How to Pay it Forward: 5 Ways to Make the World Better

How to Pay it Forward: 5 Ways to Make the World a Better Place

Medical professionals as a group have power to change the world.  We are highly educated, fairly well-respected individuals with good to great compensation and plenty of resourcefulness. 

In what way do you want to impact the world? What is your legacy going to be?  The impact can be individual, through donations and kindness, or by joining together in advocacy groups, we can be even more influential.  

  1. Donate effectively
  2. Use your time to improve the world
  3. Form environmentally friendly habits
  4. Make your immediate world a happier place
  5. Leave a legacy

1. Donate Effectively

A lot of doctors would love to spend time performing humanitarian work, but life’s commitments mean this is unrealistic for many.  Twice the doctor  has a powerful idea – donating a day of earnings to charity can be a more effective way to make an impact with your time.  

Choose a Charity

There are over 1.5 million non-profit organizations, which makes choosing one to support overwhelming.

Instead of donating to random tin shakers or Go fund me pages, I like the idea of researching the choice to ensure my donation makes a real difference.

For charities that will make the most positive impact, Give Well and Effective Altruism have shortlists that provide maximum impact per dollar donation.  Their methodology is outlined on the websites.

Others want to donate to particular charities, due to personal interest or in honour of a loved one. Change path  has a tool that will shortlist charities based on your preferences.  You can’t get much easier than that!

Check the Charity is Legitimate

Before you donate to a charity, it is important to check its legitimacy. Unfortunately, many unscrupulous individuals have defrauded charities, posed as collectors and even faked illness for Go Fund Me pages.

Australian charities should be registered with the National Charities and Not-For Profits Commission (ACNC).

For lesser known charities, or those based overseas it is worth checking Scam Watch.

Check the transparency, financial sustainability and privacy behaviour of your favoured charity at Change path

I‌ find it very annoying, and stop donating to a charity if it pesters me with phone calls.  Consider asking on your social media page if anyone has experience with the charity you are considering donating to.

Make sure it’s tax deductible

Choosing a charity that is a tax-deductible gift recipient allows you to donate a lot more to your worthy cause.

To receive a deduction, it must be claimed in your tax return for the income year in which the donation was made. You cannot receive products (eg charity calendar) in exchange for your donation if you wish to receive a tax deduction.

Consider A Donor Advised Fund Before Retirement

For those about to permanently step down in to a lower tax bracket, look in to donor advised funds.  These allow a one-off donation of at least $10,000 in cash, shares or property. The donation is eligible for immediate tax deduction in the current tax year and rate, but funds are allowed to continue growing, to be donated to chosen charities every year.

Should You Sponsor a Child?

Child sponsorship is appealing to many due to the personal relationship developed between sponsor and child.  
It seems a more relatable way to introduce children to charitable giving – and helps them appreciate the privilege they were born in to.

There have been controversies surrounding child sponsorship, including concerns that the favouring of a single child in a family or community may lead to resentment and relationship breakdowns.  Most charities have moved away from providing a single child with financial support in favour of using donations to improve conditions for the community and family in which the child lives. 

It is important, if a personal relationship is developed through letters, that this continues until the end of the program (when the child turns 20 or 22).  The positive benefits of hope, and the comfort of knowing someone elsewhere in the world cares about the child would be devastated should the sponsor lose interest and stop writing.

It is also vital letters written are sensitive to the child’s family – including the other members, and culturally appropriate.

Compassion is a Christian organisation providing old school individual child sponsorship through‌ Africa, Asia and Central/South America.  The University of San Francisco undertook a study in to the outcomes and found children sponsored by Compassion were 42%‌ more likely to finish secondary education, 83%‌ more likely to complete university, were more likely to become leaders in their communities.  

ChildFund and World‌Visionhave a hybrid approach.  They still allow the personal side of sponsoring a specific child, writing letters between sponsor and donor.  But sponsorship funds are pooled for the whole community.  Both organisations allow supervised visits for sponsors and donors to meet, fully funded by the sponsor.  

Donate Your Car

Kids Under Cover collect donated car from Melbourne, Sydney, Newcastle, Brisbane, Townsville, Adelaide, Perth, Darwin, and Hobart (and may collect from outside these areas if you call and ask).  

They sell the cars at auction and use profits to prevent youth homelessness. You can tax-deduct the sale amount or if your car has a market value of more than $5,000 are eligible for a tax deduction based on an ATO valuation.

2. Use your time to improve the world

The Medical Evacuation Response Group Merg.com.au is a group of doctors advocating for refugees with urgent health needs.  The bill to repeal the legislation is being debated this month, but regardless I suspect the group will continue to passionately advocate for refugees with health issues.  Contact the group through the website if you are interested in joining the fight.

Have another issue close to your heart? Find like minded people and start your own group.

Voluntary work is something many of us would love to do, but feel we can’t commit to the usual requirements because of jobs and families.  Médecins Sans Frontières is the best known volunteer organization for doctors.  Volunteers must be able to commit to a minimum 9 month placement and meet their eligibility criteria.

There are volunteer organisations that offer much shorter trips, possible to go in your annual leave.  YMAM‌‌ Ships  visits PNG‌ on short tours (2 weeks), working with local health services to offer quality training and medical care.  They even accept a limited number of families of volunteers on board. 

Australian Doctors International organise doctor volunteer placements in Papua New Guinea for 2-6 months

Non-medical volunteering is another option – helping at your child’s school, at your local library or online.

Consider how your career can help you change the world in a positive way.  Some junior doctors aspire to be public health specialists for this reason, but no matter what you’re interested in, there is likely a way you can use your expertise and experience to improve the world.

Fred Hollows saw an opportunity to help and his organisation has saved the sight of over 2.5 million people to date.  What a legacy!

3. Form environmentally friendly habits

I know many of us would like to do more help the environment.  It’s probably easier to think about one area of your life, form new habits that are more environmentally friendly and then move on to the next

Grocery Shopping

Plastic bag bans are in for good- so remember your reusable bags or put the food back in the trolley unbagged (I often leave mine in the car).  Collapsible crates/boxes kept in the car are an alternative to bags.

Despite the plastic bag ban, there are still plastic bags in the produce aisles, find some bags at home, make some out of fabric around the house, or do without (fine for larger items)

There is also PLENTY of plastic wrapping in every aisle of the grocery store.  Avoiding packaged food is good for your health, your wallet and the environmental so try and avoid packaging wherever you can.

Try and actually use all the food you have brought – thinking about land clearance to grow food, transportation to the supermarket and your home, it is extremely wasteful to buy food and throw it away when it has gone bad.  Work out a meal plan (recurring weekly or fortnightly plans make life easier), use leftovers originally (frittatata, pie, omelette).  I have a labelled “Leftover” shelf in the fridge so its easy to see what needs to be eaten and food doesn’t get lost.

Consumerism

Labelling new trendy products with “Eco-friendly” sells well, but clearly is far less environmentally friendly than using what you already have.

Pause and consider whether your purchases are really necessary.  Try and use items until they are truly worn out.

When you do need something new, can you give a used item a second life?  Buy used when you can, and donate items when you no longer need them (Kids clothes and toys!)

Borrow when you only need something for a short time – the library is a wonderful community resource.  Try sharing rarely used items with neighbours so you don’t each have every item to store.

Use Less Fossil Fuels

Walk or cycle instead of driving when you can.  Buy a fuel-efficient car and try not leave the car loaded with heavy items you don’t need 

Turn the lights off at home when no-one is using them, turn electrical items off at the wall rather than leaving them on standby. 

Solar panels are expensive to put in, but could save you money long-term if you are staying in the same residence for 5-10 years. 

When you have to replace appliances (when they are broken, not because you have refurbished the kitchen and want to burn some extra cash!) consider the energy star rating

Remember to bring your keep cup and water bottle!  Label with your name and form habits so you don’t lose it every week and have to buy another!

Recycle – do you have a functioning system for recycling at home and at work?

Christmas

Sustainable living have a few tips on how to improve your traditions to make them more environmentally friendly.  

4. Make your immediate world a happier place

At home, conversations with our spouse and children can become very functional.  It only takes a few moments every day to strengthen your connection and brighten someones day.  Remember to appreciate your spouse, spend extra playtime with your children, and talk to them about their day, their thoughts and interests (no matter how ridiculous).

At work, be the happy face everyone is pleased to see (even if you don’t feel like it), take the extra minutes (when you can) to chat to your lonely patient rather than getting a coffee, and find out a little about your colleagues.

In the rest of life, give way more when driving, spread kind words regularly. Challenge yourself to make someone else’s day every day!

 

5.
Leave a Legacy

You can bequeath a percentage of your assets to your favourite charity. Charitable gifts in Wills of property, stocks and shares are exempt from capital gains tax.

Organ donation is probably the greatest gift you can give, with the potential to save several lives.

Register on the donate life website (or check you are registered) and talk to your family about the decision

Hopefully this article has given you some new ideas (or reminders) of how you can make a positive impact. I’m still working on many of the habits!

Do you belong to an advocacy group you would like other doctors to know about? Or have a favourite charity you wish to share?

Add your comment below with your great ideas


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How to Save More Money

Do you want or need to save more money?  Or increase your investments?

Many finance professionals advise a savings rate of 20%‌ of post tax income. It seems about right for many, not the extreme savings of 50-90%‌ (FI crowd), but enough to achieve an independently funded early retirement.

Your target savings rate is a personal choice, based on your goals, timeline and commitments.  Most will not easily achieve their target and often are reluctant to make large sacrifices.

But is possible to increase your savings rate with little standard of living compromise.

Introducing a money management system to trap savings, optimizing tax and being more conscious about your spending are low hanging fruit to increase your savings rate with minimal effort.

Next, consider the big ticket items and decide whether you are getting maximum value.  Eliminate as much waste as possible (you’re not going to miss throwing spoiled groceries in the bin!)

The easiest way to increase savings after these steps is to commit to saving a set percentage  of each future pay rise.  Through committing 50%+ of pay rises to savings, your savings rate will increase significantly over the years without any loss in lifestyle.

This is an extremely powerful method for doctors in their junior years, who will experience large jumps in their pay over the next 10 years.

save

How to Manage Your Accounts – Introduce a Money Management System

The idea of a money management system is to capture spare income automatically, instead of allowing it to be spent unconsciously.  It will also help you avoid overdrawn fees and direct debit failures.

I like the Barefoot investor option which uses an electronic version of splitting earning into separate buckets (accounts) for different uses (but I use mortgage offsets for all my “Buckets)”.

There is also the Empower wealth version which encourages use of offset accounts.

The essential components of both is to separate budget needs from wants.

Both require you to set a budget for discretionary spending, transfer the money in to a separate “discretionary account” regularly and only spend out of that account for discretionary items.  No unplanned refilling of the discretionary account allowed!

What is discretionary spending?  Anything that is not essential for the household – dinner and drinks, take away coffees, lunch from the canteen, concerts, holidays, upgrading house décor/furniture, clothes apart from basic replacements.

Understanding the marketing psychology tricks behind the adverts may help you see through it.  This DINKs article covers the topic.

There are many grey areas – groceries are essential, but the chocolate and soft drinks brought at the same time are discretionary.  Fuel to get to work may be an essential, fuel to drive interstate on a road trip clearly not.

In the Aussie Doc household, we have all income coming into a single account offset against our mortgage, out of which come all bills and essential spending.

From that income account we direct debit into savings, investments and separate discretionary spending accounts (separate for house, holidays individual) all offset against our mortgage.  We ensure  there is always a minimum buffer in this account to make sure we never get overdrawn

Most essential expenses go on credit card (for points) and we monitor spending to watch for discretionary slippage within our “essential” spending.  Credit cards get paid off monthly automatically.

Both adults in our household have the same monthly discretionary spending money, and spend it however we like, without guilt.  I think this is so important in sustainability of savings.

It is very worthwhile to read the two approaches, and work out which (or a combination) suits your household.  Make it your new years resolution to never pay another overdrawn fee!

Pay Less Tax

An intern earning $70,000 will pay around $14,000 tax per year.  Fully fledged specialists will pay eye watering amounts if they earn enough to pay up to 47% tax.

Improvements in tax efficiency can create significant savings without reducing lifestyle at all.   Consult your accountant on what you are able to optimize, below are some topics for discussion

Maximize Tax Deductions

Money spent in order to earn money is usually tax deductible.  Common deductions include AHPRA‌ fees, work related courses, conferences including transport, accommodation and food while you’re away from home for work purposes.  Work uniforms, medical equipment (stethescope, stationary), overtime meal allowances and income protection paid for outside of superannuation are tax deductible.

The ATO‌ website has a specific section on tax deductions for medical professionals.

It is vital you are always claiming unequivocally within the rules. You need a trustworthy accountant who will help maximize deductions without overstepping.  Tax fraud seems to be one of the few things you can go to jail for in Australia!

Ensure you have a tax record keeping system that works, and make sure you record and claim every tax-deductible expense.

My Deductions should be ideal for this but I‌ wouldn’t rely on it, after it deleted all my data last year.  I use Samsung notes on my phone for portability and convenience.  I can note expenses, then take and store photos of receipts.

Make sure whatever system is backed up in case you lose or break your phone or computer.

Salary Packaging

Salary sacrificing is probably the biggest way you can save on tax, paying only 15% on packaged salary.  Read the full article on salary sacrificing here.

What to do with Your Tax Return

Most people celebrate a large tax return at the end of the financial year – it feels a bit like winning lotto. For interns starting out, this could be a great savings starter fund.  Use it’s potential wisely instead of blowing it on consumerist waste.

If you have a solid money management in place, and especially if you have a principal place of residence (PPOR)‌ mortgage and are in the highest tax bracket, consider varying your PAYG withholding

If you expect to recieve a $10,000 tax refund, pay 47% tac, vary your PAYG withholding.  Instead of waiting to be refunded‌‌ at the end of the tax year, pay $400 less tax per fortnight and avoid lending the ATO an interest free loan of $10,000.

If you automate the $400 in tax savings every fortnight into a 100% mortgage offset account, $200 in mortgage interest (assuming 4% interest) could be saved over the year.  $200/hr is not a bad return on investment for time completing the application.

If the fortnightly savings are likely to vanish, you’re better off waiting for an end of year tax refund and using the lump sum to boost your savings be saved by the end of the tax year.

Tax Planning

Timing when you earn ABN income, and when you pay tax deductible expenses can help you pay your mortgage off faster.

If you earn less than $70,000 as a sole trader using an ABN, you pay tax owed after the end of the tax year.  This requires some control to not spend tax owed!‌‌  If you earn $40,000 gross through ABN‌ instead of payroll and are on the top tax bracket you will owe $18,800 at the end of the year.

If you put the tax owed as you earn it in an offset account against your mortgage at 4%, you will save $376 in mortgage interest over the year (in comparison with paying tax as you go).

If you happen to earn the $40000 over the first half of the tax year, and again save it in your offset, you could save $549 in mortgage interest.

Timing payment of tax deductible expenses at the end of the tax year will mean you receive a refund promptly, minimizing time your money is missing your savings or offset account.

Stop Sleep Spending!

Discretionary spending is non-essential spending.  This is a big one.  Many have no idea where their pay disappears.  This is unconscious spending.

Spending without brain activation – swiping for this, that and everything that’s convenient and then not even remembering it.  It’s almost sleep-spending!  And most of us do it! Ever got a package in the mail you forgot you ordered?

The big benefit of setting a discretionary budget and having to stick to it is- you have to activate your brain when spending, or you run out of cash, and you’ll learn for next month.

Making money for discretionary spending a limited resource (esp for high income earners) forces you to assess the value of the purchase you’re considering.  Do you really value that disappointing convenience food or is it worth putting a bit more effort in to preparing something tastier to take from home?  Is there something you value more, a weekend away or luxury item that you would rather save your discretionary spend for?

Often, these decisions will seem trivial and the money saved not significant.  But if you make a habit of turning on your brain when you’re about to make a purchase, and making a value decision each time, you are likely to find savings mount up quickly!  The little things really do add up.

Remember, your pre-decided discretionary fund is for guilt free spending.  Whatever you spend your discretionary money on is fine, as long as it makes you happy!

Annual Checklist to Optimise Finances

Save on Housing Costs

This is most people’s biggest cost. ‌If you are able to reduce this cost and save the rest, you’re on the fast track to financial freedom.

If appropriate for you, consider shared accommodation for a few more years, or rent out a room in your home to help lower expenses.

When purchasing or renting a new home, carefully consider the amount you are willing to pay, and  whether a more affordable home would work.

If you find yourself living in free hospital accommodation, make sure you maximize this amazing opportunity to save and/or invest the extra cash.

Save on Transport Costs

The hidden costs of car ownership can really slow your financial journey. ‌

If you can rely on public transport, your feet or a bicycle consider doing this to save yourself thousands of dollars (the environment and the hassle of car maintenance).

When you need a car infrequently (getting home from late shifts at the hospital), investigate whether it would be cheaper to uber on those occasions.

If you do need a car, the wisest financial moves are based on damage limitation.  Consider insurance costs and fuel efficiency as well as the initial outlay.

You can spend a lot of money trying to impress Dr Jones, but your new top model vehicle won’t be new or top model next year anyway.  Consider second hand cars, to avoid losing money on massive depreciation in the first 5 years, but get an independent inspection to avoid buying a lemon if you can.

The cheapest way to own a car is to buy a great quality reliable 5+‌year old car and keep it for as long as it reliably runs.

If, like me, the fear of buying a lemon of a second hand car is too off-putting, buy a reasonably priced, great quality new car (ex-demo?)‌.  Resist all the extras designed to increase profit margins, and drive it for as close to forever as possible.

Save on Insurance

These costs seem to increase massively as the years go by!

Between income protection, car/boat/trailer insurance, house insurance, health insurance and professional indemnity, insurance is actually our household’s third biggest expense (after tax and housing).

You can save hundreds of dollars every year with no effect on your lifestyle by shopping around every time an insurance renewal comes through. ‌Consider engaging an insurance broker to see if they can get you a better deal. Any professional associations you are a member of may offer doctor discounts, so worth checking this.

Save on Groceries

Are you throwing food away every week?  This is terribly wasteful.  Try meal planning, a repeated weekly or fortnightly plan makes life easier.  Get creative with leftovers.  Challenge yourself to use all the food you buy.

Consider reducing the amount of processed foods – the packaging has a negative environmental impact, it’s not good for your health, and it is relatively expensive.

Sign up for the supermarket points programmes.  Maybe you can use these to save money on groceries at Christmas, or put them towards a flight in the future (the Lazy docs guide to points to follow)

Save on Utilities

These costs are getting more significant every year.

Try being conscious of your household energy consumption for a billing cycle. ‌You may be surprised at how much of an impact turning off lights and power switches off at the wall has.  It’s great for the environment too!‌‌  If you have a cheaper overnight tariff, make it a routine to put the dishwasher on at night, and washing machine on a timer for early morning just before you get up.

Solar panels take several years to pay back the initial outlay, but if you’re planning on staying in your home for more than 7-10 years, worth looking in to. Another win for our environment!

Saves on Fees and Direct Debits

Have a look through your bank and credit card statements for any sneaky direct debits that you have forgotten about and no longer need.  Cancel them stat! ‌

Are you paying banking fees?‌‌  If so, change to a fee free bank.  ING and ME bank are recommended by the Barefoot investor as fee free and ATM fee free, no matter who’s machine you use. Opening an account is all online and pretty easy.

Set a reminder once a year, or when you are expecting your next pay rise.  Review your savings and if they are not yet on target, increase them by 50% or more of your pay increase.

Try to avoid false economy whentryingtosavemoney.  Consider lifetime spending when making decisions and try and free more cash up over the longterm. Continue reading

Four Money Personalities and How to Build Wealth

Four Money Personalities and How to Build Wealth

There are four types of finance personalities.  Work out which one you are, then how to build wealth.

Chronic Overspenders

Most people spend all they earn each month (sometimes more). As pay increases, they celebrate by improving their lifestyles. No matter how high wages rise, they never get ahead.

Good Intentions, Impulsive Spenders

Many of us have good intentions, set super strict budgets but become demoralized by perceived lack of progress, leading to impulse buying the latest smart TV‌ or similar.

I‌ have repeatedly set extremely optimistic budgets, only to give up when unexpected expenses come and cause, in my mind, failure.

By This time Next Year We’ll be Gazillionaires…

These are often chronic over-spenders who are looking for a quick fix. They are vulnerable to Get‌ Rich Quick schemes as will invest impulsively, motivated by fear and greed. They occasionally get lucky, but the vast majority will end up broke.

Slow &‌ Steady Achievers

Health, study and finances are not a sprint. All three require small positive choices repeated over months to years. These choices need to be sustainable, not feel like a sacrifice, and be built into your weekly habits and routines.

These habits should be as automatic as possible, requiring little mental energy.  The more time spent reviewing decisions, the more likely you are to change them in a moment of weakness.

A no spend month is unlikely to make a difference to your long-term financial future, especially if you over compensate afterwards!

How to Become A Slow &
Steady Achiever: How to Build Wealth

So how do you tackle a big audacious goal?

Want to pay off student loans or mortgage, fund extended travel or save for financial independence and eventual retirement?

Many of the attributes that make you good at studying for, and passing exams can also be used to build wealth. Passing challenging exams takes preparation, scheduling, plenty of sacrifice and sustained commitment over (what feels like)‌ a ridiculously long period of time.

Securing your financial future is less intense, but requires the same preparation, scheduling, a little sacrifice and, most importantly, sustained positive action over many years. So lets consider your financial goals as if they were your next set of exams. ‌How do you go about studying for and passing those massive postgraduate exams?

How to Build Wealth: Set Goals & Write Them Down

Exams

Which exam are you going to sit?  When do you want to sit them?‌ Aiming for special merit/prize or just to get them done? Consider life events in the meantime and set realistic goals accordingly.

Postgraduate exams are hard.  They often require a year of study to prepare. A YEAR OF STUDY. Alongside working part or full time. And the usual adulthood responsibilities such as preparing food so you don’t starve.

Financial Goals

Money is a means to an end, not a goal in itself.  What are your values and goals?‌

What money do you need to achieve your goals and live a life consistent with your values?

Make a list of goals. Consider future events (weddings, kids, house purchase, travel)‌ and set realistic deadlines around these.

There will have to be compromises- there is never enough money to go around. ‌Take advantage of this to really review what you truly value. Which goals are the most important?

Write down your goals and dates somewhere that you can review them on an annual or bi-annual basis.

How to Build Wealth: Find Your Resources

Exams

Plenty of your colleagues have sat through these exams before, and can point you to the best resources. It’s very easy to get overwhelmed with more resources than you can ever consume.  Find the textbooks you need, a small list of the best websites with articles and practice questions.  Find some study buddies and senior colleagues willing to act as coach.

Finances

All your senior colleagues have also been on a financial journey (for better or worse)‌.  Money is a taboo topic, so rarely is wisdom learned passed down to junior colleagues. ‌

We all just start afresh when it comes to money.  Generation after generation make similar, preventable mistakes, because money is a taboo topic. 

I’m thrilled you’ve found this site.  It is my hope to create a forum sharing knowledge to help doctors fast track their way to financial know how.  But there are thousands of finance sites for you to procrastinate on (especially if studying for exams!)‌

My advise is find a couple of reliable, trustworthy and highly relevant sources.  Subscribe to get regular information to keep up to date.  Educate yourself by committing to reading a magazine or book per month or an email or two a week.

Money Magazine is an excellent resource- a monthly magazine containing lots of personal finance, superannuation updates and introduction to investing explained for non-finance people.

An email subscription to this blog will get you weekly articles covering topics relevant to Australian doctors, to give you a shortcut to  financial knowledge usually built over a 15+ year career.

Dev Raga is another Australian doctor who has released a fabulous podcast covering the basics of investing in a step by step fashion.  I‌ thought his detailed coverage of Mortgages and Wills, two tricky but important topics, were particularly helpful. His experience in both areas is obvious. He releases a 10-30 minute every week or two, great for bite sized learning during your commute.

I would advise learning before you have financial decisions to make. Choices we make can have massive financial consequences that we don’t recognize.  Where you buy a home, for example, can impact the need for vehicle ownership‌‌, private or public school for your kids, capital growth potential and therefore investing equity.  A baseline level of knowledge, and an idea of where to get more information will lead to better informed everyday financial decisions.

Breaking Your Goals Into Manageable Chunks: 1 Bite at a Time

Exams

How do you even tackle the huge curriculum?

Start with a calendar and break the curriculum into chunks, spread over the months you have assigned for exam preparation. I would always advise leaving spare ‘chunks” of time at as no-one ever sticks to their study schedule- it always takes longer than planned.

Finances

Break your financial goals down into more manageable chunks over time periods.

Use online calculators at Money Smart to work out how much you need to allocate each pay period to achieve your goals.

Usually, you will not have enough. Start with what you can manage and review every time your pay increases, putting most or all of your payrise into the plan until your on target.

It ussually feels feeble, as if you will never reach your goals and arent making any progress. Trust the process, automate and look back in a year or two – you will likely be amazed at how far you have come. ‌The hardest part (like exam study or a new diet, is getting started)‌.

Do it Over and Over and Over Again

Exams

You also will not feel like your making progress studying.  Just keep hammering away and keep your eye on the prize – post exam celebration‌ (make sure you plan some wonderful reward – you deserve it). ‌

Schedule regular exercise, get outside daily and plan the odd evening off to watch a movie, read a book or engage in your favourite hobby. You will find your mind better focused after taking the time out.

Finances

Automating your savings will make your plan more sustainable. During the early months/ years, before the results are showing, you will need some extra motivation to stay the course. If you have a friend or partner interested in similar goals, an accountability buddy can help,

Consider listening or reading something regularly to help maintain motivation.  I‌ like the Choose FI‌ podcast, it is based in the US but is full of ideas and ideas to raise your savings rate.

There is also a lot of talk about value and I‌think this is something that is worth focusing on. What are your values – and does your spending really reflect them?  Do you really value having the latest Iphone or is environmental sustainability important to you – encouraging you to buy less, hold on to something for its useful life and only upgrading when you need? If you spend money consciously only on what you value, your savings rate will increase with minimal impact on your enjoyment.

Review Your Progress at Set Intervals

Exams

Practice written questions provide some insight into your progress, but letting a senior colleague practice test you (as intimidating as it is) is the most valuable tool available in getting you through the exams.

Finance

Set a regular time to review your financial goals, progress made, and whether your spending is aligned with your values. Tax time is a good time to do this, as you have to review your finances anyway.‌‌ I like to review at tax and time and end of the calender year.

How to Build Wealth: Plan for When Things Go Wrong

Exams

Leave some slack in your schedule for unexpected  time stealers. It’s unlikely you will avoid any illness or other emergency that stops you studying for a period. Plan for it.

Finances

An emergency fund will provide protection from the financial side of unplanned events.  This is critical in the early years when you don’t have a lot of financial reserve.  Ensure you have appropriate and adequate insurance in case of major emergencies and personal tragedy.

If you’re investing in the stockmarket, it will dip, correct or crash. Write down your strategy for when you get jittery and feel like following the herd and selling assets at the worst time possible. Listen to JL‌ Collins’ dulcet tones in the Stockmarket meditation. Namaste.

All that is required for financial success is a written plan, regular automated investments and some planning for the unexpected. Be aware of your money personality and be aware of your weaknesses.  Try not to either completely ignore your finances or become obsessed, and have a plan when panic or the latest hot fad may distract you from your sensible plan.

Do I REALLY Have to Save an Emergency Fund?

Do I REALLY Have to Save an Emergency Fund?

  • Consider what kind of (and cost of) emergencies that could happen
  • Assess your current financial situation
  • Weigh up peace of mind vs opportunity cost
  • Decide on size of emergency fund
  • Work out a plan and save an emergency fund!

Unless this is the first personal finance article you have read, you will be familiar with the concept of saving an emergency fund.  Recommendations are commonly to have 3-6 months expenses (or more!) saved in case the unexpected occurs.

The Barefoot investor calls it “Mojo” to make it sound more interesting.  Being able to cope with unexpected financial setbacks is an essential pillar of financial security.

But if you are desperate to get your debt under control, or itching to dive into investing, saving an emergency fund is slow and frustrating.  The White Coat Investor and other high profile US physician bloggers feel they don’t need an emergency fund.

So do you, as a doctor, really need to save an emergency fund?

It depends.

What Types of Emergencies Could Affect You?

This is very variable depending on your situation.  What sort of emergencies could happen to you or your household?

Do you own a house?  Large house repair eg Replace water heater or major roof leak $5000-$10000

Do you live far from extended family? – Flights home and time off work in case of that dreaded family member emergency

Do you have sick leave accrued and own occupation income protection?  What is your waiting period and duration of payment (2 yrs vs until 65)?  If you were too ill to work would you need to cover expenses with savings?

How secure is your income source(s): Do you have a permanent or temporary contract if employed, work as a locum or private practice?  Is there another income earner in the household?

Do you have dependents?

How much are your monthly expenses?  If you had to cut all the fluff, how much would you need for your household to make mortgage/rent payments, pay for food and utilities, school fees and other essentials?

Do you have negatively geared property? Or leveraged investments that could be margin called in a market crash?

What is Your Financial Situation?

Are you already in debt? I wouldn’t count HELP, as this does not need to be paid if your income stops.  But if you already have credit card or Afterpay debt that isn’t paid off monthly, you’re in a vulnerable position.

How much surplus income do you save per month?  Is it enough to cover emergencies anticipated in a single month?

How much extra do you have sat in your mortgage?  With a redraw facility or HELOC this can be considered your emergency fund if sufficient

How much tax to be paid is sitting in your account for most of the year?  Due to effective tax planning, I plan to always have around several thousand dollars in my “Tax to be paid” account, offset against my mortgage.  This could be used short term in an emergency, and re-earned before tax is due.  I earn the next year’s ABN cash before I have to pay the last years tax.

Do you have a buffer(s) in your everyday account(s) or offsets?  Kids savings account that (at a push, and temporarily) could be used to get you out of trouble?

Peace of Mind Vs Opportunity Cost

The White Coat has multiple income sources.  Having tens of thousands of dollars earning 2-4% in a “High interest” savings account or mortgage offset account is inefficient in comparison with long-term investing returns.  If you have income far in excess of your expenses, perhaps an emergency fund is unnecessary.

Three years ago, our car died dramatically.  My partner was stuck in a dusty somewhere in the middle of nowhere.  He was hundreds of thousands of kilometres away, hostage to the nearest tow service and car mechanic.  It cost $10,000 to get home for Christmas.

For most of us, saving an emergency fund is prudent. But you may have enough cash that is lying around anyway that you don’t plan to spend and can double as part or all of your emergency fund.

I have a buffer in my everyday account in case my employer forgets to pay me (it’s happened) or expenses going out are larger than expected), $2000 in a “house” account to cover replacing broken appliances or car insurance excess and extra mortgage repayments that could be withdrawn.  I also have my “To be paid” tax sat in an offset and some kids’ education savings sat in an account earning 5% that could be quickly access in a real emergency.

If you’re just starting out, you likely don’t have money “just lying around’.  The priority is paying down consumer debt, in my opinion.  there is no point in saving into an emergency account paying 2-4% if your outstanding credit card debt is charging interest over 10%.  In this situation, I think you’re stuck using the credit card as your emergency fund until you have paid it off.

Save an Emergency Fund

If you have a mortgage, the easiest and most efficient place to park your emergency fund is in an offset.  A redraw is also reasonable.

If you don’t, you’re stuck with a “High interest” savings account.  The easiest, simplest and lowest risk choice is to find an account with $0 fees, and a reasonable interest rate.  At the time of writing ME Bank offered 2.2%.

If you can be bothered opening multiple accounts, its possible to get a slightly higher interest rate (2.6% currently) for an introductory period – and move your savings from one bonus introductory account to another every few months.

If you have several months of pay saved  up in case of emergencies because you have unreliable or lumpy income, term deposits or even a bond index may be worth looking in to for the savings not required immediately.

Unless you are financially independent, or have monthly surplus in excess of the cost of potential emergencies, I believe some sort of emergency fund is wise.  Going without really does seem to be tempting fate!

Sit down and work out how much of your income, below is a table to use as a starting point.



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How to Start Investing: Time is Ticking

Aside

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Would you love to get investing in the stock market but don’t know where to start?  This article will provide information to get investing within an hour.  No more procrastinating!

Time in the market is the single most important factor in returns.  Compound interest is an incredible super power that can grow or destroy (through debt) wealth exponentially.

In the graph below, as time passes the amount contributed and total amount separate – due to compound interest.  Eventually, compounding builds a money making machine, where the interest/capital growth/dividends earned outstrips your contributions – a great feeling!

Where to Start Investing

You are already invested in the stock market – through super.  I’m now grateful the government forced me to use the power of compound interest from the age of 24.  I didn’t really appreciate it at the time.

The super account, fees, portfolio and insurance may not have been completely appropriate, but it’s better than what I would have saved for the first decade of a career – nothing!  To find out all you need to know about super, read here.

Outside Mandatory Super- Options

Outside this 9.5 10% mandatory contribution (unlikely enough to provide the retirement you desire), you have several mainstream options in saving for the future

  • Voluntary super contributions – taxed at only 15% assuming you remain under $25000 contributions per year and earn less than $250000. Ideal for higher tax payers who don’t mind their money being locked up for a long time (it stops you saving it after all!
  • Purchasing investment property – Leverage is powerful in magnifying growth (and loss) but needs significant savings or equity to enter as well as time and knowledge. Tax benefits are especially beneficial to high tax payers, but only if the asset if chosen correctly.  Brick X offer fractional property investing.
  •  Stock market outside super – Remains accessible rather than being locked up until your preservation age. Ideal for those with a low income or long term stay at home partner on a low tax bracket. For a non-working partner, 0% tax will be paid on growth until dividend income reaches over $18200 (this will take a while!)
  • Savings accounts and term deposits earning ~2-3 % are really only keeping pace with inflation and are not a realistic option for long term wealth building. Important for an emergency fund though!

How to Start Investing in the Stock Market

So, if you have decided investing in the stock market outside super is appropriate for you, there is an overwhelming number of books and articles on how to do this.  Here are my recommendations for best personal finance books for Aussies.

The easiest route recommended lately is index funds or ETFs.  You have got to open a brokerage account, work out which funds to buy, how to put in the order, and usually need to save up a minimum to be invested.

These barriers can mean people don’t get around to starting for years after they meant to.  Back in 2008, I was a resident having just purchased my home.  I didn’t have a lot of cash to invest, and no idea how to go about starting…if only micro-investment apps had been around, I may have been able to get in on the best time to invest during my lifetime.

You may not have enough money yet to consider it worthwhile investing, and brokerage fees will be an unreasonable percentage of your investment amount.

There is nothing like being invested in the stock market already to truly understand your risk profile.  We all like to think we would hold strong and not sell at the worst possible time.  History tells us its human nature to lose nerve and do just that (sell at the bottom).

What Is Micro Investing?

I am an advocate for micro-investing before you have REAL money spare.  Putting small amounts of money into the market automatically and experiencing the ups and downs and related emotions of volatility.

There are some apps that literally sweep electronic spare change (eg the 50c after buying a $4.50 coffee).  This sounds useful for hopeless savers and broke students to save tiny amounts, but consider the fee structure carefully.  Others you can set a direct debit up, from as little as $1.

Once you have experienced your precious savings (no matter how small) reducing suddenly and unpredictably a few times, you notice the pattern that it always comes up again – and often rewards you for holding on tight.  If you do lose your nerve and take your money out, this is much better  with a few hundred invested than a few thousand.  You will also have a much better understanding of your likely behaviour in a big stock market crash.  This information can be used to design a more conservative portfolio with lower volatility.

Micro-investments are usually re-balanced automatically once you have invested enough to pay fees. I am a fan of automating most things, and this is no exception.  Re-balancing myself 2-4 times a year would provide lots of opportunity for me to doubt my strategy (especially with the market down) tempting me to change allocations.  Its hard to sell your best performing asset!

Micro-investment apps generally charge no brokerage fees.  This is a massive advantage for those with small balances, but the management costs (as they are recurring) break even, and become more expensive than buying assets directly and paying brokerage fees once you have over $50,000, depending on fees obviously.

So, can you start in a micro-investment app and once you have over $50K or so, sell and buy index funds or ETFs?  Yes, but don’t forget to consider Capital Gains tax – which you will have to pay on any gains when you sell.  If you have held the asset for at least 12 months you will get a 50% discount on your marginal tax rate.

Robo-advisors and micro-investment apps are incredible new(ish) tech that make investing far more reachable for those on average incomes.  They often come combined.

What is a Robo-Adviser?

A robo-adviser is an online platform that asks clients a number of questions and uses an algorithm to suggest an investment portfolio – taking in to account factors such as your age, investment goals and risk profile.

They cannot currently make truly independent advice, or consider complex scenarios, and do not give advise on asset protection.  Robo-advisers typically have extremely low fees, involve no human interaction, in my view, lowering opportunity for conflicts of interest.

These robo-advisers are time efficient – there is no need for an appointment, an account can be set up at 10pm in your pjs.  The different platforms often have educational resources to help you learn about investing.

Which Roboadvisor and Micro-investment app is Best?

New apps are appearing in Australia every few months, so there is plenty of choice.  Factors to consider include

  • What happens if the company dissolves? Do the shares belong to me or are CHESS sponsored
  • Minimum for investment
  • Management costs – can be free (with downsides) up to 0.65%
  • Investment choices offered

I have summarized a few points about the apps below.

  Fees Minimum Ownership Investment Choices offered
RAIZ $3.50/month under $15,000 then 0.275% No minimum Legal title of ETFs held by custodian 6 7 choices including socially responsible
Stock Spot Free 1st 6 months

 

0.66% fee or $5.50/ month under $1000

$2000 HIN at CHESS subregistry 5 portfolios offered.  Options for SMSF and Investing for kids
Clover $5/month up to $1000 then 0.65% (0.6% over $50000) $2500 Investments held in your own name in Macquarie cash management account 5 portfolios with socially responsible option within each
Six Park 0.5% up to $199000 $10,000 Assets held in your own name 5 core portfolios to choose fom
First Step $1.25/month under $5500 then 0.275% $1 Australian Executors Trustee (prof custodian) is independent from First Step and holds investments 3 core portfolios to choose from with “themes’’ that can be added to each – including eco, health, tech & Asia
Spaceship Voyager Free under $5000 then 0.05% for Voyager 0.1% for Universe portfolio No minimum External custodian – “If spaceship voyager money could be moved to another responsible entity or assets sold and money returned” Spaceship Voyager (Index fund) or Spaceship Universe (Active management)
Commsec Pocket Brokerage fee (when buying) $2 for up to $1000 –or regular transfers.  No ongoing fees* $50 Investor owns shares 7 portfolios to choose from including Sustainability Leaders
Quiet Growth Free under $10000 (can get more free by recruiting friends) then 0.6% discounted to 0.5% over $30,000 $3000 Investments held by Saxo Capital Markets in your own name 5 portfolios according to risk profile

Vanguard personal investor

  • NO brokerage or management fee if investing purely in Vanguard products!  
  • Can automate regular investing into managed funds, but not ETFs yet
  • 0.1% management on individual share & competetive brokerage

How to Start Investing

Which app is best for you probably depends on how much you are wanting to invest in one go.

I have good personal experiences with RAIZ and Quiet Growth, although the fees with RAIZ are expensive for small amounts under $15000 and Quiet growth gets pricey once you have over $10,000 invested.

With small amounts (under $1000) to invest, First Step or SpaceShip Voyager fee structure looks fairly efficient.

If you have $3000 to start with, Quiet Growth or Commsec Pocket may be more cost effective.

With over $5000, consider buying directly using SelfWealth online brokerage, RAIZ or Vanguard personal investor.  

Pearler have also opened a microinvestment option, although I havent yet had chance to check it out.

Remember you will have to pay tax on dividends, and any gains if you sell your portfolio, and consider the best timing for this.

It is important to get independent advise and not make financial decisions based on an anonymous blog!

Who has used a micro-investment app?  What were your experiences?

There is an updated article including information on some of the stock brokers and how to dollar cost average.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.