How the Life Wealth Plan Can Help You -
Client Case Study 1
(Please note names and personal details have been changed for privacy).
John and Fiona are pretty much an average family. John works full time while Fiona has part time work as well as look after the couple's three children.
They have a mortgage on their house, a personal loan for their car and a credit card which has blown out to $10,000 being owed.
When they came to us as clients they were spending more each month than their income which is why their credit card had reached its limit. If they had continued in this manner then their situation would have become much worse in time.
Also John and Fiona were not on the right loan product to suit their circumstances and had ended up with a loan that had a high interest rate.
John and Fiona's current situation before Smart Money:
Income
John Income $65,000 per year
Fiona Income $15,000 per year
Total income per month (after tax) $5,285
Assets
Family Home Valued at $440,000
Motor Vehicle Valued at $45,000
Home Mortgage $300,000 at 8.15%. Repayments $2,235 per month. 30 year term
Personal Loan $40,000 at 12.5%. Repayments $899.92 per month. 5 year term
Credit Card $10,000 at 18%. Repayments $250 per month.
Living Expenses $2,300 per month
Total spending each month is $5,684.92
What Smart Money did for John and Fiona
The first area that needed to be addressed was their spending because if they kept on spending more than what they earned their debt was just going to get worse. An analysis was done on their actual living expenses to see if any areas could be reduced. A living expenses budget was completed which a Smart Money Wealth Coach will assist John and Fiona with to ensure they stay within their new budget.
As they had some equity in their home we refinanced their home loan so that all debts were consolidated into the one loan with a low interest rate. We also showed John and Fiona how to best use their cashflow to minimise the interest they were paying and in turn pay off their loan quicker.
By utilising and implementing the Smart Money System John and Fiona not only freed up their cashflow but they are also on track to pay off their new consolidated loan in 13 years and 11 months. Much better than the 30 year home loan term they had.
Having a loan with a low interest rate has certainly helped John and Fiona with their immediate cashflow issues however Smart Money has more importantly shown them how to pay off their loan in less than 14 years.
John and Fiona are also on our Smart Money Monthly Wealth Review System to keep them on track to ensure that they don't fall into the same traps they had previously.
John and Fiona's New Situation:
Income
John Income $65,000 per year
Fiona Income $15,000 per year
Total income per month (after tax) $5,285
Assets
Family Home Valued at $440,000
Motor Vehicle Valued at $45,000
Liabilities
Home Mortgage $352,000 at 7.15%. Repayments $2,347.73 per month. 30 year term
Living Expenses $2,300 per month
Total spending each month is $4,647.73
Summary of Position
|
|
Current Situation |
Situation After |
|
After Tax Income |
$5,285 per month |
$5,285 per month |
|
Value of Loans |
$350,000 |
$352,000 |
|
Loan Repayments |
$3,384.92 per month |
$2,347.73 per month |
|
Living Expenses |
$2,300 per month |
$2,300 per month |
|
Years to Pay Off Home Loan |
30 years |
13 years & 11 months |
|
Interest Paid in Load Term |
$520,521 |
$780,952 |
|
Net Wealth* After 10 Years |
$671,097 |
$780,952 |
|
Net Wealth* After 20 Years |
$1,404,438 |
$1,953,751 |
* Net Wealth - assets minus liabilities
John and Fiona's before situation was actually worse than above because they were going deeper and deeper into debt.
-
They will see a net wealth improvement (20 year projection term) over their current situation of 39.11%.
-
By implementing the Smart Money System John and Fiona will save $298,937 in interest (normally paid to bank over loan term).
-
By paying off their loan in around 14 years this equates to a saving of $21,352 per year, $1,779 per month and $410 per week.
- Not only will they pay significantly less interest they will also increase their net wealth after 20 years by $549,313.
This has all been achieved without an increase in income or having to curb their living expenses just by following the Smart Money System John and Fiona have been able to secure their financial future.
Smart Money Step 2: Invest the interest you save to create real wealth
Once John and Fiona are on their feet cashflow wise Smart Money will show them how to invest the money they are saving on hidden interest to build their net wealth for the future.
