Question 1: Presentation Slides
You have been asked to give a talk to the staff at the local primary school about financial planning. The Principal has specifically asked to address the following issues:
1. What is financial planning?
2. How do you know if an advisor is qualified to give advice?
3. The concept of risk and return
4. What is salary sacrifice and how does it work?
Required:
You are required to prepare a PowerPoint Presentation (PPT) which will be the basis of your talk. (Note: you are not required to give the actual talk). The PPT should be no more than 10 slides and should clearly address each of the above issues, but note that as a PPT you should not attempt to include full explanations on each slide. For your submission, you should submit Handouts or Notes format with at least 2 slides per page.
Question 2: Case study
You are a financial adviser and the following information is an extract of data you gathered as part of fact finding during an initial client consultation for married couple Jason and Sandra Barlow:
Husband - Jason Barlow aged 54 Wife - Sandra Barlow aged 49
3 children -aged 26, 22 and 16 Older two children are independent, 16 year-old - Cooper attends secondary college and lives at
home.
Jason has annual gross income of $115,000 Sandra has gross annual income of $55,000
The couple have combined savings of $30,000 earning minimal bank interest.
Jason has a balance of $320,000 in superannuation. Sandra's superannuation balance is $125,000 The couple do not salary sacrifice.
Jason has a managed fund with a current value of $40,000
They have a mortgage of $60,000 on their home. The mortgage will paid off in 4 years time. Jason plans to retire at 60 and Sandra will retire at 55.
The couple have set an objective of saving at least 15% of their combined after tax income until their retirement.
Assume their income will remain constant in dollar terms and that the 2015/16 tax rate will stay constant until their respective retirements.
Assume that the school fees and related education expenses will remain constant and continue for the next 4 years as their son completes secondary school and an undergraduate business degree.
Assume all expenses have been adjusted for inflation and will stay constant in dollar terms until the couple retire.
Assume the couple both have 9.5% employer superannuation until their retirement.
Annual Budget Sheet
|
Regular Commitments
|
$
|
|
Mortgage repayments .......................................
|
18,000
|
|
Rates ............................................................
|
1,260
|
|
Electricity/Water/Gas ........................................
|
1,350
|
|
Telephone/Mobile ............................................
|
2,500
|
|
Pay television/Internet ........................................
|
1200
|
|
Insurance - home/contents ..................................
|
550
|
|
School fees and related expenses ...........................
|
7,500
|
|
Insurance - car ................................................
|
475
|
|
Private health insurance .....................................
|
3,000
|
|
Credit cards .....................................................
|
15,000
|
|
Loans ...........................................................
|
5,000
|
|
Petrol/maintenance ...........................................
|
8,000
|
|
Car registrations .............................................
|
1050
|
|
Public transport ...............................................
|
2,500
|
|
Annual deposit to Jason's managed fund.................
|
2,000
|
|
Other expenses
|
|
|
Food ............................................................
|
8,000
|
|
Clothing/Haircuts/Beauty ...................................
|
4,500
|
|
House maintenance ..........................................
|
3,500
|
|
Medical/Dental expenses.....................................
|
2,000
|
|
Entertainment/Dinners .......................................
|
2,500
|
|
Clubs/Prof. Memberships ...................................
|
1,000
|
|
Gifts - Birthdays/Christmas .................................
|
3,500
|
|
Total ............................................................
|
94,385
|
Required:
2A) Calculate the Sandra Barlow's and Jason Barlow's annual income after tax and Medicare.
You can exclude income earned from the combined savings and Jason's managed fund.
Assume that the Barlows' Private Health Insurance has the tax rebate included in the premiums.
2B) Calculate the amount of combined funds Jason and Sandra will accumulate for their retirement. This will include their actual savings according to:
- their annual budget;
- Jason's managed fund and;
- their 9.5% superannuation contributions.
You can show these as separate calculations. Use an excel spreadsheet to show calculations on a yearly basis up to the time of the Barlow's retirement age.
Assume a real rate of return of 4% for saving, managed funds and superannuation.
For ease of calculation, assume their savings, managed fund savings and superannuation contributions are made at the end of each year.
You can assume the Barlows have the correct amount of tax deducted from their gross earnings and do not need to pay more tax (or receive a tax refund) for each year until their retirement.
You can use a spreadsheet to make the calculations or use the relevant future value formulas below:
2C) Using all the information provided, comment on the key issues the Barlow's need to consider in planning for their retirement.
Important Note:
While answering requirements involving calculations, you are expected to describe your approach and explain your calculations. If assumptions are made, these assumptions must be clearly stated.
In order to answer requirements of this Practical Case Study, you may need to access resources other than the set text.
All sources used in your assignment must be clearly referenced both in-text and at the end.
This course calls personal wealth management