In 1999, Andrew, aged 44 worked as a mining engineer earning $135,000 per annum, while his wife Rachel, aged 45 worked full time as an administrative assistant earning $40,000 per annum. They had two children attending high school. Their assets included their home, an investment property valued at $500,000 with $400,000 of debt, a share portfolio worth $100,000, and superannuation valued at $150,000. Their annual living expenses were approximately $80,000 per annum.
In a weekend car accident, Andrew was severely injured causing him to lose one of his legs and lose all mobility in the remaining leg. The accident was not Andrew’s fault and due to his injuries, a personal injury case followed. After two very difficult years, in which Andrew had to rehabilitate and Rachel juggled part-time work, children and assisting Andrew, they received a compensation payment for personal injuries to Andrew of just over $1,000,000, after expenses. In 2001, they approached Alman Partners to design a financial plan to secure them a ‘worry-free’ future.
By 2001, Andrew had started to develop a small niche consulting to the mines on-line from home while Rachel had returned to full-time work.
After extensive analysis of their financial position, personal values and future goals, Alman Partners drafted a financial road map that catered for Andrew’s on-going rehabilitation costs, funding their children’s higher education needs and providing them with a secure income to supplement their work incomes. Some of the main features included:
- Dividing Andrew and Rachel’s investment portfolio into three separate ‘buckets’ defined as ‘cash’, ‘income’ and ‘growth’ described below:
- A first ‘bucket’ containing two to three years’ worth of cash or high quality liquid investments, such as on-line savings accounts or short-term deposits – $200,000. Andrew and Rachel could draw down on this bucket to fund their day-to-day living expenses and this bucket would be topped up with income from their second bucket.
- A second bucket containing funds equivalent to four to five years’ worth of living expenses in the form of income funds and fixed interest investments – $360,000. Andrew and Rachel would top this bucket up with dividends and income from the investments they hold in the third bucket.
- A third bucket containing growth-orientated assets such as Australian and International equities, property assets or infrastructure funds.
- Pay $100,000 off the investment property debt to bring it to a neutrally geared position.
- Establish sufficient insurances where possible to ensure in untimely death, accident or illness that the family was protected financially. Before the accident, Andrew and Rachel hold very little insurances and had never considered the implications for their family.
- Review Wills and establish Enduring Power of Attorneys and Advanced Health Directives
- Change the asset allocation on Andrew’s super fund to a balanced option.
Andrew and Rachel are now 55 and 56 respectively, their children are post- university and on their way in life. Andrew’s consulting business has grown to a point where Rachel is now able to stop work and pursue her more creative side. Andrew has eagerly watched the rapid development of artificial limbs with the confidence of knowing that he has resources to pay for the most up to date technology. As Andrew explains, “Alman Partners provided us with high quality and in depth financial advice over the years. By following their advice we have ended up exactly where we always wanted to be. Our investments are set up in a way that will ensure that we can support our lifestyle needs throughout our retirement. Alman Partners will provide you with peace of mind by getting your financial house in order and keeping that way.”
*Names have been changed to protect the individual’s identity.