George was the managing director of a marketing company in his late 30s and in good health. His wife, Mary, worked part time in an IT firm and they had two children aged 8 and 12. Like most young families they had an active life, busy with school and various activities including sports and social events. His oldest child had recently started secondary school and with the increase in expenditure due to school fees George and Mary realised they needed to examine, and perhaps restructure, their finances to meet their short, medium and long term requirements.
George was looking for someone who could help him generate a customised plan for his own situation. His friend recommended Bellwether Financial Planning and at the initial consultation George was taken by the personal nature of the service and attention to their broader, lifestyle goals.
His initial aim was to ensure that he would be able to meet school expenses and plan for college funds. The client had not thought past this. However, while discussing George and Mary’s aspirations and expectations for life, the conversation broadened. Ideas such as retiring at 60 and leaving a tax efficient legacy for the children arose. His wife was highly supportive of the idea of early retirement and she also mentioned remodelling the house in ten years when the kids were due to leave home.
During discussions of outcomes and potential strategies, George indicated that he was open to medium to high risk strategies.
George and Mary owned the family home with a mortgage and a couple of rental properties with associated mortgages. They had a share portfolio of c. €100,000, mostly blue-chip equities, albeit they had little or no input into the day to day trading of the portfolio. They also had some savings and large funds in the limited company (not his personally).
His primary income was a company salary of €150,000, with additional income from rental properties that were giving a modest return.
George had a company pension, which was little more than an afterthought, to which his company was only contributing €500 a month. He also had a pension from previous employment.
George was paying the marginal rate of tax and sheltering very little income.
George’s outgoings were primarily mortgage repayments, school fees, holidays and household expenses.
George had life cover, which was solely for mortgage protection, and private health insurance for his family. He had no other protection, either personal or business, for income, business or death.
Options Identified by Bellwether 360°
We put in place a comprehensive, tax efficient, protection plan (primarily using company funds) to protect the business in the event of key employees becoming sick or death, protect George’s own income and provide for the family in the event of his premature death.
We also set up a comprehensive pension strategy, extracting funds from the company to ensure that his pension fund at retirement would meet c. 50% of his projected lifestyle expenses.
George disposed of one of the non-performing rental properties in order to reduce mortgage repayments, associated costs and the hassle of this particular property.
We earmarked funds within the share portfolio, 50%, for the most immediate educational costs (for the next five years). We set up a regular savings plan to meet the projected costs of education from year 5 onwards and to gift the children €40,000 each towards a house deposit at the age of 30.
Financial Action Plan Outcomes
With the agreed plan put into action, George and Mary were able to not only maintain the family’s current lifestyle but also cover the cost of private school education.
George remarked that he had gained significant peace of mind from this new financial plan partly from knowing that he and the family were protected in the event of illness and partly knowing that projected post-retirement living expenses would be met.
Both he and Mary were also delighted to find that after performing cashflow projections, he would be able to retire at age 62 and still achieve the above life goals, with cashflow sufficient to meet living expenses to mortality age 95.
*These case studies are for illustration only.