Wealth engineering for future security

Whether it is a total financial overhaul or a prod in the right direction, almost everyone can benefit from some level of financial advice from a professional.

A lot of people might ask family and friends, others look to their accountant but how much do these people really know about personal circumstances and goals?

Financial Review Investor asked readers to present their financial information and a couple of key questions to two leading, independent, advisers: Suzanne Haddan of BFG Financial Services and Mike Ingham of Godfrey Pembroke, Camberwell.

Former policeman Michael Tarulli and recruitment consultant Stephen Feitsma might be of the same age and in what financial advisers like to call the accumulation phase of wealth creation but their situations couldn't be more different. One is looking at starting his own business with no intentions of ever retiring the other wants to boost his income-generating assets to retire as early as possible. Both participants have reasonably complicated financial affairs, which they need to give serious consideration on the best way to proceed.

FINANCIAL SNAPSHOT

Stephen Feitsma

Age: 43

Occupation: Senior consultant, recruitment

Salary: Between $60,000 and $100,000, including super.

Assets

Property: $400,000 and $275,000

Super: Approximately $70,000

Investments (managed funds or shares): approximately $40,000 in total.

Cash in the bank: $1000

Liabilities

Mortgage debts: $463,000

Other loans: Car hire/purchase: $13,000

Credit card debts: $6000

The average week

After-tax income:

Salariy: $1090

Rental income (per week): $250

Total: $1340

Expenses

Home loan: $277

Personal loans: $98

Investment loans: $401

Investment property costs: $70

Living expenses: $300

Total: $1146

Insurance policies

Life Insurance: $54,000

Total and permanent disability: approx $600,000

Gross income protection: approx $8000

OWNING a home outright and retiring at 60 on an income not too dissimilar to what he has now are goals for Stephen Feitsma, 43.

With $179,000 owing on his principal place of residence, he is unsure whether to continue paying it off, rent it out or sell it and buy something closer to the Melbourne city centre, which is his other goal.

"My aim is to pay off a home or own a home outright in the future," he says. "I also want to be able to move into a location closer to the city to be closer to work."

One consideration is to buy something and rent it out for a few years before moving into it himself. He already owns one investment unit on the outskirts of Melbourne. This loan is combined with one to invest in Almond Investors Ltd, a managed investment scheme.

Stephen has been in this scheme since 2006 and Macquarie Forestry since 2005.

"The harvest for Macquarie Forestry is projected to take place in 2016 but I don't think the return on it will be that great based on the drought we've had," Stephen says. "Also, the almonds are sold in US dollars, which impacts on returns as a result of the high Australian dollar."

The schemes were suggested to him by a financial adviser as a good way to offset his income tax. Stephen wonders how they should be placed in his overall strategy.

"Ultimately, I would like to retire at 60," he says. "If I can work out a way that moves me in that direction, it would be great. I'd like an income of at least $60,000 a year through investments and so forth."

With no financial dependants, Stephen's focus is on paying off his mortgage, which is helped along by commissions earned in his job, contributing about $10,000-$20,000 a year.

FINANCIAL SNAPSHOT

Michael Tarulli

Age: 44

Occupations: Disability pensioner/student

Salary: $1382 fortnightly (net pension)

Assets

Four properties worth: $2,145,000

Super: $68,875

Investments (managed funds or shares): JBWere Margin Lending facility - $208,420

Individual holdings (trading under company name): $91,050

Cash in the bank: $110,000

Liabilities

Mortgage debts: $820,000

Other loans: Margin loan on equities $82,000

HECS debts: Higher education loan program $11,000

The average week

After-tax income:

Salary (per week): $690

Rental income (per week): $1380

Total: $2070

Expenses

Investment loan on margin lending (per week): $100

Investment property loan (per week): $1304

Investment property costs (per week): $307

Average living expenses (per week): $673

TOTAL: $2384