Financial Planning for Steve and Amy

This assignment provides a comprehensive evaluation of Steve and Amy's financial circumstances, including their income, expenses, debt, and savings. It offers recommendations on how to boost their superannuation, protect their wealth through insurance policies (life insurance, total and permanent disability insurance, income protection insurance, trauma insurance, and private health insurance), and make additional contributions to their superannuation. The analysis takes into account Steve's overtime earnings and suggests ways to save for future investments.

Financial Planning

INTRODUCTION
The given report is going to make provide some solutions to a couple who are going to
marry soon. Here, for this purpose an interview is taken to clients- Steve and Amy to analyse
their goal related to wedding and honeymoon as well as problems they are facing to achieve the
same. For this purpose, a financial plan that includes entire recommendations with some
alternatives are provided.
Current situation
Your personal profile Steven Holt Amy Samberg
Date of birth 27 January 1993 12 May 1992
Current age 26 years 27 years
Marital status De-facto De-Facto
Residency Status Australian Australian
Residential address 1/15 Surf Street, Mermaid Beach
QLD
1/15 Surf Street, Mermaid Beach
QLD
Telephone [phone] 013 503
Email address [e-mail] [e-mail]
Employment status Detective within
Queensland Police
Office Manager at
HKY Accounting
Dependents Current age & date of birth
No
No
Your health Steven Holt Amy Samberg
Current health Healthy Healthy
Pre-existing medical conditions? No No
Member private health fund No No
Smoker? No No
Family history considerations? Depression on father’s side Heart issues on mother’s side
Lifestyle Assets Owner Value
e.g. house, cars, home contents etc 2 car around around $32,000
Home contents around $25,000
Subtotal $57,000
1

Financial Assets – Non-Super Owner Value
e.g. bank accounts, shares, rental property, managed funds etc Bank saving
account $13,500
Rental Home $450,000
Subtotal $463,500
Financial Assets – Super Owner Value
Provide details of any superannuation fund(s) held Q super funds $35,000
Sunsuper $2,500
Australian super $26,000
Subtotal $63,500
Assets Total $584,000
Liabilities Owner Limit Amount
outstanding Interest rate Repayment
Provide details of any
liabilities Credit card $6000 $1500 18% $850
Liabilities Total
Net Worth (Assets – Liabilities) $x
Client Income $
Income source e.g. salary / wages, dividends, rental income etc
$85000 + 12%
super per year +
15,000 overtime
$60000 + 9.5%
super per year
Income Total 175,900
Expenses – N/A for this assignment
Estimated Cash Surplus / (Deficit) per month $x
2

INSURANCE
Owner Insurance
Type
Insurance
Provider
Benefit
Amount
Waiting
Period
Benefit
Period Premiums
e.g. client’s
name / super
fund
e.g. income
protection
Steven 75% of
income Company $63,500
Amy
Life
insurance
and
disability
$250,000
Potential issues / special consideration
 Budgeting
Objectives
 To achieve a mix of both capital protection and capital appreciation.
Risk profile
 Steven is a growth investor whose main objective is to achieve long-term capital growth,
with less emphasis on income.
 Amy is a conservative investor whose main objective is to achieve a combination of
income and growth but with low risk.
Wealth creation & lifestyle recommendations – outside superannuation
1. Goal [wedding] : To deposit money to near about $23000 in next 18 months
3

Recommended strategy:
 It is recommended to Steve and Amy to use ‘Pay Yourself Automatically’ technique in
order to save money. Here, instead of pay bills, rent and more, they need to pay for
themselves first i.e. they can pay with a minimum amount $650 each in every month.
This would enable them to save more than $ 23,000 in given time period easily. Along
with this, they will get some interest rate as well which is near about 2.5%.
Advantages of strategy [reasons why]
 Pay Yourself Automatically is considered as best saving strategy where an individual
can start saving with minimum amount of $10. Therefore, despite of waiting lump sum
investment, they can save money more better.
 This strategy includes a concept of dollar cost averaging that contributes to save small
amount of money more easily in regular interval of time.
Disadvantages of strategy
 The main drawback of this strategy is that it fails to provide short term benefit
investment plan. It could prove beneficial only for long term plans.
 There is minimum interest rate which doesn’t provide much benefit due to minimal
saving investment.
Alternatives considered
 Australian share fund refers to another investment plan that provide more attractive
plans for investors both in terms of medium and long-term capital growth. If Steven and
Amy will make investment in such shares then it will become easy to focus on short-term
price fluctuations.
2. Goal [honeymoon]: To save money for wedding to near about $40,000 in upcoming 18
months
Recommended strategy:
 It is recommended to Steve and Amy to make investment in balance fund scheme. Here,
they can invest 50 to 70% of portfolio in stocks with remaining money in bonds.
Advantages of strategy [reasons why]
 As both persons are first-time investor so, it offers a low-risk investment plan. This
method also provides high capital appreciation as well.
 A strategical combination including both debt and equity components will make the funds
of Steve and Amy less vulnerable to market volatility. Along with this, equity components
of fund will also provide benefit to generate good capital appreciation, whereas debt
components will shield their investment from volatility as well.
Disadvantages of strategy
4

 Since balanced fund scheme involves virtually risk-free but due to diversification clients
cannot customize the assets for tax planning and wealth recreation.
 The capital gains also coverage the risk of taxation.
Alternatives considered
 It is advice to both Steve and Amy to consider on making investment in conservative
fund scheme where they make investment in those companies that have strong balance
sheets, lowering the probability of facing loss in vulnerable economic condition,
appropriate cash flow and more. Therefore, it will provide better return on investment to
them for accomplish their goal for big honeymoon.
Wealth creation recommendations – superannuation
1. Should Steven consolidate (combine) his superannuation funds?
Recommended strategy:
 No, it is recommended to Steve to not to consolidate his superannuation funds as
it will increase risk of getting not much appropriate return on funds of investment.
Advantages of strategy [reasons why]
 Transferring all super into one fund includes high risk of loss as every fund scheme
includes some drawbacks.
 All type of funds take some charges therefore, consolidate superannuation funds will
prove a wrong decision for small investors.
Disadvantages of strategy
 Consolidate superannuation funds will reduce paper work and provide fund for
accomplishment of current goals as well.
Alternatives considered
 Steve should consolidate superannuation funds which helps in easier management of
super account. It stop paying multiple fees as well if an individual is investing in many
fund plans for getting high profitability.
5

2. What investment option should they use for their superannuation fund(s)?
Recommended strategy:
 It is suggested to Steve and Amy to use RRSP i.e. Registered Retirement Saving Plan
for using their superannuation fund. It is basically a setup which shelters the investment
amount from tax till an investor withdraws his money from the given RRSP tax shelter.
This would prove a number of options to invest in a vast array such as savings accounts,
mutual funds, fixed deposit, term deposits, stocks, bonds and more.
Advantages of strategy [reasons why]
 All contributions within the limits can be used for reducing the amount of income tax
which an account holder pays for deposits. Therefore, if a salaried person is paying a lot
in terms of income tax then by contributing to his superannuation into RRSP may help in
reducing the same.
 A small amount of money can also be withdrawn by an individual from his RRSP for
education. Here, within LLP i.e. Lifelong Learning Plan Steve and Amy can withdraw up
to $20,000 for education of their future child. This plan also gives over 10 years for pay
the money back.
Disadvantages of strategy
 Australian government has framed a schedule which determines how much an account
holder within RRSP can withdraw amount, where they have to pay tax for every
withdrawal amount.
 Entire withdrawals from RRSP are taxed as income.
Alternatives considered
 Banks fixed deposit refers to an alternative strategy where Steve and Amy can use their
superannuation funds to coverage the life risk and enjoy safe benefits.
3. Should Steven and/or Amy make additional contributions to their superannuation?
Recommended strategy:
 Yes, both Steven and Amy need to make some additional contribution to their
superannuation. For this purpose, in order to boost superannuation both Steve and Amy
can contribute some amount either from pre-salary or post-salary earning in directly
depositing.
6

Advantages of strategy [reasons why]
 Contribution of earning will help in boosting their superannuation and arrange funds to
cover major risks. In this regard, Steve and Amy can take guidance under APRA i.e.
Australian Prudential Regulation Authority where many people make contribution in
boosting their superannuation.
Disadvantages of strategy
 As Steve and Amy are going to make plans for wedding and big honeymoon that already
needs much investment. Therefore, currently in this condition they cannot compromise
their salary for superannuation.
Alternatives considered
 As Steve get $12000 amount for overtime therefore, by doing more overtime once within
a week, he can earn more money. This amount he can further save for future to boost
superannuation.
Wealth protection (insurance) - recommendations
1. Life insurance
 For purchasing life insurance policy, Steve and Amy need to consider some main factors
as financial commitments, budget, coverage needs, medical terminologies and more.
Here, many options are available which includes death coverage, disability insurance,
critical illness, income protection and more.
2. Total and permanent disability (TPD) insurance
 By making investment in this kind of insurance, Steve and Amy can get benefit for pay
off mortgage, personal debts, a lump sum for any uncertainty and ongoing medical
needs.
3. Income protection (IP) insurance
 As per ASIC rule i.e. Australian Securities and Investment Commission when an
individual pay for purchasing this policy then they get benefit such as life coverage and
total or permanent disability.
7

4. Trauma insurance
 This policy will provide lump sum money to Steve and Amy to cover immediate financial
needs and medical expenses.
5. Private health insurance
 For this purpose, Steve and Amy can use HIPCAPS policy i.e. Health Industry Claims
and Payment Service for Medicare claim.
Other
 x
8

Appendix 1 – Future value (FV) calculations
Savings: $650 x 18 months = $11,700 to each
Therefore, total amount = 2 x 11700
= 23,400
Interest rate per annum = 2.5 %
Total amount = P (1 + R%)T
Here, P = 23400
R = 2.5%
T = 18 months of one and half year
A = 23400 (1 + 2.5%)1 (1+ 1.25%)
= 23400 x 1.025 x 1.0125
= $24,284
9