Case study-single professional home owner ready to invest

Cara Brett 29 May 2016

Welcome back to our CASE STUDY SERIES, where we are outlining some of our clients and the different strategies we put in place for each. For some back ground on the series, see the intro here.

Jason is a 35-year-old Manager earning $120,000 pa. He is single and owns his own town house worth $550,000. The outstanding loan is $320,000. He specifically came to talk to us to talk about investing. He also wanted to address his income protection insurance. When he first put it in place 5 years ago, he was earning $65,000 and wants to be covered for his current salary.

Jason has been paying over and above his minimum home loan as he hates the idea of debt. He has an offset account on his home loan and has been able to accumulate $25,000 within there. He projects that he is comfortably saving $100 per week that he wants to invest with.

He is planning on going to Asia with his friends in 6 months and will need $6,000 for that. He wants to take the money from his offset account for fund the holiday.

He is interested in SMSF’s but admits he doesn’t really know anything about them. He has $95,000 in his super fund.

From our discussions and the information that Jason gave me, we need to address the following:

  • Assess his income protection to ensure that it is up to date with his income. We will also review any other insurance he has to make sure it is up to date and cost effective.
  • Investment options for his excess cash.
  • Superannuation options – specifically addressing his questions around SMSF.


  1. The income protection insurance that Jason had only covered him for his reduced salary and only had a benefit period of 2 years. We increased his insurance to be in line with his salary (industry standard is 75% of his income which equates to $7,500 monthly benefit) and increased the benefit period from 2 years to age 65. This means he has the maximum level of cover if something were to happen to him. We also looked at his other insurances to make sure they suited his lifestyle. His Life and TPD insurance was a perfect level for him anyway and because he had level premiums, it meant that he could not get a better price in the market today. He didn’t have trauma insurance however so was happy to have the cover for this, especially as he has a family history of heart disease. Trauma insurance pays a lump sum if you suffer a critical illness like cancer, stroke or heart attack. Jason thought that $200,000 would be a comfortable amount of money to ensure he can cover any potential medical costs that could arise and allow him to take some time off work to recover.
  2. As Jason is going to Asia in 6 months, we set aside $6,000 of his offset account for the holiday, we also left $2,000 as a buffer in the offset account as we like to have money set aside for emergencies. That left $17,000 to set up an initial investment portfolio. As he has $400 per month excess, we told him to continue to pay off an extra $200 off his home loan each month. We then organised a direct debit of the other $200 to go directly into his investment portfolio. We set him up with a Separately Managed Account that invests in a range of Australian equities, International equities, property and term deposits. He has access to see what is occurring on his account on a daily basis, which he was pretty happy with. The investments are actively managed aiming to perform better than the market.
  3. He is happy with the idea that he is paying off his home loan and investing at the same time. This portfolio is reviewed throughout the year to make sure it continues to meet his needs. We have projected his investment should be worth over $74,000 in 10 years.
  4. By directing some of his excess cash towards his home loan he is also substantially reducing the time it will take to pay down.
  5. We spoke to Jason about SMSF and suggested that this may be something he is happy to explore later down the track. We went through the costs of a SMSF and he didn’t realise how much they cost to set up and manage. We discussed that once he has a balance of $200,000, we could open up the conversation again. We did however suggest that there are other super funds available to him that have hundreds of investment options available. They work similar to a SMSF, but without the costs and responsibilities that come with it. Jason hadn’t heard of these before so was happy for us to give him some recommendations around the best super fund for him, where he could invest in a lot of different investments that suit his needs.

We set all of this up for Jason and now continue to manage his insurance as well as his superannuation and investment portfolios ongoing. As his situation changes, we will identify opportunities and work with him to invest more over time and facilitate the SMSF if and when it becomes a good option for him in the future.

His investment portfolio is actively managed by us throughout the year and if opportunities become available we will let Jason know how that could work with his existing investments.

We have an annual formal review but we like to make ourselves available throughout the year to discuss any financial questions that he might have.

This post is from our resident Financial Planner Cara Brett, check out her details in the About Us section.

Posted in: Cara BrettFinancial Planning, and Investments

About the author: Cara Brett

Cara Brett proudly heads up Bounce Financial - founded in 2014 after a successful, decade-long career in the financial services industry. Cara’s experience encompasses both the financial product and financial advice sides. This gives her a comprehensive and holistic knowledge of all facets of financial planning.