Net Worth Illumination: case study

John and Jane were in their early 40s with two young children. Our discussions revealed that they were relatively risk adverse and wanted to maintain their lifestyle. They were concerned about their children’s education and wanted to send them to a local private secondary school, though they were concerned about the costs of having a large mortgage and school fees and wondered if they would be working so much to pay for both that they wouldn’t enjoy any family time. Upon further discussion they were concerned about their ability to maintain their work rate, which was of course providing their income.

Surplus Income

We reviewed their existing arrangements. They had good employer pensions, a £450,000 mortgage and school fees were estimated at £6,000 per child per term. Their combined income was now over £250,000. We initially established a proper cashflow budget so that we could identify what income they required to support their lifestyle now and in the future. We identified the surplus income and once an emergency reserve was built, allocated it towards repayment of the mortgage. We also identified the risks to their lifestyle if there were alterations to their income (for whatever reason). This risk was then properly insured, we also got them to renew their Will, appointing guardians for their children and removing the Bank as the Executor.

Reduced Commitments

Scrolling forward to the present, the surplus income has now cleared their mortgage in full, many years earlier than planned. Surplus income has been directed to a reserve for school fees. It will be sufficient within 2 years. As a result:

  • before they are 50 they will have met their largest expenses.
  • we could reduce their insurance cover.
  • of the planning and radical change to their net worth, they have reflected on their plans again, which resulted in Jane working part-time and John is even considering retiring earlier.

The reduced commitments have meant that they are able to reconsider their careers so that they fit with their own family life.

Of course, there were other options open to John and Jane, but together we rejected those in favour of debt and stress reduction, which was suitable for them.

Dominic has been our financial adviser for the past 6 years, and throughout this time we have received a very helpful service which has been tailored to our family’s needs. It has been particularly useful recently to review our current financial situation regarding retirement planning, and to see how this may evolve into the future, with a range of possible scenarios (using Solomon’s financial planning software). We have found that Dominic has always explained matters in a straightforward and clear way, enabling us to understand and make the right choices for our situation. We would wholeheartedly recommend his services.
Hazel Bradley