We’ve Paid off the Mortgage – What Now?

How to choose the best income protection policy

We've Paid off Our Mortgage - Now What?

Congratulations on paying off your mortgage!

What an incredible achievement!

Most have been so focused on achieving this goal, they are not sure what to do next.

With mortgage repayments gone, you will have a significant chunk of cash flow freed up.

Most will keep their mortgage open whilst fully offset, for more flexibility to withdraw money in an emergency.

If you just want the mortgage closed once and for all, Money magazine has an article on practical considerations of how to actually close your mortgage and obtain the deed certificate.

Whether you close the mortgage, or keep it open/fully offset, there are three main options for your new freed up cash-flow:

  1. Invest it to achieve financial goals
  2. Spend it on lifestyle upgrades
  3. Reduce working to free up time for other passions

The main issue is to make this decision consciously – don’t let it slip away from you through unconscious lifestyle inflation.

Put this hard-earned cash to work for whatever you need and value the most.

Let’s examine each option in more detail.

  1. Invest it to Achieve Financial Goals

Have you developed a financial plan?

You need to know if you are on track for retirement.  To know this, you need to have set your goals.

When would you like to retire?  What will your annual spending be? How much is your superannuation projected to pay out if you continue working as is until your desired retirement age?  If you desire to work less, how does this adjust this picture?

What other important financial goals do you have over the next 20 years – a new car?  A wedding?  Kids’ education costs?  A trip to Antarctica (yes please!)?

Examine your financial goals and current trajectory to decide whether you need to put some or all of the freed-up cash towards reaching your goals.

What is your risk tolerance?  It’s important not to invest in a volatile asset if you’re likely to pull your cash out when the stock market crashes.

We tend to overestimate our risk tolerance.  Were you invested in 2008?  How did you behave? What did you learn?

If you have never been through a market correction, it’s probably best to play on the periphery while you get accustomed to volatility.  Perhaps try a micro-investment app whilst investing most of your cash in a lower volatility asset.

The worst thing you can do is pull your money out when the market is down, in my experience it takes experiencing a couple of market downturns to feel confident enough to ride it out.

What is your tax position?  Do you have a long-term no- or low-earning partner at home who could receive investment income without paying tax?

Or are you a high income household for which tax minimization strategies are important?

You won’t want your money sitting in a bank account for more than a year (apart from your emergency fund) or it will shrink in real value due to inflation.

Inflation is what makes the cost of living increase every year (usually 2.5-3%).

$100 is worth less in terms of what it can by as the years go by.  Your investments need to beat inflation, or you are going backwards.

Generally, higher rates of return are associated with higher risk.

You can work out what % annual return you require to meet your goal using Money Smart’s savings calculator.

You need to know how large a retirement sum you need (25 x annual spending is a reasonable starting point), and how much you will spend per year in retirement.

You can then fiddle with the interest to work out what post tax, inflation adjusted return you require.

It makes little sense to take on more risk with your investments than you need to achieve your goals.

What is your time frame?  Whether you are 35 or 55 makes a huge difference to the amount of risk you want to take on.

Real estate generally needs at least 10 years to be worthwhile, 7 years is often quoted as the minimum time-frame for the stock market.

Your health and life expectancy are big factors in how long you need your retirement nest egg to support you (and therefore your withdrawal rate).

should i make a financial plan?

If you decide you need or want to invest, you have two main options:

a). Dollar cost average into an investment

The easiest and lowest risk option is to simply divert your freed up cash-flow into an investment.

Make this automatic with a direct debit and be patient, you will soon be surprised how quickly it adds up.

Now is the time to do some research – if you don’t yet know where you want to put your money, direct debit it into a savings account and get started with some research and professional advice.

There are many options in investments to choose from:

Cash in the bank is government guaranteed, up to $250,000, even if the bank goes bust.

But you will receive less than 2% interest, which is unlikely to keep up with the pace of inflation (2.5-3% per year).

Term deposits are currently providing equally feeble returns.  Unless you already have more money than you need for your goals, this is not a realistic option for more than an emergency fund and retirement cash reserve.

Bonds – Government bonds are the lowest risk investment.

By paying into a bond, you are lending money to the government, who are considered extremely unlikely to default.

As interest rates drop, bond “Coupon rates” (interest you earn for money loaned) increase, making them more attractive to investors.

Normally, the longer term bonds attract a higher yield, but over recent months this has reversed so that short term bonds are paying out more (this is apparently supposed to predict a stock market crash, but it’s been happening for a while…)

You need a really large investment amount to buy bonds directly, but Bond ETFs can be easily brought via a broker on the ASX, similar to shares.

Corporate bonds – Have more risk than government bonds, but are still considered low risk.  This time you are lending your money to corporations who pay you interest (the yield).

Insurance bonds – These are nothing to do with the bonds above.  They are investment products offered by insurance companies and can contain any type of investments.

If investments are held for 10 years, there is a tax benefit to top tax threshold households, as tax is only paid at 30% on these investments.

Examine the fee structure carefully to ensure the fees don’t consume all the tax benefit.

Peer to Peer lending – This is another, fairly recent way to lend your money, directly to other consumers.

Peer to peer lending connects investors with borrowers, cutting out the middleman so giving both a better deal.

They offer decent rates, especially over 5 years, but the risk of borrowers defaulting is the main issue.

Rate Setter have a provision fund that pays in cases of borrower default, but if there was a huge number of defaults, this would be overwhelmed and investors would lose their money.

Money shouldn’t be invested that can’t be lost, but P2P lending may have a peripheral role in a portfolio (I’ve not invested yet).

Shares – The easiest way to gain exposure to Australian and International equities is through ETFs or index funds.

Buy the whole market initially (broad Australian and International index fund or ETF), and once you have a reasonable portfolio, decide whether you want to be bothered researching individual shares.

Share markets crash, and rebound, and bounce around all the time.

History tells us dollar cost averaging into a broad index fund is the best way to go most of the time.  It’s hard to beat, but you have to stomach the volatility.

The ASX has a basic education online course for beginners .

To buy shares, ETFs, or bonds, you will need a broker.  Google “Broker” and you will find lots of choice.  Look at price (particularly for the size of trades you are likely to make), and education/information provided.

Most people use a discount online broker, although full service brokers still exist.  These offer advice on investments.

Property – The only way to dollar cost average into property is via a Real Estate Investment Vehicle (A-REIT) or BrickX.

There are variable amounts of leverage with these funds, and they do have the advantage of diversifying your investment over multiple properties and mean no landlord hassles.

A-REITs also have the advantage of more liquidity than a direct property investment which you have to wait to be sold.

There are residential and commercial real estate trusts, allowing individuals to dip their toes in the commercial property market, which is often considered higher risk to buy a single asset in and may be financially out of reach for many investors.

b). Borrowing to Invest

If you have an appropriate time frame and are willing to take extra risk, leverage can increase returns.

The equity in your home can be used to borrow funds for an investment property, or for those with knowledge and experience, shares.

Leverage is a double-edged sword in my humble opinion.  It can magnify returns but makes it possible to lose more than the money you have put in, and in extreme circumstances can threaten the home you have worked so hard to pay off.

Leverage needs to be considered carefully, first minimizing risks.

2. Upgrade your lifestyle

If you have already hit all your financial goals, are on track for retirement, have an accessible healthy emergency fund and are happy in your work, perhaps it’s time to upgrade your lifestyle.

Or perhaps you’re putting some money towards investments but feel you can afford to treat yourself a little.

Consider carefully before committing to ongoing regular costs and ensure they are really worth your time earning them.

Take some time to consider what will really produce the best benefit to your lifestyle.

In the words of Paula Pant, “You can Afford anything, but not everything”.  I don’t think most doctors believe this applies to them.  It applies to everyone!

Spend some time thinking about what will really improve your quality of life, instead of impulsive purchases.

Experiences seem to produce more ongoing pleasure than products, especially if planned in advance and anticipation and delayed gratification are involved.

My personal priorities would be 1). Increase holiday budget and plan an AMAZING trip every year 2). Take time off at half pay so that I can take more time off during school holidays to spend with my little ones 3).  Getting a cleaner so I don’t have to spend my precious time off doing boring housework.  Everyone’s different though!

3. Reduce working to free up time for other passions

Perhaps the best improvement in lifestyle would be to work less.  Part-time work is an amazing opportunity, in my opinion, to live a more balanced life.

With more time to enjoy with my family, and indulging hobbies, when I return to work I am more refreshed and able to enjoy work more.  I appreciate the benefits of more time to look after my health with regular exercise and healthy meal planning and preparation.

Consider if part-time work would improve your lifestyle.  Once in the top tax bracket, cutting hours has a disproportionally minor effect on pay due to high taxation as you get paid more. See more about optimizing your income for tax.

If you are unable to cut your hours permanently, perhaps you could take some more time off unpaid (for the self employed) or on half pay to allow longer holidays.

No matter what you choose to do with your freed up cash flow, this is an exciting time of life, with a plethora of opportunities to choose from.

Enjoy your debt free (or non-deductible debt free!) life and the freedom that comes with that financial security of completely owning your own home.

Do I Regret Investing in Property

Do I Regret Investing in Property? The First Six Months

Just over 6 months I finally took the scary leap to purchase a property for investment purposes.  I say finally, because I have had a vague plan to invest in property for over 15 years, but never felt I was financially ready or knowledgeable enough before last year.

I spent a long time weighing up the pros and cons of property vs shares.  Then spent hundreds of hours reading property investment book, listening to The Property Couch podcast, analysing data from Your Investment Property Magazine and walking the streets before finally deciding to use a professional buyers agent.

The looming election in 2019 helped me bite the bullet – labour intended to end negative gearing (apart from on new properties).

I wanted to get in to the property market before any changes occurred.

Labour lost that election, and negative gearing is probably safe for another few years.  But I thank Labour for creating the urgency needed to end my analysis paralysis.

I had, based on another medic’s recommendation, started listening to the Property Couch podcast.

Over many episodes, I had developed a sense of trust in Bryce and Ben, the friendly duo imparting free wisdom every week.

I reached out to their company, Empower Wealth for help in selecting a great quality property investment.  My detailed review of Empower Wealth is here.

Closure of the property went very smoothly, Empower Wealth walked me through each step with clear instructions and great organisation.

They helped me select a property manager  who started viewings for rent before exchange and I had multiple tenants applying to rent the property – outbidding each other to secure the home.

This level of competition was not expected but encouraging.  I had been pretty nervous so was reassured the potential tenants obviously thought it was a great property.

Australian property rent or buy

Property Investment Teething Problems

My new property agent helped me pick through applications and weigh up pros and cons of each potential tenant.

I ended up signing a contract with the most reliable and trustworthy sounding tenants.  This was all made easy by the property manager.

There were a number of phone calls in the first two weeks, and I found myself concerned this property investment deal was going to be a big hassle.

There were minor unforeseen issues, like the oven not working and needing to be replaced, tenants having difficulty finding plumbing to attach a washing machine.

None of this was especially cumbersome, but if it was a weekly occurrence going forward, I would have resented the hassle.   I was looking for a passive (ish) investment, not a weekly commitment.

Things settled down though.  The initial issues were fixed, the rent arrived regularly on time, and the property manager organised payment of all bills, taken from the rent.

It should be pretty easy at tax time to have all the property income and expenses (apart from interest) recorded on the property manager’s online platform.

The property manager communicates regularly by email, which suits me well.  They also have an online portal I can log on to view expenses and rental income.  The net rent is transferred to my offset account every fortnight, to put towards mortgage payments.

So far my calculations on affordability have proven conservative, and  I am having no issue with covering the mortgage payments.

I accompanied the property manager for the first inspection, which went well.  The tenants have extended their lease, which I’m thrilled about.

For now, things are pretty easy.  The repairs required have been very reasonably priced .

I’m grateful to the property manager for having a network of proven reliable and fair priced tradespeople.  I haven’t got a similar list for my own home where I have lived for over a decade.

So far, I’m really happy with the property investment experience, I am realistic that there will be times (particularly around change of tenants) that it will be a bit of a hassle – making decisions, choosing tenants and following up on damage after tenants have vacated.  Having a property manager has shielded me from most of the work involved.

We’re saving hard again, with the rent coming in being more than we had planned for, and further drops in interest rates we are already saving for our next property deposit.

It’s too early to know whether the property is performing as predicted, I’ll update when I have a new valuation.

How to Make Australian Income Tax Efficient

should i make a financial plan?

How to Make Australian Income Tax Efficient

Tax was my highest expense in 2019/2020 – four times the cost of my next largest expense (housing).

If you’re paying tax, you’re earning income.  If you’re paying lots of tax, you’re earning plenty of dough, so have no reason to complain!

But not all income is equal to the tax office.

Tax avoidance is illegal, and will land you in serious hot water!  Definitely not worth taking any risks.  But the Australian Tax office (ATO) allows tax optimisation.  A small reduction in your tax bill can make a significant difference to your take home pay.

We will discuss some of the ways to make sure you are paying only the tax you are obliged to in this article, starting with the big power moves, and moving on to the easier, small but important optimisations.

Consider More Tax Efficient Income

As your income increases in Australia, the tax efficiency declines substantially due to the “Progressive tax” system (the more you are paid, the higher % of your income you pay in tax).

Taxable income

Tax on this income “Marginal Rate”

Net income for maximum in bracket

0 – $18,200



$18,201 – $37,000

19c for each $1


$37,001 – $90,000

32.5c for each $1


$90,001 – $180,000

37c for each $1


$180,001 and over

45c for each $1

No max

Table from ATO website

Investment income is also taxed at your “Marginal rate”, but Capital gains are discounted by 50% if the asset (e.g. property or shares) is sold after at least a single year of ownership.  If you made all your income in a year from capital gains, you would halve your tax rate!

In contrast. Business income is taxed at a flat rate of 30% with small businesses (up to $50 million annual turnover) currently taxed at 27.5%, reducing to 25% for 2021/2022.

If your business income is produced more than 50% from your personal work /skills (Most GP or private specialist practices) it is classed as “Personal Services Income” and taxed at your marginal rate (completely losing out on the advantageous taxing of businesses).

Business income has to be a genuine business, at least 20% needs to come from business income rather than passive investments (some would open a “Company” to keep assets under and pay tax on rent/dividends on business rates rather than marginal rate).

Once you earn above $37000 annually (32.5% marginal tax), income is more efficiently earned through business (25-27%) or capital gains (Up to 22.5%).

You are actually penalised by earning income through personal effort!

It’s definitely worth investing outside your career in medicine and start creating income taxed more advantageously.

Salary Sacrifice to Pay 15% tax Instead of your Marginal Rate

Salary sacrificing your accommodation costs is as close to a no brainer, easy tactic to reduce tax paid for those whose employer offers this great perk.  Cut through the confusion with my article on salary sacrifice for doctors here.

how to pay less tax

Utilise Your Partner’s Marginal Rate

Single income families are disadvantaged by the tax system.  A couple each earning $150,000 would pay 32.7% of total gross pay in tax.  A single earner bringing in the same household income of $300,000 will pay 41.2% in tax.

Having a stay at home partner/parent is far from a purely financial decision, and the Aussie Doc household have chosen to make this choice, despite the tax disadvantages.

The one advantage of having a non-earning partner is their marginal tax rate – 0%.  That’s the best you can get!  Your stay at home partner can earn up to $18,200 per year in investment income without paying tax.  That’s better than superannuation!

Remember, to think in to the future – if your partner returns to work will it still be advantageous to have the investments in their name?  Selling the investments will result in paying capital gains tax (hopefully with 50% discount if held for more than a year).

Keeping Lifestyle Expenses within a Lower Tax Bracket

There is an argument for purposely keeping annual spending under the next tax bracket (minus tax), and using the excess income to fund tax advantaged investments, or to allow part-time work.

Pay / grade

Income Tax

Total tax as % of gross income

Intern $70k

14297 + 1400 medicare levy


RMO ~ $90k

20797 + 1800 medicare levy


Registrar ~ $150k

42997+3000 medicare levy+875 MLS


Specialist ~ $300k

108097+6000 Medicare levy+ 1759 MLS


From the table above, if the $300,000 specialist cut down to 0.5FTE their tax % would reduce from 41.2% to 32.7%.  Instead of receiving $82.80/hr after tax on average, he/she would receive $97.10 net per hour worked.

Not everyone would want to work part-time of course, but the choice to do so is limited by costs of annual living expenses.

The specialist would have to keep their annual spending under $100,991.  How much a doctor allows lifestyle inflation to absorb his / her pay is the main barrier to having this choice.

How much house can I afford?

Negative Gearing

I almost didn’t include this for fear of encouraging you to invest to save tax.

Investments should be made for their anticipated (well researched) returns.

Many, many doctors before you have fallen foul of making investments to save tax -and lost a lot of money in the process.  If the underlying asset does not perform, you are literally throwing money away!

But if there is an excellent asset (property or shares) that you would like to invest in, negative gearing may be an added bonus.

Negative gearing is more advantageous as you reach the higher marginal rates.

If you brought a well-researched property, but the costs of holding that property (Interest, property manager, repairs and rates) are greater than income produced from rent, you will be losing money each year.

Australia is unusual in it’s willingness to let you deduct this “loss” against other income sources, therefore reducing tax paid on your primary income, and reducing your loss in holding the property.

The idea is that the increase in house value over time more than compensates for this loss.  The big risk comes with choosing the asset … again, a poorly performing asset completely destroys this strategy.

Emergency fund for family emergencies

Doctor Tax Returns

You are able to deduct work related expenses at your tax return.

The average intern receives a small refund (A great starter fund for your emergency fund, house deposit or first investment).

More senior doctors deducting significant amounts annually should consider a PAYG withholding variation to adjust the amount your employer withholds for tax out of each pay.

This allow you pay less tax fortnightly – a great strategy if you are self-controlled and can direct the tax saved into a mortgage offset account.

If you are receiving a $10,000 refund, you are effectively lending the ATO that money tax free.  You can bet they won’t return the favour!

If you are a home owner with a mortgage of $100,000 at 3%, you could save yourself ~ $300 in interest over a year by having the tax in your account instead of taken out of your pay.

Potentially deductible items include: 


Medical equipment (eg stethoscope)

Self-education (courses or text books, journal subscriptions)

Branded work uniform clothing (Not regular smart clothes)

Professional indemnity fees

Phone and internet fees for the portion used for work

Laundry expenses for washing work clothes

Home office expenses (eg electricity)

Overtime meal expenses (check specifics with accountant or ATO).

Donations to tax deductible charities

Accountant fees

Travel expenses only if you travel between from your place of work to another (Not just a commute to work) – accommodation, flights, food

You will need to record all these expenses and check whether you can claim them.

Have a system for recording your expenses easily.  The ATO have an app, but the first year I used it they deleted all my data.  I now keep a notes document on my phone with pictures of receipts embedded in document.

Locum Doctor Australian Tax Efficiency Hacks

Travel and accommodation are often covered by the hospital or agency, but if not could be deductable.  For irregular locum travel, you may be able to claim cost of food so keep receipts and remember to ask your accountant.

If you earn more than $75,000 as a sole trader, you will need to register for GST, and pay tax quarterly.

If you earn less than that (as I do with irregular locums when dates/hospitals suit), you are able to keep the entire income until your tax is due after June 30.

For fellow mortgage slaves, this money could potentially sit in an offset for over a year!   Just remember to put aside how much you may need to pay in tax (I just put 50% of income in a “tax to be paid” offset for simplicity).

Accidentally spending tax owed seems to be a common issue, especially for the 1st year or two of self-employed business, so watch out for this!

Best Buyers agent

Timing Income and Tax Deductible expenses Optimally

This is especially relevant to those with a mortgage offset account, as significant amounts of interest can be saved.

For those under the threshold for GST registration (<$75,000 in ABN income) it is advantageous to earn this early in the tax year – if you could earn $40,000 in gross side hustle income in July and sit this in an offset saving 3.3% you will not have to pay up the tax until September/October of the following year – saving up $1500 in interest!

Similarly, although unlikely as powerful is trying to time tax deductible expenses for the end of the tax year.   If you need to buy a new laptop or pay for an expensive course, the want to minimise time between you paying and receiving a tax refund, so your money is in your offset as long as possible.

First Home Savers Scheme

If you’re not yet contributing up to the $25,000 concessional cap (which is taxed at just 15%) to superannuation, and saving for a house, consider using the First home savers scheme to boost your deposit with tax savings.

See the ATO to check eligibility as well as small print conditions.

Mortgage Offsets

Mortgage offsets have been mentioned a few times in this article and for good reason!

For those that have a mortgage, putting your savings in an offset will save you more interest (currently 3-4%) than any high interest savings account (currently 1-2%).

Interest earned from a savings account would be taxed at your marginal rate – interest saved is not taxed.

Australian Tax Optimisation Using Discretionary Trusts

Income splitting is illegal in Australia.  You are unable to split your personal services income between yourself and your spouse.  Sorry!  Again, we are back to the disadvantages of having high and low earning partners as opposed to two moderate earners (significantly more tax for the unequal spouses).

Investment income, however, can be far more flexible.  Property or shares can be put into a “Discretionary trust” where earning can be distributed to whichever beneficiaries are most advantaged that year.

It is worth thinking ahead, small children now will be university students in 10 years and may attract a marginal tax rate of 0%.

Optimising Tax Efficiency of Australian Income – But NO Tax Avoidance!

It is worth making sure you are optimising tax within the ATO guidelines.  Watch out for “tax avoidance” investments or schemes.

Many a doctor has been caught out, motivated to avoid the punitive tax levels associated with personal services income, and lost all their money as a result.

Choose your investment first, then optimise for tax not the other way round.

Money Confessions of a 40 Year Old Doctor

Financial Confessions of a 40-year old Doctor

I started work as a terrified intern saddled with, what seemed at the time, a huge amount of debt.

I remember wishing there was some sort of financial guide to help me dig myself out of debt, and use my wage in an efficient manner to create financial stability.  In comparison with our US colleagues Aussie graduates have it really easy, but debt never feels good.

Through the years, finance rarely came up in conversation with older doctors.  It’s something we just don’t talk about.  I have been frustrated, after making financial mistakes, to discover many senior colleagues had made similar errors.

The idea of this blog was tumbling around my head for a couple of years before, during hotel downtime between locum shifts, I took the plunge and started this site.  In writing this blog, please do not mistake me for a finance professional or expert in investing.  I simply want to share financial shortcuts and mistakes discovered over my career, and encourage others to do the same.

On to my mistakes, in the hope my confessions can help you avoid regretful decisions, or at least make you feel better about the choices you have already made.  Please don’t judge me for the stupidity of youth…

Financial Confession No 1: Debt Management

I was brought up to understand debt is bad, and mortgages a necessary evil that should be paid off asap.  In some ways, I heeded this wisdom.  I have still never borrowed for a car purchase (a major destroyer of wealth).  In other areas. I completely flunked this test of patience and self-control

University loan payments – that magical money that arrived in my account to be spent on beer, clothes, rent and books. Loan money didn’t seem “Real”.

I wasn’t earning it and I told myself that it would feel like a small tax out of my generous postgraduate wage.  I wasn’t particularly extravagant as a student, but certainly could have done with treating my loans like “Real money”.  I have now experienced paying the whole painful amount back dollar by dollar.  For any student readers, don’t deprive yourself, but do make sure your spending consciously and cautiously!  You will have many better things to spend your money on 5-10 years after graduation than paying back debt.

In the last six months of medical school, I got a bit spendy.  The looming promise of a regular pay cheque convinced me to relax a bit more.  I swiped my way to several thousand dollars in high interest debt (at 29.9% interest, at the time this did not even fill me with horror.)  Unthinkably dumb! So many people live like this – trapped in a cycle of paying off minimum amounts of credit card debt by huge interest charges.  My first few intern months were spent on paying this silly debt off.

Not completely cured of stupidity, after buying my first home, I succumbed to the temptation of decorating it with “Decent” furniture asap.  A trip to a local furniture store later, I had acquired several pieces of new furniture on an interest only deal!  I thought I was being super smart (and keeping the money in my new offset account)…. They charged administration charges to the “Interest free account” so I may as well have been paying interest, and ended up paying for this furniture for long after it was new and filling me with pleasure to use.  And of course, I spent the offset money on something else.

biggest money mistakes to avoid

Financial Confession No 2: Home purchase and renovations

My home purchase I do not count as a mistake – it has given us shelter, a sense of security and finally, after a decade – I’m paying less in mortgage payments than I would have been in rent.  Whenever you hear a widely accepted truth, such as “Rent money is dead money” stop and question it.

In this article, I discuss and calculate, whether a home is better financially to buy or rent.  Money isn’t everything, and the sense of satisfaction and stability are priceless.  But financially, I would have been far better buying an investment property in a capital growth area (or putting savings into index funds) and continuing to pay rent in the regional town I lived.

The “Big Reno” has a created a house that fits our family’s lifestyle so much better, with loads of room for the kids to run around, and a pool they have learned to swim in.  We love it!

But we over invested, and it will take quite a few years in measly growth to make the money back in value.

Before you take on a big renovation, consider the financial aspects, top value house in the area (you want to spend no more than your renovated house will be worth) and whether you would be better buying, taking in to account 6% buying and 2% selling costs.

Financial Confession No 3: New Car purchase

Most people have no idea how much of an impact their behaviour with cars affects their long-term financial outlook.  Buying new cars, trading in regularly and car loan interests can steal your financial freedom.

Mr Money Moustache has analysed all aspects of financial efficiency in life and gives some great advice about cutting the costs of car ownership.

My “crime” was to buy a new car.  I was scared of buying an unreliable second hand car.  And maybe a little bit felt I deserved better than the hunks of junk I had brought so far in cash.

That was a decade ago (but feels like 5 minutes), the car was not particularly well looked after (I’m lazy) and is scratched, dented and looks suspiciously like I may be allowing homeless people to live in it.

But it still gets me from A to B, and will last me (hopefully) for at least another 5 years.

Disappointingly, the New car feeling lasted for a few weeks.

The most cost-effective way to own a car is…don’t.

After that a great 2nd hand car from a very reliable make, is far more efficient given the huge losses in value from depreciation over the first 5 years of a car’s existence.  Holding on to that car until you need to replace it (rather than when you get bored, or it begins to look scruffy) also improves efficiency.

Financial Confession No 4: Not Paying for a Financial Advisor, and taking advise

I thought I was doing the responsible thing, after a big jump in pay, to see a “Financial adviser” to organise my finances. It turns out he was an insurance and managed fund salesman.  He did get my partner and I to review our insurance needs, and secure better life and disability as well as income protection insurance at a relatively young age (the premiums increase steeply during 30s).

However, he also convinced me to move my superannuation to a “Superwrap” product that was charging 4%!  I was reluctant, but he was pretty convincing that the better performance would outweigh the fees, and after all – you get what you pay for.  They didn’t of course, and after 3 inefficient years, I moved my superannuation to the original fund and will likely stick with them until retirement.

Remember, the fees are the only thing that is ever guaranteed!  Ruthlessly minimise fees to get ahead.

Finance confession No 5 Salary Sacrifice

For years, this just seemed too confusing, and I was too lazy to take advantage.  Ridiculous!  Too lazy to make a phone call and fill in some forms to get free money (the tax I paid!  Every time I changed job, this was a big hassle I often didn’t get round to sorting out for months or years.  It is a great deal, don’t be lazy, Read this article, and salary sacrifice your accommodation costs and superannuation

financial drift

Financial Confession No 6: Drift

“Drift” is a term I first heard on the US based Choose FI podcast and it summarizes a common pattern I fell in to.

I have always been interested in personal finance, but often get to a point (especially in my early training years) where progress towards financial goals was extremely slow -and I would lose interest and focus for years at a time.

During this period, automated actions such as paying into my mortgage continued, but extra income that was gained through pay rises was absorbed into the households spending unconsciously.  Actively using those pay rises could have got me to financial goals faster, but nothing changed until I snapped back in to goal setting mode.

Drift is almost inevitable, for a medical professional probably even more so.  The demands of work, postgraduate training and exams are extreme.  You will not have time to keep your finger on the financial pulse of your household too.

Set your goals. Automate as much as possible (savings & investments), make an appointment with yourself to review your goals and progress.  Set a reminder on your phone, calender or email once or twice a year to meet with yourself (and partner if you have one) to limit the destructive effect of drift and keep on track to your financial goals.

Financial Confession No 7: Money organisation

With our mortgage, 10 years ago, came multiple offset accounts.  This should have been great, but meant to a disorganised mess with overdrawn fees as a result of money being in the wrong account.

Each household needs a money organising system.  Finances get more complex as you grow older, and often spend on many more items.

I have trialed a few systems, the most important feature seems to be separating discretionary spending (Wants) from obligatory spending (Needs).  There are some grey areas, but decide for yourself what are Wants and needs, and pay for wants our of a separate account – with a set amount to spend each week/fortnight/month.

Barefoot investor is the system I have adopted.  Empower wealth have a book and online platform free for use by anyone.

Hopefully I’ve given you some red flag signs to watch for before making any big money mistakes.Anyone want to make feel me a bit better by sharing their own financial errors?

How to Develop a Financial Plan and When to Do it

should i make a financial plan?

How to Develop a Financial Plan and When to Do It

Should you employ a professional financial planner for a detailed roadmap of your financial journey?

Or can you develop your own plan, keep moving in the right direction and review and adjust along the way?

I’ve included a graph for the science lovers (based on “Observational data”).  This one demonstrates my observation of doctor planning temperaments compared with the general population.

Clearly, I am on the extreme left – hence my need to research each financial decision in such detail I may as well write the article and share online!

should i develop a financial plan

If you “Wing it” completely with finances (by ignoring them), it is very likely you will end up with inadequate investments to live your ideal life in years to come.

Time spent developing a  plan will get you closer to your goals (even if you don’t really know what they are yet).

A rigid plan stuck to without wavering may be best for those with definite goals and time frame, and to whom a “Set and forget” plan is appealing.

But life plans and financial markets change, presenting opportunities and challenges along your journey, sometimes best served with some flexibility with planning.

Financial Checkpoints During Your Career.

Significant pay changes or life events (co-habitation, separation, starting a family) are important opportunities to assess your long-term financial situation and make or adapt a financial plan.

At entry to internship it’s possible to maximize the power of compound interest with tiny amounts of savings ($100 / fortnight?) for incredible results over 30-40 years.

 Amount invested per fortnight

Years invested

Projected balance at 7% growth










When moving up to registrar, most receive a significant bump in pay – an opportunity for lifestyle inflation or getting long-term financial plans on track.

Starting work as a General Practitioner or Hospital Specialist involves another bump in pay, though with less time for compounding, still a significant opportunity to save and invest.

Pre-retirement – A check-in 10 years before retirement is important to ensure you are on track.

These review and plans can be performed with a professional, or independently depending on your financial literacy, complexity of investments, personality and time.

setting longterm financial goals is really hard

Should You See a Financial Planner to Develop a Detailed Financial Plan?

Seeing a financial planner can help non-planners start setting goals to work towards.

The deadline of an appointment demands answers to the tricky questions such as home and travel aspirations, child education costs, expected retirement age and income for an acceptable retirement lifestyle.

For the younger folk, setting these big goals seems overwhelming.

When retirement is 30-40 years away, how on earth do you work out the income desired?  It’s easy to put it in the “Too hard basket”.

Face the tough questions now, knowing the answers won’t be perfect.  Your goals can always change, but working towards a plan is likely to land you in a better financial situation than burying your head in the sand.

For those that tend to worry, a professional financial plan can provide a sense of certainty and reassurance.

For those with an ambitious target or tight time frame, a professional can help work out if your target is realistic, and form a plan likely to achieve your goals.

If you come in to a significant lump sum windfall and don’t have a plan for it, it’s best to find a trustworthy professional to get a sensible plan.  It’s important to avoid falling for a scam or impulsively speculating in risky investments.

Individuals with only basic understanding of finance, and little interest or time to invest in the topic will benefit from using a carefully chosen professional.

Having a written plan (professional or otherwise) can help you stay the course when the inevitable market crash occurs.

A dip in the market (Property or shares) is a valuable opportunity to take advantage of the coming recovery by pouring as much in as you can manage.

But a fall in stocks tends to prompt the opposite behaviour.  Panic selling at the worst possible time locks in a loss.

A written plan stating your behaviour if your asset value falls  (10 or 20%) to invest a planned amount more per pay, or continue with original plan regardless.

A professional financial plan is an expensive exercise ($2000+) so you want to time this carefully to get the most value.

The plan can only take into account your situation at the time and anticipated future circumstances.

Life often changes far more rapidly than we anticipate, sometimes making a plan irrelevant in just a few years.

If you are paying for a financial plan early in your career, it is worth checking the cost of plan reviews and adjustments.

Your plan will be based on the current assets you own (superannuation, property and other investments outside superannuation) and estimated future performance of those, as well as continuing investments.  Anticipated growth is based on long-term historical performance.

Past performance is the best indicator we have, but does not always predict future growth.  1-2% error in estimated growth can make a huge difference to your situation in 30 years!

We may be about to enter a disastrous or amazing decade for investing – nobody really knows!

Starting Balance

Yearly Contribution x 30 years


Projected Balance













The closer you are to your goals, the less important the anticipated growth and inflation, and therefore the more accurate your plan is likely to be.

By the time you are 10 years ahead of retirement you really want to be confident you will hit your goal on the current trajectory.

If you have left it later than this, it may be a little belated to make magnificent changes to your financial situation, but a professional can help work out where you stand and how your options weigh up (Working longer, downsizing home, retiring with less).

The timing of your plan in relation to market movements may result in over or under estimation of your projected growth.

Plans written during a bull market (when markets are hitting all-time highs, as currently) may overestimate.  Those formed during a bear market (when the stock market falling, on the news daily) may underestimate.

The most important issue if you decide you would like a professional plan will be to find a trustworthy, qualified and competent advisor.

Professional or Otherwise You Need a Financial Plan

Preparing for a Financial Plan

Whether you are seeing a professional or developing your own financial plan, you will need to gather lots of information, and make some decisions before working out a plan.

Especially if you are paying for a plan, make sure you have enough time to work through this properly to get the most value for your financial planner fee.

Start by brainstorming your hopes and dreams over the next 40 years, with your significant other if you have one.

Divide them into time frames.  What would you like to achieve in the next 5 years, 10 years, 20 years etc.

Estimate the age at which you would like the choice to retire.  Are you happy with that being your preservation age (bearing in mind this may change in line with the ageing population)?

If you want more control over your retirement age you will need some assets outside of superannuation.

It can be intimidating to estimate your desired retirement income 30-40 years in advance.

Consider your current expenditure as if you were retiring this year.   This can be performed manually (for example calculating spending over a 3 month period) or through one of the banking apps designed for this purpose.

Which of your professional expenses will disappear – commuting, work clothing, AHPRA and college fees?

Will you still need any personal insurance?  Will you still be paying premiums?

Do you currently have children at home that will be independent by the time you retire?

How much do you currently spend on travel? Is this enough to maintain your traveling aspirations in retirement?

Come to a figure in today’s days dollars.  This is your retirement income in today’s dollars.

You will also need to know what assets you currently own, and how much you are currently contributing to superannuation and other investments.

The final information you will need is whether you have any surplus income you can put towards your goals.

Analyse recent spending.  Do you have a surplus already?  Is there spending you would be happy to cut back on to produce a surplus (or grow a bigger one).

List any further assets, liabilities and income from all sources.

Developing a plan

Your superannuation fund likely has some extremely basic modelling for projection of retirement income.  Read all the small print to ensure whether it is taking into account fees and insurance premiums.

Each retirement calculator uses different assumptions so comparing a couple of calculators.

Is there a gap between your projected retirement income and the income you desire? Calculate how much you need to invest (inside or outside super) in order to fill the gap before your desired retirement age.

At the early stages of your career, it may seem impossible to get a realistic idea of your situation, and a professional plan too expensive.

Investing something ($100/pay) – and increasing that every year (1/2 of pay rise?) is a great start.

A formal finance review and plan can then occur mid-career to assess what adjustments are needed.

Investing automatically via direct debit (and ignoring the market dramas) is the easiest way to slowly grow financial security and freedom.

Where will you put these savings?  This depends on what growth you need, your risk profile and what suits your situation.  For long-term goals, you will need to outgrow inflation (~3% long-term).

Professional advice, robo-advise or lots of personal research are your options in deciding which way to go.

If your plan is more complex, involving investment properties and/or debt, it is likely worth paying for either a professional planner or purchasing financial projecting software.

should i make a financial plan?

At certain times of life, a detailed professional financial plan may be a good plan – Coming in to an unexpected large sum of money, or other large and unexpected changes in circumstances, starting a family, and planning for retirement.

But an independent professional plan is an expensive exercise, and it is all based on educated best guess assumptions for future growth.

If your finances are fairly simple, many choose to work on their own financial plan, working on rough estimates to get them closer to their intended goal without the large expense of a professional plan.

The one thing that is absolutely no use is to stick your head in the sand.  It is important to have an idea of where you currently stand financially, set goals and work towards them.

Should You Protect Your Income? The Ultimate How to Guide

Do you need income protection?

Should You Protect Your Income? The Ultimate How to Guide

There are massive changes coming to income protection.

Despite being the most expensive personal insurance, and premiums increasing recently, insurers are losing money annually.

The Australian Prudential Regulation Authority (APRA) has stepped in to address concerns about insurance provider sustainability. An open letter from APRA to insurers outlines its intentions for the near future.

Changes are planned to commence March 31st 2020, when it will likely become impossible to secure “Agreed value” policies covering more than income in the 12 months preceding the claim.

From July 2021, further changes are expected, with abolition of agreed value policies altogether and insurance policies requiring renewal every 5 years – under new terms and conditions.

My take on this is that income protection is going to become even more expensive, and less generous.  If you are considering starting a policy, talk to an adviser as soon as possible to try and get in before the changes.

What is Income Protection? How Does it Work?

Income protection is the personal insurance you are most likely to claim.  It provides a regular income in case of inability to work due to illness or injury.

Those over the age of 25 will usually have some automatic income protection through their superannuation, but those under 25 have to request insurance.

We see patients becoming unexpectedly injured or severely unwell at work all the time, but often don’t consider the financial consequences of lost income – which can be severe enough to cause home repossession.

Most people, including doctors, feel somehow immune to these random events, but of course they can happen to anyone.

Do you need income protection?

Do You Need Income Protection?

This really depends on your situation.  What would happen if you contracted an illness or catastrophic accident requiring months to years off work?

Unless you are financially independent through investments, or have someone who loves you earning more than enough to support you both, it is likely you should have some income protection.

Even if you don’t need insurance now, it is worth considering whether your needs are likely to change.  Do you plan to have children?  If you will need income protection within the next 5 years, consider securing the policy now.  Premiums escalate surprisingly rapidly as you age (significantly in 2-3 years during my 30s as I discovered!)  Delay also risks developing a medical condition in the meantime that could make you un-insurable, far more expensive to insure or have significant exclusions in your policy.

How much Income protection do You need?

This is tricky!  It will take a detailed look at your budget, and what your obligatory expenses are (you won’t be holidaying overseas if your ill enough to claim income protection).

Then you need to look into the future and anticipate changes to those expenses.  For the reasons outlined above, it’s best to make your policy as future proof as possible.

Consider other sources of income. How much of your obligatory expenses could be covered by your partners income?  Do you have any investment income coming in that would continue despite illness or injury? Also take in to account any significant long-term savings that could help financially support you.

Remember to calculate gross income required – your benefits will be taxed as personal income.  You may (in the next few months) still be able to secure an “Agreed value” insurance policy.  This means you will be paid a prior agreed benefit in the event of a claim (Up to $30,000 per month).

It is likely agreed value insurance policies will not be possible after July 2021 (perhaps sooner).

The other type of policy (the new norm) is “Indemnity Value” – the benefit paid is based on your income immediately prior to the claim.

Indemnity value policies may be better for those going up the payscale over the next few years, but could be disastrous for individuals becoming ill or injured after 12 months of parental leave, other extended time off work, or the 1st year of a private practice before profits kick in.  It also could be detrimental for those whose health has been deteriorating for a period of time, and who have reduced hours worked as a result.

If taking out an indemnity value policy, try to find one that will calculate the benefit on your income over the past 3 years to minimise the risk of being short changed.

How to choose the best income protection policy

Can You get Income protection?

Your ability to secure a policy depends on age, medical history and “Risky” activities and occupations.  Chronic illnesses, extended periods of time off sick or a history that is perceived as high risk to insurers (especially back pain in men, anxiety in women) will make securing a policy more difficult and more expensive.

Sometimes insurers will offer a policy with specific exclusions that won’t be covered if they recur (such as back pain if you once complained of pain in the back!).  It is definitely not worth lying about your history, as the insurance providers will not pay out if they find you have been dishonest (even if it’s completely irrelevant to the eventual claim).

Exclusions can be reviewed and sometimes removed at a later date, provided you have had no further issues, you have a good insurance broker to negotiate on your behalf, and the provider decides to play ball.

When does Income protection kick in?

You can choose different waiting periods before your income protection starts paying benefits, usually 30, 60 or 90 days.  This should be based on your amount of sick leave accrued (assuming you are staying with your current employer) and how long your emergency fund would last if the worst happened.

Premiums drop significantly as you increase the waiting period.  Do remember, though, that if you have two episodes of illness with a brief return to work between, the waiting period may have to be served for the second illness again.

who needs income protection?

How long does Income protection last?

Superannuation income protection policies often pay out for only 2 years – not much use if your surgical career is ended by a traumatic limb amputation.  Other policies continue to age 60 or 65 years, which will provide long lasting income replacement – at significant cost.

When considering how long you need income protection for, consider your savings, debt, partner income, dependents, your age, superannuation balance, and your Total permanent disability insurance payable if you were never able to return to work.

Own Occupation vs Any Occupation

Many cheaper insurance policies (including those that come with your superannuation) will only pay out if the insured cannot work in any capacity.

Unless you can cover your expenses with a minimum wage job (I’m impressed if you can!) get own occupation insurance.  Again, you will pay extra for this.

Should You Buy Income Protection Inside or Outside Superannuation

Premiums are tax deductible whether they are in or out side of super.  If you need to claim on the insurance, income is taxed at your marginal rate, regardless of whether premiums were paid inside or outside superannuation.

Paying from within superannuation can help affordability at the time if cash flow is tight.   If you are not salary sacrificing the maximum into superannuation, increasing your salary sacrifice to cover the premiums is a tax efficient way to pay.

If no extra is contributed to superannuation to cover into the premium, they will eat into your superannuation balance and cost a lot more in the long-term due to lost investment earnings on the premium amount.

Insurance inside superannuation is often cheaper, and the most hassle-free way to secure insurance. Unfortunately, superannuation income protection is often an inferior product, often paying benefits for only 1-2 years.

Benefits may cease if the insured becomes permanently incapacitated (qualifying for Total permanent disability if they have it).

For protection inside super, the unwell person needs to meet the legal condition of release of superannuation law as well as the insurance policy definition of incapacity.

Insurance inside superannuation cannot be moved to another superannuation provider.  If the insured is moving employers, they must either keep the same superannuation or start a new policy.

As well as excess management fees associated with multiple superannuation accounts, automatic insurance could mean individuals with more than one super account are paying multiple insurance premiums.

If the insurance is left with an old superannuation account, and the premiums consume the entire balance, the insurance will obviously be cancelled.

Income protection inside superannuation may be appropriate for you if you have few expenses, or have significant savings and no plans for adding dependents to your household.  You also need to have reviewed your superannuation and made sure you’re happy using the fund for the long-term.

If you have insurance through your superannuation, it is worth checking your occupation rating.

Doctors (apart from retrieval) are considered low risk and therefore attract a cheaper premium, as long as the correct occupation rating is applied.  If you are automatically enrolled as a blue-collar worker, you are paying more than you should.

Income protection insurance outside super has a larger choice of features and usually more extensive cover available, at a greater cost.  It is a hassle to get set up – requiring medical underwriting, lots of paperwork and lots of questions from the insurance company.  But once it’s set up, as long as you pay the premiums, could last as long as you need income protection (before July 2021).

Stepped or Level Premiums

You have a choice of two fee structures.  Stepped premiums start out much cheaper and are based on age, but escalate significantly as you get older.

Level premiums start out significantly more expensive but do not increase with age, and are generally considered more cost effective if income protection is required for 10 years or more.

Over the past 5 years, even level premiums have increased significantly due to an increase in claims. I had been horrified by my “level” premium increases, but now read that the insurance industry has been making massive losses for the past 5 years – and frankly it benefits no-one if these companies go bust.

Income protection and other payments

It is worth checking whether your income protection policy will continue paying benefits even if you qualify for TPD.  This will make a huge difference on how long you should have income protection benefits for (2 years or up to age 65) and how much TPD you require.

Income protection is taxed as normal income (assuming you’ve claimed tax deductions on the premiums), so remember this when planning how much you require.  Base your benefit amount on gross income required. The ATO have a simple tax calculator to help you work this out. https://www.ato.gov.au/calculators-and-tools/simple-tax-calculator/

Look at the small print on whether premiums are reduced should you receive compensation payment or social security benefits

Income Protection and Tax

Income protection is a tax-deductible expense.  Insurance benefits paid in the event of a claim are therefore taxed as normal income

Can I claim income protection on tax?

Does Your Policy Cover Partial Disability?

Check whether partial disability is covered.   When Dr Cristina Yang was stabbed in the abdomen with an icicle , she probably wouldn’t have been able to return to work for a while.  Her employer may have put her on a “Return to work” program of half shifts two or three times a week.  Would her Income protection policy have covered the rest of her income?

If a self-employed anaesthetist has a fracture requiring a dominant hand plaster cast, he will be able to perform some administrative tasks but will not be able to anaesthetise patients – likely leading to a significant reduction in income.  Will income protection make up the difference?

Do you get paid super?

I’m reading a lot about inadequate retirement savings lately.  Periods of time not contributing to your superannuation (eg parental leave, extended time off work) make a significant dent in retirement savings.  It is possible to get a policy that pays superannuation, just as an employer would.  You guessed it – at a cost.  Decide whether you need it, and check this small print when comparing policies.

best income protection

Index linking

Is the income protection benefit index linked?  This means the benefit paid increases with time to compensate for inflation.  If Dr John Dorian suffered a major head injury from his scooter, aged 25, will his income protection benefit still cover his expenses in 40 years time?  Not a major issue if you only need income protection for a few years, but worth getting if needed for a decade or more.

General exclusions

Policies also have general exclusions that they will not pay for – Usually they will not pay if the insured is in a combat zone, injured due to acts of war or terrorism or no longer an Australian resident, illness as a result of pandemic or pre-existing condition, self-harm and attempted suicide.  Similar to your house or car insurance, it’s important to read and compare the policies in detail to understand what is covered and what is not.

How much does income protection cost?

This is extremely variable depending on age, waiting period, length of benefit payments, pre-existing conditions etc.  Expect to pay anywhere between 2 and 5% of the benefit amount as a premium (Mine comes to 3% currently).

If you are buying several polices, ask for a discount!

Where to buy the best income protection?

You have three options – through your superannuation, through an insurance broker, or direct.

Income protection is extremely complex, and is absolutely no use if you buy a policy that in the event of a reasonable claim, does not pay out.

A broker will have a great understanding of all the pros and cons of different policies and help you weigh up what is most important.  They should also manage the claim process in event of illness of injury.  As you may know, insurance companies in general like to avoid paying out, so it would be beneficial, in my view, to have someone experienced and knowledgeable negotiating on your behalf.

Insurance brokers are paid a significant amount of commission for signing you up, so they are clearly not independent.  It probably makes sense to work with more than one insurance broker, and get quotes from direct insurers and carefully compare the terms of the policies.  It’s advisable to get all this right the first time so you only have to do it once!

When to stop income protection?

Insurance companies would like you to stay fit and well (Awww!) and working while paying premiums for the rest of your working career.  Premiums will increase as time passes, and stepped premiums will escalate dramatically as you age.

In order to be cost effective as possible, you need income protection for the minimum time you really need it – often with debt, dependents and little in the form of assets.  As debt is paid down, dependents become independent and asset base grows, there will come the point you can self-insure.  Make sure you assess this carefully, and only cancel your policy when you’re sure you don’t need it. I imagine it will be a great feeling to get rid of those hefty premiums once and for all!


Income protection is a fairly complex topic, thanks for sticking with me through this mammoth guide!

At the end of the day most people will find they have to balance their needs with keeping insurance premiums reasonable.  I hope this guide gives you an idea where you can make compromises.

Did you get the TV Medical drama references or am I just showing my age?! Go on…indulge me.  Who is your favourite TV Doc?

Now go ahead and work out your insurance needs, and get that policy sorted ASAP.