Choose Hope: How to Defeat Coronavirus with Stubborn Optimism

Like many health professionals, you are probably scared and uncertain. Last month, your life was normal, even mundane. Over the last few weeks, horrifying reports of the pandemic overwhelming healthcare systems have been bombarding our senses.

Many are finding it difficult to think of anything else. Some are struggling with anxiety and stress insomnia. It’s hard to escape the tsunami of doom when your phone alerts you every few minutes with another report.

This epidemic needs to be taken extremely seriously . We need to follow public health advice on the actions needed, and when to initiate them.

Confirmation bias is very common in medicine, and the rest of life– looking for evidence to support your point of view, and subconsciously discounting evidence that opposes it.

If you are expecting the end of the world, you will keep confirming that by seeing, reading and hearing opinions supporting that dismal outlook. If you cling to hope, you will start to find the positive stories hidden amongst the doom and gloom.

My suggestion is to concentrate on factors you have control over. Stubborn optimism will help us face this pandemic with energy and determination, caring for patients and ourselves to our best abilities. A little faith and solidarity will help us get through this health crisis.  

The Human Cost of Coronavirus

This may be your first viral pandemic, or you may have worked through H1N1 in 2009. Swine flu caused a horrific 151,700-575,400 deaths worldwide. The illness was particularly severe in young people and pregnant women. My personal memories of the pandemic include a couple of sad deaths and the annoyance of putting on and taking off PPE. I was a junior doctor at the time, so was mainly involved in less severely unwell patients.

Influenza causes ~ 12,000-60,000 deaths per year according to the CDC, but is a lot more predictable.

COVID-19 has sadly caused 7,982 deaths, expected to continue rising for several months. It is highly unpredictable, with models of coronavirus ranging from Armageddon to quick containment and herd immunity through vaccination. There are probably too many variables to really make a likely projection of what is going to happen. Due to the rapid transmission of the virus, with a relatively high mortality rate, we have been warned resources will be overwhelmed, limited mainly be insufficient staff and critical care resources

But Australian hospitals have had weeks of notice. We’ve been preparing all this time, and are as ready as we can be with the resources available.

It is obviously impossible to train extra healthcare professionals in a few weeks, and everywhere is affected so we can’t fly them in to help.

But the warnings from China and Italy have given us realistic expectations – and this is a massive help.

Health services have been recruiting medical and nursing students, retired, non-clinical and non-practicing staff. Leave has been cancelled.

Those of us who work part-time have more capacity to increase hours to help with the load. Non- ICU/ED/Paediatric specialities are collaborating like never before, all offering help, ideas and strategies to manage the work.

There are, of course, ongoing challenges. Concerns about supplies of PPE are worrying. The UK are apparently producing their own in factories designed for other things. There must be a way we can produce adequate PPE for this health crisis.
Fear among staff and patients is a significant issue. We will be head down working extremely hard for the next few months. We need to support each other as best we can to get our patients, our health system and ourselves through this.

The cooperation and collaboration going on between specialities that don’t always see eye to eye is something to be celebrated.

Economic Implications

Social distancing measures put in place to control the spread will obviously take an economic toll, damage business, and put casual and low-income workers in an extremely vulnerable financial position. Stimulus packages need to be well targeted for those who really need help, mortgage payments may need to be frozen and we need to be swift to step in help those who lose jobs and are suddenly vulnerable. Flight cancellations and possible closure of schools will obviously have negative financial implications for the economy and families.

Over the last month, the stock market has shown enormous volatility and massive losses, a big worry for retirees who depend on investment income. Uncertainty is always bad for prices in highly liquid assets. Predictions for stock market performance are frequently suggesting a rapid and dramatic recovery, with some predicting complete economic collapse of the world with no recovery in sight.

Public levels of concern are extreme, emptying supermarkets of shelves, and unfortunately causing hoarding and some violence.

Tourism has already been massively impacted, with flight and hotel bookings cancelled, as well as fewer people out in restaurants. Workers in these areas are often poorly paid, on casual contracts and will be the ones unfortunately struggling through this crisis.

I am optimistic with correctly targeted and timed interventions, this too shall pass! Australia got off pretty lightly comparatively in the GFC, lets hope we can do it again.

We are almost all invested in the stock market through our superannuation. Now is not the time to be changing your superannuation allocation. To be honest, I would highly recommend not logging in to your account for the next few months. Your superannuation is invested for the long-term. The value will recover – and while the market is low, as long as you are still earning, you are buying through your stock market at great prices.   There is even a guided meditation to help you keep calm and avoid making rash decisions! 

The coming months may be a good time for some readers to begin investing in the stock market outside superannuation. If you don’t have much cash to spare, the microinvestment apps are a reasonable place to start, and the experience of watching your small purchases plummet and recover, whilst practicing not selling will be invaluable for the stock market crash that occurs when you have significant amounts of your net worth in the stock market.

Control what you can control

There comes a point, when you have all the information to prepare as much as is possible. You know how to put on, and take off your personal protective equipment (PPE), have familiarised yourself with your local protocols and you understand your role in the pending healthcare crisis. You are as prepared as you can be. Your department have been through the frenzy of preparation, and are now just organising smaller details. You have controlled everything within your locus of control.

Many factors are outside of your control. You have no control over rhe speed at which the virus continues to spread globally, mortality rate of the disease, or behaviour of the general public.

Instead of focussing on these things, which will bring no benefit to anyone (unless your public health expert or politician), focus on the factors within your control.

  • Ensuring use and meticulous following or donning and doffing procedures (most health professionals contaminate when removing or doffing PPE). Work in pairs and make sure you are both following procedure
  • Don’t come to work with a cold. You could be spreading coronavirus or any other virus that will cause many more staff members to quarantine
  • Practice social distancing – you are at higher risk of contracting and therefore spreading COVID-19 as a healthcare worker. You could be spreading it for days before showing symptoms. So medical professionals need to be strict about avoiding crowds wherever possible, and staying home when not at work (you’re going to need a good rest between shifts anyway)
  • Avoid travel by public transport including air travel. This is not banned domestically currently, but an infected (even asymptomatic) healthcare worker on a plane seems like the fastest way to spread this disease to different towns and cities
  • Hand washing, more handwashing and a bit more handwashing
  • Spreading the social distancing information online through your social media accounts.

Whenever possible, choose cautious optimism

  • Hope that the vaccine currently undergoing initial human trials is highly effective and puts a rapid stop to the contagion through herd immunity
  • Hope that through consistent messaging, social distancing, hand washing and staying home as much as possible, the virus spreads slowly enough for Australian healthcare to cope, resulting in lower mortality and better outcomes for COVID-19 and unfortunate patients that happen to become injured or sick with something else during the crisis
  • Look forward to several months time, when this is a painful memory. When life will return to (a different) normal, and we will appreciate our mundane routines for what they are -safety and security
  • Hope that the Australian people reflect on our treatment of refugees so far, and person see them as just like us. Living a normal, routine life until something unexpected exploded their world. Hope this breeds more empathy for people fleeing danger, now everyone wishes they could flee to a safe place
  • Appreciate the professionals who risk their lives every day, routinely, to keep us safe. Feeling unsafe at work is new to most of us, and very uncomfortable. Police officers, fire fighters and soldiers for example, accept risk to their lives as part of their jobs. We probably don’t say thankyou enough to these everyday heroes.
  • Hope that we can support those families who have lost their income fast enough to keep them safe and well until the economy and job market recovers
  • Hope the retirees have some cash savings stashed away that will support them until their investments recover

We well get through it. We will care for these patients, as we did with SARS, and H1N1 and all the other severe viral outbreaks we have managed over the years. And eventually, this too shall pass. It will be many months before we know the full human toll of this virus, but it is expected to be significant. The full economic effects may take many years to be understood.  

What ways have you discovered to reduce the stress of the health crisis?  Leave your tips for other docs to read and use.


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How to Include Fun Money in Your Budget

Common and sensible advice, is to save and invest 20% of your net income.  This seems, ironically, both too small to make a significant difference, whilst also seeming a massive lifestyle sacrifice.    So most put it off and lose out.

Front loading savings by investing small amounts from the very start of your career will provide disproportionate results due to the effect of compound interest.  A small degree of delayed gratification is the ‘Secret” to building financial freedom, and eventual independence. 

Some readers are late to the party, perhaps having spent several years spending all that you earn (or more). Although probably earning more, fear of leaving it too late can hold you back.  20%-30% of your net income is a significant amount, and with sustained saving and investing will turn your financial situation around surprisingly quickly.

No matter your stage of life, or how much you earn, progress always feels painfully slow at the start.  Whether you are using your savings to pay down a mortgage, build an emergency fund or dollar cost average into an investment, I doubt anyone gets through this without it feeling hopeless at some point. 

However, over time, it gradually gets easier – interest starts to compound (whether from interest you don’t pay or interest you earn) and it feels less and less like hard work over time.

Around two years of commitment is needed, in my experience, to feel like you are getting somewhere.

FOMO: The Fear of Missing Out

The fear of missing out (FOMO) is a powerful motivator, often used to sell products, experiences and dodgy investments. 

When your friends and colleagues spend insane amounts of money on holidays and luxury vehicles (and they will, long before they are financially ready) you will doubt yourself. 

A little bit of the green-eyed monster (envy) will probably make you wonder whether saving and investing is worth it. 

It can be really difficult to sustain enthusiasm for such a long-term goal.  This FOMO can lead to impulsive spending that can undo a lot of your hard work to date. 

  

Balancing Short and Long term Goals

Nobody’s tomorrow is guaranteed.  We see shockingly premature deaths and terminal illness during our work all the time.  This does tend to give you a skewed perspective.  Of course, the vast majority of healthy people don’t need to see a doctor. 

Particularly sad cases, especially if their lives before illness mirror our own, tend to have a powerful effect on our thinking.  It is definitely not worth living in deprivation for a future that is not guaranteed. 

In reality, life expectancy in Australia is 82.5 years and readers of this blog are in a wealthier demographic than the average. 

It is very likely you will live a long life.  It makes no sense living only for today. 

There has to be a balance between FOMO and YOLO (You Only Live Once), so neither your current or future self is short changed.

Exactly where the balance is right is very individual. 

Why Budget Fun Money

With a long-term goal requiring some delayed gratification, it is vital to have some encouragement strategies along the way.  Some of the strategies I use include:

    • Reading regularly about financial independence through email subscriptions, facebook/twitter and Money Magazine.  I think the subscriptions are important –  I aminvoluntarily reminded of good financial management even when I’m not “In the mood” and over time has helped me refocus·        
    • Setting short-term goals and celebrating them.  Start with regular goals (Save my first $1000…) and wean yourself to longer one
    • Budgeting for “Fun money”
    • Writing this blog – Keeps me busy and less impatient with the inevitably slow progress.  Researching topics in so much detail sometimes gives me a whole new idea or way to look at a topic.
    • Making a financial plan and reviewing it (and progress) twice yearly

“Fun money” should be completely guilt free.  I know how much is allocated to the “fun account” each pay, but don’t track the actual spending within that account. 

Of the household money management techniques I have read about, separating discretionary from essential spending is the key to success. 

Having a smaller account from which discretionary spending, or fun money is spent and saved allows budgeting on a much smaller, and less complicated scale. 

All essential spending comes out of a different account, and so doesn’t need intense scrutiny more than once or twice a year, when essential spending categories are examined to see whether spending can be reduced (e.g. shopping around for cheaper insurance premiums).

Having this smaller account makes spending decisions more transparent. I find it useful to have a separate account for fun money.  Check out my Upbank review for a comparison of Upbank, ING and ME features.  

Instead of money just disappearing, if too much is spent from the fun money account, it runs out.  You are then confronted with the consequences of excessive spending, by denying yourself your favourite takeaway coffee, beer with mates until pay day. 

As long as you stick with the system, this is a powerful way to limit discretionary spending to reasonable amounts. 

You will find yourself consciously making decisions on which discretionary spending item you value more, and only spending on expenses that are worthwhile for you.  Seems so simple! 

Yet this is the cornerstone of effective money management, and spending less than you earn – a skill that most people haven’t learnt, or choose not to practice. 

FOMO even motivates me to save a portion of my fun money, for impromptu fun opportunities.  I’m hoping for a weekend in New York one day.   

Fun Money for Couples

Allocated spending money for fun comes in even more useful when you have merged finances with a life partner. 

It is rare that both members of a couple are on exactly the same page financially – usually one is a relative saver, the other a spender – with huge variations in extremes. 

But this provides plenty of potential for conflict, argument and resentment.  What are the results if one partner is obsessed with saving a home deposit, and the other blows $500 on a play station or Dyson Air Wrap?  Sound familiar? 

These conflicts are almost universal in couples at some time in their relationship.   

It is important to have some completely separate cash that each partner can spend without criticism or judgement. 

How Much Fun Money should I Budget?

Enough fun money should be budgeted so that you don’t feel deprived, but not so much you can afford everything. 

The fun money strategy has to force you to make value decisions. 

Paula Pant is a prominent financial blogger who has coined the phrase “You can afford anything…But not everything”.  I think some on high incomes don’t realise this applies to them too!

Ideally, you would start with a financial plan, and work back to see how much fun money you can afford. 

Many will be better off starting with limiting their fun money to a reasonable level first, and realising that doesn’t mean deprivation, just more conscious spending on what you actually value. 

Not increasing this “Fun money” when payrises occur will result in a relatively painless increase in savings rate over a few years.   

The Aussie Doc Freedom household based our fun money on Barefoot investors advise – 20% of net income on “Blow it” money.  Half of our “blow” money goes towards joint discretionary spend such as holidays, Christmas gifts, and home improvements. 

The other 10% of our net income is split evenly between the two adults, providing a pretty generous allowance to spend on whatever we like. 

Balance priorities for now and later. Allow yourself a fun budget, and stick to it, to build the habit of prioritising the way you spend you money. Spend less than you earn, build up to 20-30% of your net income save. Stick to it for 2 years and just see how far you have come!


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How Do We Pay off Our Mortgage FAST?

We have just brought our first home!!! Do you have any tips on how to pay off a mortgage fast?

Congratulations!
Tips before paying extra into your mortgage:

– Consider putting extra payments into an offset.

This will save you the same amount of interest but you maintain more control (bank can’t stop you withdrawing unlike in a redraw account).

It also means that if years down the track of you decide to rent your home out (perhaps when upgrading) you can tax deduct the interest payments on the loan you have left. If you’ve paid it down you cannot withdraw and tax deduct

– Consider opportunity cost. Your mortgage repayments will reduce in real terms (%of income) due to inflation so will not seem such a burden in 15 years. With interest rates at record lows, make sure you consider investing with your extra cash flow vs extra mortgage repayments

Regardless, you should aim to minimise debt to save interest

– Pay fortnightly instead monthly
– use an offset to store savings for other goals
– salary sacrifice into mortgage (saving on tax)
– pay a bit extra from the start (most powerful effect on total interest paid) perhaps pay as if interest rates were 1-2% higher as a buffer in case of rate changes
– if self employed consider timing income and tax deductible spending to optimise tax and keep money in your offset as long as possible
-when interest rates drop keep your payments the same
– with each payrise put some of the extra into your mortgage each pay

It always feels like slow progress to start, but you get the first 1/3 paid off soooo slowly it really starts to accelerate

The Efficiency (and Unfairness) of Wealth

I have lived my adult life so far on a huge variety of incomes, now in my 40s with a small family and 5+ years into specialist practice.  As my income and wealth have increased, I have noticed a change in the way I am treated by businesses, financial professionals, and the Australian Tax office. 

As a medical student, I somehow managed to survive on a loan and a few thousand dollars from a part-time job.  Unfortunately, I didn’t record this at the time (too busy sticking my head in the sand re student loans), but I suspect I was living (reasonably well) on under $20,000 per year. 

This last tax year, I grossed over ten times that.  I have had an easy no-effort surplus of income to save a few times in my life.   What a luxury!

  1. During internship my salary jumped from $20,000 in loans to $80,000 and I blew most of it on lavish meals out, gifts and travel.
  2. During residency, I was renting a modest townhouse in a cheap area of town, combining finances with my now-husband to bring in an income of $110,000 gross.  Saved the surplus for my home deposit.
  3. Once I secured my job as a consultant, my pay took a big leap, but becoming a parent meant seriously saving for lots of expenses including retirement, childrens’ university fees, childcare fees and school fees.  We have made significant progress in paying down our mortgage, buying an investment property and contributing to superannuation.    I’m starting to feel on top of things financially, and that we are now on track to meet our retirement goals. 

It’s Expensive to be Poor

Money goes further the more you have of it.  An unexpected $2000 car repair bill is a financial catastrophe for a family living paycheque to paycheque.  This causes a lot of stress, and likely results in having to borrow money and pay interest, resulting in the poorer family paying even more for the car repair

For families that barely bring in enough income to cover their expenses, the credit/loan cycle is a dangerous black hole it’s hard to escape from. 

Having an emergency fund (even if it’s only $2000) is a major step in freeing yourself form the credit – interest cycle disadvantage. 

When you don’t have to scrape the money together to pay bills, paying on time can be rewarded with discounts, again saving money for the wealthier family.

If you only have $100 in the bank to last you until pay day and you need to buy groceries, you will buy the bare minimum to meet your family’s needs. 

Having money in the bank allows you to buy when the price is good, bulk buying to take advantage.

Money in the Bank Efficiency

One of the biggest factors in building wealth over the last 30 years has been growth in Australian property. 

People lucky and savvy enough to be able to scrape together a deposit and buy property in Sydney 30 years ago really had to do nothing else to acquire significant wealth, which could then be used to create further income streams. 

Buying a home can be a great first step in building financial freedom, but is not always a good plan.  Don’t just buy any home expecting it to appreciate in value,

Money in the bank of homeowners is often placed in an offset, reserved for something else (holiday, car?) whilst simultaneously working hard saving interest on your home loan and shaving years off your mortgage repayments.

When my 10 year old car does need replacing, I will have the money right there to buy a well thought out a sensible reliable car.    This is far more cost effective than paying for a car of credit and paying interest on car loan payments – a major destroyer of wealth. 

I’ve had the cash to install solar panels on my roof, massively reducing power costs over the years, only becoming a more valuable asset as time goes on (as long as they last). 

Doctor discounts

You may notice this as a junior doctor even.  Companies find out you are a doctor, and they want your business.  You may be a broke intern finally getting your first paycheque, and no money to spend at the business, but companies with longsighted vision want to secure you as a customer. 

This is the reason financial advise / wealth management companies pay to advertise to you as final year students or interns. 

If I were the suspicious type I would say they like to capture you pretty naïve with low financial literacy, knowing your unlikely to switch once you have significant assets under management (money you have invested with them that they are siphoning their extortionate fee from) due to capital gains tax if you sell those assets, time and hassle.

Doctor discounts are heavily advertised for mortgages.  Doctors can generally get a mortgage with only 10% down and avoid lenders mortgage insurance, a major saving. 

This is not saying it is always a good idea to get a mortgage with less than 20% down, but if the property is well selected, and the value is likely to increase faster than your savings, then the earlier you can get in the better. 

Anecdotally, doctors have been able to negotiate harder with banks as desirable customers – with annual fees being waived and interest rates being further discounted.  The banks are not doing this to be kind.  Doctors are very reliable re-payers, and so low risk, and often take on significant levels of debt.

There are many companies that advertise through the colleges, medical indemnity companies and unions and offer a discount to members.  It’s worth checking to see if you can get a discount for large expenses through these connections. 

There are facebook groups such as Business for doctors, investing for doctors that have organised group discounts.  Again, worth joining if your on facebook anyway and looking out for discounts.

Its Not All Positive though: Societal Expectations

Doctors have a reputation for being wealthy.  Most earn well above average income within a few years of working.  There is an expectation that doctors drive a certain type of car, and live in a fancy house. 

But there is a huge difference between a large salary (which can all be spent very easily) and true wealth – a large asset base that will provide income going forwards even if you were unable to work.  Poor choices in house and car are powerful destroyers of wealth.  Society, your family, friends, colleagues and even yourself all reinforce these expectations of how a doctor “should” live. 

Try not to get these expectations get in the way of reality.  Work out carefully what you can really afford, and make sure you have planned for retirement, an emergency fund and a freedom fund (for changes of heart, sabbatical, burnout and family) within a short time of reaching consultant (or before!).

Spend the first few years making sure you are financially stable and set up for long-term security and freedom, and you can then start living the “doctor lifestyle” if that is what you desire. 

Divorce and legal cases

I have never, luckily (and touch wood) been through either of these.  But it is apparent that these are two events that can undo all your hard work over the years of living less than you earn, learning and investing.  Doctors have medical indemnity insurance, which should protect them in event of a medicolegal issue. 

But society see doctors as high income targets – for those looking to shortcut the learning, earning and investing with a frivolous lawsuits.  Luckily here in Australia we are not as far down the litigation road as the US, but will following in the same direction.  Insure well, actively assess and minimise risks.  When selecting assets to purchase, also consider carefully how to structure the ownership for asset protection – you will need professional advice here, but there may be an advantage in keeping your assets in your partners name, in a company structure or family trust. 

There is no way to protect your assets against divorce once the divorce is happening.  Choosing the right spouse is probably the only effective protection, but pre-nuptial agreements are worth considering if one party comes to the marriage with far more assets. 

 

Taxation

To make the system a little fairer, and reduce the rich-poor divide that would otherwise continue to widen due to all these factors, most governments use a “Progressive” tax system. 

Those earning more pay a higher % tax the more they earn. 

It’s always seemed odd to me that you are punished for earning high incomes through personal effort (personal services income) whilst income through a business or capital gains is advantaged. 

Those that plan to stream their income into assets that can produce capital gains or business income will be at even more advantage.  I’ve written a whole post on tax optimization. 

There are many ways in which having a larger than average income gives you multiple advantages that should help you achieve financial freedom within a reasonably short period of time. 

Societal expectations of a “Doctors lifestyle” leads to lifestyle inflation that can waste most of these opportunities. 

Don’t squander all your privilege.  Secure your financial future as quickly as possible and find a way to pay it forward.