Comprehensive Financial Plan: Budgeting, Investments & Insurance

This report presents a comprehensive financial plan for Andrew Ferrell, focusing on budgeting, debt repayment, insurance, and investment strategies. It begins with a statement of advice (SOA) outlining the financial advice provided, followed by SMART goals and objectives, including maintaining a net income of $60,000 per year and establishing a $10,000 cash reserve. The report details Andrew's current financial situation, including assets, liabilities, and cash flow analysis. A growth risk profile is determined to be the most suitable, with an asset mix of 30% income assets and 70% growth assets. Key recommendations include prioritizing debt repayment, retaining existing insurance coverage (with a TPD replacement), and reducing credit card usage. The report also emphasizes the importance of budgeting to minimize expenses and increase net income, suggesting a reduction in spending on luxuries and leisure. Approved product lists from St. George are referenced for budgeting and superannuation strategies. The appendices include cash flow analysis and life insurance calculations.

1
Financial Planning

2
Table of Contents
Statement of Advice...................................................................................................................3
What is it?..............................................................................................................................3
Summary................................................................................................................................3
SMART Goals and Objectives...................................................................................................3
Current Situation........................................................................................................................4
Risk Profile.................................................................................................................................5
Growth risk profile.................................................................................................................5
Strategies and Recommendations..............................................................................................6
Budgeting...............................................................................................................................6
Approved Product List of St George..........................................................................................8
Reference List............................................................................................................................9
Appendices...............................................................................................................................10

3
Statement of Advice
What is it?
The statement of advice (SOA) records the financial advices to a company or the clients. The
financial advices that have been given to St George are recorded in the statement of advice.
The SOA is provided to the company under Corporations Act 2001. The particulars that are
not included in the SOA are all the particulars of the financial situation of the company. The
financial advice has been provided for the superannuation, expenses, income, loans and
insurance needs of Andrew Ferrell. The statement of advice includes the current
arrangements’ review and also the relevant recommendations for the required changes. The
law has been complied with while preparing the financial advice and it acts in accordance
with the interests of Mr. Andrew Ferrell in the best possible way.
Summary
We recommend Mr. Andrew that he repay all his debts at the earliest of time. The debts
would include the loan for his car, which is of $17,000 and the loan of finance card which
costing $10,000. Both these debts together cost him $1200 every month in the form of
interests only. The life insurance cover as well as the insurance of contents and
comprehensive car should be retained, and a replacement should be made for the insurance of
Total permanent disability (TPD). It was seen in the information of Mr. Andrew that his
savings account has $1000 every month. We recommend him to save this money in the form
of personal savings. The usage of credit card by him seem to be irrelevant and unnecessary to
us, as it is evident that the per annum income of Andrew is adequate enough for him to
manage his expenses. Hence, we advise him to completely stop of at least reduce the credit
card usage.
SMART Goals and Objectives
The goals and objectives of Mr. Andrew Ferrell are as follows:
 He wants to maintain a balance of $60,000 as his net income each year.
 Wants to maintain and establish a cash reserve for the end of each year with a balance
of $10,000.
 Aims at reducing his pending liabilities of finance card, car loan and credit card,
which are $10,000, $17,000 and $8,000 respectively.
 Targets at buying a home and change his old car in the next 5 years with his savings.
 Plans to maintain an allowance of $3,000 for annual holidays.

4
 Looks forwards at minimising the tax expenses that he has been paying for the
employer superannuation funds, and also aims as boosting his superannuation
contributions.
 Wants to make sure that he has adequate funds in his Life and Total permanent
disability (TPD) insurance with the help of his existing superannuation funds.
Current Situation
Personal
Name Andrew Ferrell
Gender Male
Nationality Australian
Date of Birth 30/03/1985
Marital Status Single
Primary Health cover Yes
Employer Wollongong Council
Work status Fulltime
Occupation Town Planner
Income $95,000 p.a.
Financial
Name Andrew Ferrell
Income $95,000 p.a.
Total Assets $71,000
Total Liabilities $35,000
Total interest payable per month $1,200
Dividends received $950
Annual expenses $53,900
Annual savings $41,100
Assets
Description Value
Home $40,000

5
Car $25,000
Savings Account $1,000
Share Portfolio $5,000
Total $71,000
Liabilities
Description Value
Car Loan $17,000
Finance Card $10,000
Credit card debt $8,000
Total $35,000
Insurances
Description Value
Contents $20,000
Comprehensive Car $20,000
Life and Total Permanent Disability $125,000
Risk Profile
The results of the Risk Profile’s completed questionnaire of Mr. Andrew Ferrell have been
considered in order to determine his proper risk profile. The necessary objectives,
circumstances, risk and return attitudes and the timeframe that is required have been
discussed as well. Subsequently, we were able to determined, which has also been agreed
upon by Mr. Andrew Ferrell, that the Growth risk profile is the most suitable for him.
Growth risk profile
There is only a minor or no need for growth in an ongoing income stream. The achievement
of capital growth without needing to access the capital of medium-term is the focus of
investment. Such medium-term capital is prepared for the acceptance of variations in the
capital value for achieving accumulation of funds for a greater time period. In a particular
financial year, the chances of the occurrence of a negative return is around 18 per cent in such

6
a portfolio. The probability of occurrence of returns achievement is 95 per cent. Here, the
returns of the initial year post the investment is somewhere around 10 to 27 per cent. It often
happens that potential of the returns to fall outside the expected range is readily agreed upon
by the investors.
After holding the discussions, we have analysed that it would be appropriate to call Mr.
Andrew Feller, a Growth investor. This means that Mr. Feller, by bearing a certain amount of
risk, would want and expect value growth in his investments over a particular time period.
We have explained that in order to accomplish the objective of doubling the funds of Mr.
Andrew, a high amount of risk would be involved and borne by him, which might be
uncomfortable or unsuitable for him. Consequently, we have estimated that an asset mix
where the income assets would be of 30% and the growth assets would be of 70%, would be
appropriate for him. The income assets would include items such as deposit products and the
growth assets would include items like managed funds, etc. In every five years of investment
by Mr. Andrew in an asset mix as such, the negative return chances borne by him would be of
one year.
Strategies and Recommendations
Budgeting
Goal: In order to ensure that his objectives and goals are achieved, Mr. Andrews wants to
decrease his expenses. He wishes to review his budget and develop a new budget plan which
would target at increasing his net income as well as minimising his expenses.
Recommendation: We recommend Mr. Andrew to minimise his personal savings for luxuries
and leisure such as entertainment, vacation, grooming, etc. If a proper budget is followed by
him, his per year expenditure could be pulled down by $7,080, which means his earlier
expenses of $53,900 would potentially become $46,820, that would help in increasing his net
income.
Budgeting importance: Mr. Andrew Ferrell would need to take charge of his finance, no
matter if he possesses more or less money. If such control of the finance is undertaken, he
would feel more secure about his money and would feel less stressed about the same. A plan
should be created in order to spend one’s savings or money. Such a plan creation process is
known as Budgeting (Brealey, Myers and Marcus, 2012). The creation of such an expenditure
plan benefits an individual by allowing him to determine in advance whether he would have
sufficient amount of funds for his needs or not (Libby and Lindsay, 2010).

7
Cash Flow Analysis
Particulars Base Year
Income
Gross Salary $95000
Bank Interests $200
Dividends $950
Total Income $96150
Expenses
Rent $6000
Electricity/water/gas $1130
Telephone/Mobile/Internet $1250
Insurance - Home & Contents $800
Insurance – Car $1000
Private Health Insurance $1000
Petrol/Maintenance $4500
Car registration $1000
Food $5200
Grooming $300
Credit card $15000
Other loans $15120
Medical/Dental $1000
Entertainment/Dinners $2500
Clubs/Prof. Membership $1300
Holidays $3000
Total Expenses $53900
Surplus or Net Income $42250
Cash Reserve/Savings $1000
Credit Card $0
Share portfolio $5000
Total surplus allocated $6000

8
Advantages
Such an allocation of the budget would help in understanding where Mr. Andrew’s income
goes every day. The every day tracking of the expenditures helps in developing an
understanding of the daily income habits (Jagalla, Becker and Weber, 2011). One of the
objectives of a budget plan is to provide a financial framework for the decision-making
process (King, Clarkson and Wallace, 2010).
Disadvantages
It becomes impossible to obtain money for new ideas because the innovation and initiative of
a person is reduced down due to the inflexibility of budget structures (Kogan, Greenstein and
Horney, 2012).
Reasons for the Budget
The expenses of every financial year become clear with the help of a budget plan (Angelakis,
Theriou and Floropoulos, 2010). As such, the funds are managed more effectively, and the
future goals become easier to be achieved.
Outcome
Mr. Andrew Ferrell’s surplus income would have a potential increase of $7,080. Such
increase in the funds can further be used in the achievement of other long-term goals.
Approved Product List of St George
Budgeting strategy would be used for the Macquarie Cash Management Trust and BT Active
Balanced as the accounting of the expenditures made in investment on properties, securities
and shares can be kept.
Superannuation strategy would be used for the products of ING Balanced, Colonial First
Choice Superannuation, One Path Income Protection and CFS FirstChoice as regular tracking
and monitoring would be required for the payments made for employee’s future pension and
protection of their regular income.

9
Budgeting strategy helps in predetermining and analysing the future returns out of deposits,
hence, it would be appropriate for the BankWest fixed term deposit.

10
Reference List
Angelakis, G., Theriou, N. and Floropoulos, I., 2010. Adoption and benefits of management
accounting practices: Evidence from Greece and Finland. Advances in accounting, 26(1),
pp.87-96.
Brealey, R.A., Myers, S.C. and Marcus, A.J., 2012. Fundamentals of corporate finance. 4th
ed. London: McGraw-Hill/Irwin.
Jagalla, T., Becker, S.D. and Weber, J., 2011. A taxonomy of the perceived benefits of
accrual accounting and budgeting: evidence from German states. Financial Accountability &
Management, 27(2), pp.134-165.
King, R., Clarkson, P.M. and Wallace, S., 2010. Budgeting practices and performance in
small healthcare businesses. Management Accounting Research, 21(1), pp.40-55.
Kogan, R., Greenstein, R. and Horney, J., 2012. Biennial Budgeting: Do the Drawbacks
Outweigh the Advantages. Center on Budget and Policy Priorities, January, 20.
Libby, T. and Lindsay, R.M., 2010. Beyond budgeting or budgeting reconsidered? A survey
of North-American budgeting practice. Management accounting research, 21(1), pp.56-75.

11
Appendices
Cash Flow Analysis

12
Particulars Base Year
Income
Gross Salary $95000
Bank Interests $200
Dividends $950
Total Income $96150
Expenses
Rent $6000
Electricity/water/gas $1130
Telephone/Mobile/Internet $1250
Insurance - Home & Contents $800
Insurance – Car $1000
Private Health Insurance $1000
Petrol/Maintenance $4500
Car registration $1000
Food $5200
Grooming $300
Credit card $15000
Other loans $15120
Medical/Dental $1000
Entertainment/Dinners $2500
Clubs/Prof. Membership $1300
Holidays $3000
Total Expenses $53900
Surplus or Net Income $42250
Cash Reserve/Savings $1000
Credit Card $0
Share portfolio $5000
Total surplus allocated $6000

13
Life Insurance
Insurance needs calculator v1.0
Name (preferred name)
Gross Income
Hint: If recommending Life & TPD combined (same amount of cover) complete Life section only
L ife
Income Replacement
Gross Replacement Income Required ($ pa)
Real Rate of Return (% pa) 5.9 5.9
Term required (years)
Residual capital value 0 0 0
Capital costs (PV $)
Capital for estate ($)
Final expenses 53,900
Debts 35,000
Children
Bequests
Other 88,900 0
Total Cover Recommended 88,900 0
Less existing cover
Less realisable assets
Total New Cover Recommended $88,900 $0
T otal & P ermanent Disability (T P D)
Income Replacement
Gross Replacement Income Required ($ pa) 125,000
Real Rate of Return (% pa)
Term required (years)
Residual capital value 90,000 90,000 0
Capital Costs (PV $)
Debts
Children
Medical Costs
Home Improvements
Other 0 0
Total Cover Recommended 90,000 0
Less existing cover
Less realisable assets
Total New Cover Recommended $90,000 $0
Inc ome P rotec tion
Maximum cover available (pm) - 75% of Income 5,938 0
Maximum cover available (pa) - 75% of Income 71,250 0
Cover Required (pa)
Cost of living
Other Expenses 0 0
Cover required (pm) 0 0
Total Cover Recommended 0 0
Less existing cover (pm)
Total New Cover Recommended (pm) $0 $0
T rauma
Capital Costs (PV $)
Debts
Children
Medical Costs
Other 0
Total Cover Recommended 0 0
Less existing cover
Recommended cover $0 $0
In the event that Client 1 can't work
In the event of Client 1's TPD
Client
Partner
P artner
In the event that Partner can't work
In the event that Partner can't work
In the event of Partner's TPD
In the event of Partner's death
Client 1
95,000
In the event of Client 1's death
In the event that Client 1 can't work

14
Tax Calculation
General Tax Calculation Table
Assessable Income
Salary 95000
Bank Interest Received 200
Dividend Income Received 950
Add Franking Credits(30/70)
Other Income (i f a ppl i ca bl e)
Subtotal 96150
Less Allowable Deductions
Work Related Expenses 53900
Interest Expense on
Shares/Investments (i f a ppl i ca bl e)
Subtotal 53900
Taxable Income 42250
Gross Tax Payable 1 42250
Less Low income Tax Rebate
(2014/15) (i f a ppl i ca bl e)
Add Medicare Levy
Add Medicare Levy Surcharge (i f
appl i cabl e)
Add Temp Budget Repair Levy (i f
appl i cabl e)
Less Franking Credits (i f a ppl i ca bl e)
Net Tax Payable 42250
Item Client 1 $ Client 2 $