They also wanted to do some much-needed renovations to their home and to be able to update their car every five years or so.

OUR RECOMMENDATIONS

We recommended that Janine and Robert commence a program to salary sacrifice, so that they could continue to live on the same income, but to divert more ‘before tax dollars’ to their super fund. This tactic saves them $15,000 p.a. in tax, and these savings were able to be directed to reduce their home mortgage. We also set up a Transition to Retirement strategy that saves them $6,000 p.a., which created more funds to devote to super. We maintained the underlying investments they held in their super funds because they were quite sound, but we restructured how they are owned. We arranged that they hold their investments directly, which reduces fees and assigns tax benefits directly to Janine and Robert (rather than being spread across all investors as can be the case with a managed fund). They’ve been able to make the renovations to their home including a kitchen replacement, and have the peace of mind of knowing that their financial strategy has improved their situation by more than $21,000 p.a. This boost to their wealth has enabled them to grow their super faster, to reduce their home loan and to know that they will have the means to travel when they wish to.

Case 2

WHO

A couple in their late thirties with three young children

MAJOR GOALS

To ensure their financial situation is organised as well as it can be so they can work less and spend more time as a family, and to purchase a home of their own

When David and Clare came to see us, they felt their financial arrangements could be improved upon, but they were not sure where to start. David has his own business and at the time he came to see us, he was working 6 or 7 days a week to provide for his family. His partner, Clare, works part time and they have three children under age 7. They own two investment properties, but rent the home that they live in. David and Clare were keen to ensure that they would have sufficient funds to put their children through a school of their choice, and they also wanted to purchase a home of their own. David also wanted to be able to cut back on his working hours so that he could spend more time with his family. They were building up good savings, but the income derived from their investment properties was quite low.

OUR RECOMMENDATIONS

One of the strategies we recommended was to sell the two investment properties (in which they held excellent equity levels) and use those funds to purchase their home. This recommendation was made after ascertaining that both David and Clare were comfortable to implement this strategy. By doing so, they would decrease the amount of non-deductible debt they would need to borrow to buy their home. We then recommended that they borrow against the equity in their home to build an investment portfolio which would generate strong net income. Interest on the borrowings for this investment portfolio would be tax deductible. It is anticipated that these changes alone will increase the family’s net income by $20,000 p.a. over the next five years, which will enable David to cut back on work, and it will also help to build funds for the children’s education. In the longer term, the investment portfolio will grow in capital value which can be used for other purposes down the track, or to contribute towards their retirement funding.

Case 3

WHO

Single female, aged mid thirties, no dependants

MAJOR GOALS

To ensure her financial situation is organised as effectively as possible, to reduce debt and to give her the choice of winding down from her high-pressured job within 10 years

Sophie was looking for good quality advice regarding how to manage her money better to give her the lifestyle she was seeking, and a secure long term future. She works full time in a very demanding job, and earns $220,000 p.a. She owed around $500,000 on her home loan but was interested in living elsewhere. She realised that even though she is earning well, she needed to use the money wisely to provide for her longer term security, and to also give her the option of cutting back on work in the years ahead if she chooses.

OUR RECOMMENDATIONS

As Sophie was interested in moving out of her home, we recommended that she rent it out and rent elsewhere for a while herself. This meant that interest on her former home mortgage becomes tax deductible. We also recommended that Sophie create an investment portfolio using an investment that was structured to offer exposure to the market whilst limiting the risk or downside in doing so. This allows her to acquire significant investments that offer good capital growth potential and an excellent income stream. The structure that we set up for Sophie to own her investments enables her to defer tax liabilities, which is important as her earnings from her job already place Sophie in the upper taxation bracket. The interest on the borrowings that were required to purchase the investment portfolio are tax deductible, and we set up the loan in an offset structure whereby the interest on savings Sophie is making into various connected accounts (for holidays and savings etc) offsets the interest payable on her home loan. Sophie’s goal of generating $50,000 in passive income from her investment portfolio is well underway, and she is very pleased with the progress she has been able to achieve by rethinking the structure of how her finances are now managed.

Case 4

WHO

Couple, late forties, four teenagers

MAJOR GOALS

Wanting to reduce the tax payable on their assets so that they could grow their wealth faster

Joanne and Mark have acquired a wide range of assets over the years, including $2m in investment properties. They were concerned they were paying considerable tax each year, and they wanted to increase their net income.

OUR RECOMMENDATIONS

Joanne and Mark owned almost all of their assets outside superannuation. By restructuring how their assets were owned and moving more of them into the superannuation environment, we were able to increase their net income by $25,000 a year as a result of tax savings. This has helped with general living expenses, and also meant they can build their savings and investments substantially each year. Our advice meant that Joanne and Mark are able to get better value out of their assets, by improving the structure in which they are owned.

5 Financial has helped many hundreds of clients to build a more certain path to financial success by applying smart strategies that are tailored to their unique situation and objectives.As these stories demonstrate, each person’s situation is completely different. This means there are different opportunities available that we can implement to help lift the performance of their finances and put them in a much stronger position.

Gaining greater certainty and control over your financial arrangements will make you feel clearer and more confident about the present and the future.

Contact us to discover how you can benefit from our insights and experience that will see you achieving your goals sooner.

BOOK A CONSULTATION

This information is of a general nature only and is not intended as specific advice. Speak with your financial adviser to discuss your individual situation before taking action.

About

Why choose 5 Financial

Who we work best with

About Us

While our financial advisory services are fully customised to your goals and circumstances, here are some scenarios to give you a feel for how we may be able to help you.