Kit and Jo:

• Kit and Jo have been together for nearly 15 years and have two young children. Kit is a partner at a major accounting firm and Jo is a senior biochemist at a pharmaceuticals company. They both work long hours and hire home help for cleaning and cooking.

• Family is their top priority and they work hard to ensure that their family and work life is balanced and comfortable. The children are settled and happy at a local state school.

• Kit and Jo are concerned that the family home is too small the children will need more space in the near future. They are investigating two options sell the home and buy a larger property, or, keep the home and build a major extension.

• Recently, an elderly family relative of Kit died. This relative was wealthy and Kit will receive a substantial payment from the estate. But the exact amount is not known at the present time.

• Both Kit and Jo consider themselves to be risk takers they assess each opportunity on its merits. But they would never place in jeopardy their family or their family wealth.

QUESTION:

1. Assess the objective of repaying the car loan within 3 years (assume the interest rate is 10%)

2. Discuss the scope to establish a savings plan to enable KIT AND JO to take leave of absence from her job to work overseas as a volunteer in a refugee camp for a period of one year (assume the required savings goal is AUD38,000 and an interest rate on savings of 5%

3. KIT AND JO holds a well paid job that offers good career progression. THEY is relatively young and has many years remaining in the workforce until retirement. THEIR salary should steadily increase with time and the amount of surplus money should also increase.

Outline the types of investments she should consider for the allocation of surplus money

Client Name Kit and Jo Age Status 40 and 42 Married, home owners Two children (age 6 and 8) Accountant and Biochemist AUD150,000 pa (Kit) and AUD120,000 pa (Jo) from salary Dependents Occupation Net Income (after super and after tax) Expenses (living and financial) Major assets AUD175,000 pa including the home loan Cash at bank AUD75,000 Superannuation AUD250,000 Home AUD1.8 million Car AUD25,000 Major liabilities Major financial goals Home loan AUD1.2 million (interest only loan) Operate a conservative budget until the children complete high school in about 10 years time Client Name Kit and Jo Age Status 40 and 42 Married, home owners Two children (age 6 and 8) Accountant and Biochemist AUD150,000 pa (Kit) and AUD120,000 pa (Jo) from salary Dependents Occupation Net Income (after super and after tax) Expenses (living and financial) Major assets AUD175,000 pa including the home loan Cash at bank AUD75,000 Superannuation AUD250,000 Home AUD1.8 million Car AUD25,000 Major liabilities Major financial goals Home loan AUD1.2 million (interest only loan) Operate a conservative budget until the children complete high school in about 10 years time