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Financial Plan

Discussion in 'Financial Planning' started by Simon, 21st Feb, 2007.

  1. Simon

    Simon Well-Known Member

    Joined:
    17th Sep, 2005
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    520
    Location:
    Newcastle
    After being a little unimpressed by a recent appointment with a FP I have decided to take a crack at developing a 20 year financial plan for my wife and I.

    I would like to provide some points here for comments, suggestions and advice.

    I am considering a Portfolio type loan from the NAB with a number of splits. Underpinning the structure will be our new PPOR with $700K equity. Obviously my PPOR loan ($200Kish against a value of $900K) will be IO with an offset with my IP loan to be just IO.

    Borrowing at a total LVR of 80% will see us able to have a LOC for investing at around $500K. I will not be able to "double this up" using my margin lender due to serviceability this year but will be able to progress towards this as my wife's career advances over the next five years - she has just started work as a new Doctor.

    So I was looking at purchasing Industrial Shares and/or Managed Funds to the value of $500K with all income (from all sources inc salary, rent, dividends and distributions) going into my PPOR offset account until it is effectively paid out - then the LOC will be raised to a new level at 80% LVR. At this stage I will take advantage of any DRP and direct some of the dividends into servicing the debt.

    So I will be letting the LOC run for the first 2-3 years and capitalising the interest (and claiming it).

    Endgame is a portfolio of industrial shares (with strong dividend growth) of approximately $4M in value in 2027 or thereabouts. This will complement our Super as well as empty nesting into a waterfront PPOR worth approx $1M in today's dollars. Our current real estate holding should allow this.

    I am somewhat inexperienced in all things trusts having owned assets directly in the past. This may be the time when a HDT or the like is needed. Can anyone comment on this for me?

    Thank you

    Simon
     
  2. Nigel Ward

    Nigel Ward Team InvestEd

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    10th Jun, 2005
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    1,172
    Your wife is in an at risk profession. I believe you are too. As such you should definitely consider using a trust. If gearing will be involved in your plan, which it seems to be, then there are tax benefits from using a HDT.

    Over the long term, issues such as set-up costs, higher accounting fees and somewhat greater complexity will be massively outweighed by the potential tax benefits the flexibility a discretionary trust will provide together with the (hopefully intangible) benefits of greater asset protection.

    Cheers
    N.
     
  3. perky

    perky Well-Known Member

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    15th Aug, 2005
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    Location:
    Sydney
    Forgive me for asking Simon - but are you saying that you cannot get a lend for the margin loan?
    When I did my margin loan through BT - they did not ask what I was earning at all - I thought all margin lenders don't ask how much you are earning for serviceability issues? (unlike property which of course can have serviceability issues)...maybe I am missing something here?
     
  4. Smartypants

    Smartypants Well-Known Member

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    2nd Jun, 2006
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    Location:
    NSW
    Hi Simon.

    Was going to ask the same as Perky, i.e, what is preventing you from setting up margin loan? Or is it more of a SANF thing that you will feel more confident getting into more debt (with margin loan) once your wife is more established in her new career?
     
  5. Simon

    Simon Well-Known Member

    Joined:
    17th Sep, 2005
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    Location:
    Newcastle

    I can get it - in fact I have it. A Leveraged Equities account that has been running for 10+ years.

    I was planning on using the $500K LOC and matching it with the margin loan to make a cool $1M available. Servicing this amount wont be so comfortable until Jenni is earning more than she is as a Junior Doctor - interestings we pay our cleaner more per hour than Jenni takes home ...

    So the Plan incorporates a HDT now.