Business Finance Assignment Help

Executive Summary

Our client Linda and Vincent, have approached us to manage the funds, and achieve their need of asset accumulation, using medium to long term finances, available to them.

We have offered them a combination of various products that can be used and a plan that might be useful, keeping in mind the risks attached and other key outflows, which is foreseen in near future.

We have recommended a mix of insurance products, repayment of debts, saving extra money using managed funds, so that both, Linda & Vincent can also save some funds for future, along with buying a house and meeting their day to day needs.

The client needs to pay down the home loan quicker and therefore would be able to use further cash flow to invest at a later stage.

By investing into superannuation, the client can reduced marginal tax rate and also allow his superannuation to grow faster than if it was just to receive the concessional contributions by his employer. In the long term, it will allow you to be successful in reaching your retirement goal of having a living expense to meet all the social needs, maintaining the social status as well.

Almost everyone wants o get maximum satisfaction from each and every available dollar. Majority of mid term and small term goals cover buying a car or a house, advanced studies for kids/self, family holidays, self-sufficiency after retirement, or attrition.

To be fully satisfied, everything needs to be prorated. Proper money management is not piece of cake for everyone. Proper funds management is necessary.

A financial planner might help you in achieving economic satisfaction, personal & financial goals.

It helps one to control the financial affairs by avoiding insecurity, excessive debts, and bankruptcy.

A financial plan makes us safe and sound in terms of money matters. A person can easily define future economic needs.

Strategy discussion

Financial strategies considered

It is recommended to have three months expenses saved in case 2 persons are earning in a household. It becomes 6 months if there is a sole-earner. Here, in this case as Linda has just re-started working, the household expenses were taking care of Vincent. So, till Vincent has job & good health, they can fully save the salary of Linda.
Considering, future risks in mind, One significant portion of Linda’s salary need to be invested towards insurance for unemployment of Vincent i.e. Income protection plans, and also insurance of health of Vincent. An emergency fund is a must in any portfolio.
It is also suggested to keep aside a fixed amount every month for the house to be purchased. In case of the first payment to be made, 20% of the actual cost of the house would be required. If the amount is invested in such a plan wherein many banks offer doubling of capital in 3-5 years. That kind of maturity bonds can be considered, so at the end of that time period, they are able to make initial payment.

This amount set aside for purchasing a house can also be invested in a superannuation scheme, so that at the end of the stipulated time they are able to make maximum payment towards purchase of the house, leading to a small housing loan.

Ideal portfolio should be as below:

Not more than 25% allocated towards household expenses and managing lifestyle.

-Not more than 15% towards mutual funds & superannuation’s.

-Minimum of 5 % towards Insurance premiums- Here we need to have two insurances, so it can vary up to 8-10 %.

-Payments of a home loan, Car loan, credit cards, and home loans should not be beyond 30%.

-Balance 20-25% can be a saving for the house to be purchased, as well as the education of Julie

How it works

Total Net worth= Assets- Liabilities. Here the net worth is $3,000 per month; However, Linda feels that she would be able to save $4,500 per month.

Description		Amount
Total Income per annum		1,78,000.00
Less	Not more than 25% allocated towards household expenses and managing lifestyle.	44,500.00
Less	Not more than 15% towards mutual funds &superannuation.	26,700.00
Less	Minimum of 5 % towards Insurance premiums- Here we need to have two insurances, so it can vary up to 8-10 %.	17,800.00
Less	Payments of a home loan, Car loan, credit cards, and Home loans should not be beyond 30%.	53,400.00
	Balance can be a saving for the house to be purchased, as well as the education of Julie.	35,600.00	20%

Source : Own study

Benefits of this strategy

This strategy is the correct one to be followed, as it covers the potential risks, and also focuses on the future needs of Julie’s education and also, buying of a house. Once the 20% of the value of the house is saved, the family can save on the rent they have been paying at present. Thus the rental income saved can be a part of EMIs to be paid for the rest of the amount.

Outcomes

The strategy followed here has a simple concept.

If any family has two incomes, the monthly chores including the debt repayments should be managed by single income (higher one). The entire second income can be saved and built for future consumption. Going forward, the accumulated wealth can also be used to pay off debts, if there is a loss of the second income.

Projected 1-5 year Cash flow

It is important to stress-test the cash flow before assuming large liabilities. It is also advised to include monthly debt repayments as part of the emergency fund.
If a family has two incomes, the emergency fund can be 6 times of monthly living expenses including the debt repayments. This multiplier can be 8 if the family has single income.
(As per the founder of Navera Consulting, a firm that offers wealth-mapping and investor-learning solutions) During times of stress, you will have to anyway give up your discretionary expenses such as occasional fine dining and exotic vacations. So, when will you enjoy life’s luxuries? Importantly, do not sharply cut your discretionary expenses to buy a house that you cannot otherwise afford.
If it is a choice between occasional luxury and a larger house, choose luxury to enjoy life and reduce the stress on your cash flow (hindubusinessline, 2013).

ONGOING SERVICES

The advise here is based on current situation, however going forward, situations might change, and there will be changes in government policies, tax structures & superannuation rules. So, whenever there are new products beneficial to both of them, will be offered on timely basis.

Online profile will be maintained and also free updates will be shared on ongoing basis.

Also the confidentiality of the client will be the first priority, and no information will be shared with the third party.

How am I paid?

I am an employee of The Practice and receive a salary and/or bonus from AMP Financial Planning.

Other benefits

For further information regarding other benefits, associations and relationships, please refer to our Financial Services Guide.

Next steps

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Read the Product Disclosure Statement.
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Important information about you

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Need for advice
Mid term and long term goals
Your personal and financial information

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