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 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

$100

20

$228,099

$100

30

$525,580

$100

40

$1,110,770

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

Growth

Projected Balance

$100,000

$9000

6%

$1,328,564

$100,000

$9000

7%

$1,670,883

$100,000

$9000

8%

$2,107,379

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.

How to Find a Financial Advisor You Can Trust

Empower wealth review

How to Find a Financial Advisor You Can Trust

The Royal Commission exposed corrupt profiteering as standard practice in large financial organisations, weakly enforced by ASIC, a toothless tiger.

The commission cost $75 million of tax payers money, did not have the power to order compensation of victims and did not advise criminal proceedings against anyone.

Many recommendations have been made, which have visibly translated into excessive caution in lending in reasonable circumstances.

The Royal Commission will lead to more paperwork, more arse-covering, but it is still to be seen whether it will result in genuine protection for consumers.

It’s enough to put anyone of getting financial advise, but some will still need help structuring and instituting a financial plan.

So how on Earth do you find a financial advisor you can trust?

Most are confident we would never be foolish enough to be ripped off.  Until it happens, when most keep very quiet. It happens. A lot.

Scamwatch.com.au reported that losses to scams in 2019 was in excess of $532 million! There are lots of tips online about outsmarting scammers in general.

Trying to avoid being scammed largely means avoiding the most likely offenders, and having a BS filter in your dealings with financial advisors.

Create A Short List of Possible Advisors

Ask family, friends and older colleagues for recommendations.  Ask how long they have been working with their advisor.

If they have been clients for more than 10 years and the advisor hasn’t run off with their money and the client is still satisfied, that’s a good sign.

Beware those spewing positive reviews for companies they have only recently come to contact with, we all like to believe we got lucky and have found the perfect advisor or investment.  Only time will tell if it was a wise decision.

It is very convenient for the professionals to be approaching you through cold calling or at a medical event, but these companies are clearly looking for business.  Like selecting a restaurant during your holiday, it often pays to follow the crowd – that restaurant is  probably empty for a reason.

Are they Members of Financial Planning Association of Australia  for financial advisers or Property Investor Professionals of Australia

Both are organisations that offer voluntary membership to advisors, enforce professional standards and will also allow you to search for an advisor member in your area.

Check the financial advisers register  to ensure they are legally qualified to give the advise you are looking for.

Check the enforceable undertakings register for disciplinary action against the adviser not resulting in disqualification and past bans (ASIC often bans for 3-5 years only!)

Do They Have a Criminal Record?

I almost choked on my coffee when I stumbled across an article outlining the criminal convictions of a well known property advisor to who’s podcast I was subscribed.

Foolish youthful mistakes (as his statement seems to imply) should usually be forgiven and forgotten.  But this wasn’t a stolen car, or boozy bad behaviour.

This respected property advisor was a qualified doctor, who allegedly assaulted 60 patients, was suspended by the medical board and sentenced to 9 months suspended sentence, then sentenced to 3 months jail in 1999 and deregistered by the medical board.

Multiple articles outline the shocking abuse of trust in the Australian and the Age (available from the National Library of Australia with a free library card, articles copyrighted).

This crime, not performed within the financial services industry, is not considered by the ASIC to be relevant to his position of trust and power over many families retirement savings. I disagree.

This court case was in 1999!  AHPRA records are not searchable by the public before 2010, Criminal Records Online display records from 2012 only, and the NT article first listed was the only one I could immediately access.  I wonder if his clients have any idea about this history.

Financial advisors can have all sorts of history that you would never dream of, but certainly can affect your trust.

How to not get ripped off by financial adviser

How is the Advisor Paid?

Without a polygraph, it’s hard to judge whether your advisor’s primary goal is in your best interest.  The easiest way to minimize conflicts of interest is to pay for advise independently.

I’ve been fooled by this, not wanting to pay $2000-$3000 for financial advise, I went with a commission based advisor in 2014.  In retrospect, he was a salesman not an advisor.

Financial professionals, like everyone else, need to earn an income.  It can come from clients or through commissions.  Whoever is paying is where their allegiance lies.  If you want them working in your interest you have to pay.

This really isn’t worthwhile, in my  opinion, until you have worked out your financial goals and have some surplus income you’re ready to invest.

Before this, if your needs are pretty simple (e.g. just getting started with portfolio allocation), educate yourself by subscribing to blogs or podcasts on financial literacy and try a robo-advisor.

Insurance is probably the exception – if you have dependents or are planning a family, you will likely need to review your insurance needs.

Insurance is based on commissions.   Keep this in mind and probably see 2 or 3 insurance  brokers to be far better informed.

I sent an email to my (then) consultant colleagues asking for their experiences with financial advisors.  Many had made similar mistakes to me, and all that responded had regretted a decision made as a result from advise from a financial advisor

Check Your Not Getting Ripped Off on Fees

What are the advisors fees?  The advisor I mentioned above convinced me to move superannuation a few years ago.  The fees were MUCH high – I’m embarrassed to admit 4%!  He convinced me that the fees would be made up by better performance.

In 2017 Warren Buffet won his $1 million bet that an index fund would outperform a collection of hedge funds over the course of 10 years.  Since then there has been a lot of talk about the importance of a small difference in fees.

I only stuck with the new superannuation fund for 3 years, it under-performed my previous industry super net of fees, and was a lot more hassle, with the advisor regularly wanting me to complete more paperwork.

Avoid percentage based fees whenever you can – A one off fee will be far better value over the long-term.  Where you have to pay a percentage of your assets, fees over 1% are widely accepted as a rip off.

Financial Advice for Doctors

There are several companies set up as specialist advisory firms for doctors – accounting, asset protection, financial and property advise all under one roof.

Seems like a great idea – specialists who only work with doctors would know your claim entitlements inside out and it all sounds very convenient.

But think about it a little harder.  Why do you think these companies have set up specifically for doctors?

The same reason any other companies are interested in advertising to doctors – the profession is known to be well paid, and they are hoping to increase their profit margins,

Not necessarily a terrible thing -that is what all companies are here for.  But there are conflicts of interest with several professionals referring to one another

Don’t just blindly sign up for one of these companies.  Check them out thoroughly as described for any advisor and make your mind up carefully

Meeting Your Advisor

At some point, if you have decided you need professional advise, you are going to have to take the plunge and meet with them.

Consider meeting with more than one, to choose the one you feel more comfortable with.

Gather all your information before the day.  Ask the hard questions to yourself – what are your goals, time frame, how much cash flow are you willing to put aside?

Commit to nothing on the day.  No-one should be pressuring you in to anything.  If anyone offers you a one day only offer – consider this a massive red flag!

No reasonable investment is going to disappear in a day, but Fear Of Missing Out  (FOMO) is a common tactic scammers use to create urgency and get clients signed up without time to cool off.

Ask questions, including checking there is definitely no hidden commission incentive (some advisors charge a fee to the client and receive commission).  If you don’t understand ask again and again.  If you still don’t understand, don’t do it.  Investing should not be that complex!

Read about what you have been advised, talk to your family.  Take your time.

Once you’ve made your decision, keep an eye on your investments.  Check in regularly to monitor performance and reconsider if your goals have changed

Finally check out the Money Smart website,  a great resource for commonsense advise and explanation of investment class pros and cons.


If you haven’t already, subscribe to Aussie Doc to get reminders on how to avoid making huge money mistakes and avoid missing out future posts on money hacks especially for Aussie Docs.

Keen to Make the Same Mistakes as Many Before You? How to Get Scammed...

Want to get scammed?  Got a few thousand dollars lying round you’re itching to be parted with?  Consider donating to an hard working and efficient charity to make the world a better place instead.

If you’re absolutely determined to get ripped off:

  • Find your financial planner at a medical school fair and sign up in exchange for free pizza
  • Make sure the advice is “Free”
  • Don’t ask silly or difficult questions of your adviser – you don’t want to sound stupid!
  • Don’t bother educating yourself or checking your advise – these are your trusted professionals, right?
  • Put all your money in one go (or even borrow – go big or go home!)
  • Look for the best possible return (15%?  Sign me up!) as quickly as possible
  • Look for a one-stop shop advertising services for doctors
  • Don’t talk to your family and friends about your plans (especially if they have concerns)
  • Don’t check in your investments – you have the experts handling your money now.  Time to relax!

Four Money Personalities and How to Build Wealth

How to choose an investment property

Four Money Personalities and How to Build Wealth

There are four types of finance personalities.

Chronic Overspenders

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

Good Intentions, Impulsive Spenders

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

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

By This time Next Year We’ll be Gazillionaires…

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

Slow &‌ Steady Achievers

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

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

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

How to get rich? Slow and steady

How to Become A Slow & Steady Achiever

So how do you tackle a big audacious goal?

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

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

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

how to get rich? You need a written plan

Set Goals & Write Them Down

Exams

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

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

Financial Goals

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

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

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

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

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

Find Your Resources

Exams

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

Finances

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

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

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

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

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

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

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

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

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

Exams

How do you even tackle the huge curriculum?

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

Finances

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

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

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

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

Do it Over and Over and Over Again

Exams

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

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

Finances

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

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

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

Review Your Progress at Set Intervals

Exams

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

Finance

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

Plan for When Things Go Wrong

Exams

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

Finances

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

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

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

How to Start Investing: Time is Ticking

how to start investing

How to Start Investing: Time is Ticking

There are no affiliate links on this page.  There is no financial effect on me if you click on links in this article. 

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

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

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

Where to Start Investing

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

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

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

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

Where to start investing

How to Start Investing in the Stock Market

So, if you have decided investing in the stock market outside super is appropriate for you, there is an overwhelming number of books and articles on how to do this. 

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

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

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

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

how to save for house deposit

What Is Micro Investing?

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

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

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

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

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

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

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

What is a Robo-Adviser?

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

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

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

Which Roboadvisor and Micro-investment app is Best?

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

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

I have summarized a few points about the apps below.

FeesMinimumOwnershipInvestment Choices offered
RAIZ$2.50/month under $10,000 then 0.275%No minimumLegal title of ETFs held by custodian6 choices including socially responsible
Stock SpotFree 1st 6 months

0.66% fee or $5.50/ month under $1000

$2000HIN at CHESS subregistry5 portfolios offered.  Options for SMSF and Investing for kids
Clover$5/month up to $1000 then 0.65% (0.6% over $50000)$2500Investments held in your own name in Macquarie cash management account5 portfolios with socially responsible option within each
Six Park0.5% up to $199000$10,000Assets held in your own name5 core portfolios to choose fom
First Step$1.25/month under $5500 then 0.275%$1Australian Executors Trustee (prof custodian) is independent from First Step and holds investments3 core portfolios to choose from with “themes’’ that can be added to each – including eco, health, tech & Asia
Spaceship VoyagerFree under $5000 then 0.05% for Voyager 0.1% for Universe portfolioNo minimumExternal custodian – “If spaceship voyager money could be moved to another responsible entity or assets sold and money returned”Spaceship Voyager (Index fund) or Spaceship Universe (Active management)
Commsec PocketBrokerage fee (when buying) $2 for up to $1000 –or regular transfers.  No ongoing fees*$50Investor owns shares7 portfolios to choose from including Sustainability Leaders
Quiet GrowthFree under $10000 (can get more free by recruiting friends) then 0.6% discounted to 0.5% over $30,000$3000Investments held by Saxo Capital Markets in your own name5 portfolios according to risk profile

which microinvestment app is best?

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

I have good personal experiences with RAIZ and Quiet Growth, although the fees with RAIZ are expensive for small amounts under $5000 and Quiet growth gets pricey once you have over $10,000 invested. 

With small amounts (under $1000) to invest, First Step or SpaceShip Voyager probably offer the best value. 

With $3000 to start with, look at Quiet Growth and Commsec Pocket. 

With over $5000, consider buying directly using SelfWealth online brokerage, RAIZ or FIRST STEP  if you’re not ready to choose on your own.

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

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

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


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