We had ‘David & Margaret’
call us after they had been to their bank. Thanx Geoff for the referral to us.
David & Margaret weren’t
happy with the bank’s Statement of
Advice’ that ‘all of the products were
the bank’s & there was too much insurance.’
At our initial lunch here we
listened to this & as we summarised later to them
Lets also remember that the
bank considers your ‘liability’ as their asset. Why would they suggest reducing
it?
When Margaret corrected David in that the mortgage wasn’t
500,000 ‘it is 498,000 as I looked at it
today’ then it suggests to us that the mortgage is a stress to her.
If the bank had read what we read on the completion of David
& Margaret’s ‘HW’ then here is what they might have read.
Goals
and Objectives
Short Term Goals
1. You wish to halve your
mortgage over the next three years.
2. ….
Medium Term Goals
1.
Jettison mortgage
2.
……..
Long Term Goals
1. Put ‘mortgage money’ into
interest bearing investments/equities
2.
….
At our age it is great having no debt & when you are in the ‘fatigued fifties’ as they are then debt
reduction becomes a priority.
At the lunch
we made this suggestion but the bank had run the numbers & they were
arguably better off building their supers up. If you have a ‘growth’ profile then earning a higher
gross return would show this. However what
if another GFC or another 'third in a century' flood .
Guess where their super were to go.
Lets allow for some
comfort & listen to Margaret.
Margaret
& David will be impressed what we project for them as their debt is zero in
2016.
We also did allow for their Europe trip next July to see their children doing their OE.
Yes they do
have some factors going for them to accelerate the debt reduction
·
They are both over 55
·
They have [almost] sizeable
superannuation that could be maximised.
Remember that as your super doesn’t pay you an income it is not an asset.
·
The youngest child has just left home
& the food bill has reduced significantly.
·
David is on a high salary although
there is a whack of wasted taxx to
come out to feed the Zombies.
We also allowed for possible mooted Centrelink changes
in a year’s time.
We did if only for big brother compliance & to
save us from the ‘crows’ recommend some insurance to complete some gaps in case of a stroke or trauma. We will tailor & reduce as the debt
goes down & this allows for accelerated debt reduction than our model.
Insurance only gets dearer. Who wants to collect it.
We did comment to Stephen who is 60 today that claims are on average 2 years
after you drop your insurance. Hence
tailoring & reducing but not zero makes sense.
Would the bank
do that?
Our 1st cousin said of the health system
recently ‘they don’t know’. Hence
a preventive health story is an essential
part of our holistic planning. We noted their advt whilst watching the WTA
tennis.
As we state to all ‘ our mission is we would do for
them what we would do ourselves if we were in their position.’
This week ‘Warren’ went to the net asking for some
income protection. As he has 3 children, a mortgage & only earns 90K then
he can’t afford what he should have.
John
McAuliffe
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