My 5 Year Plan Complete: Financial Progress since 2017

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At the end of 2016, our family returned from 6 months travel with our then-toddler and baby. We had extended parental leave to allow us to travel Australia in a camper trailer, on the (dirt) cheap!

Background Before the Five Year Plan was Set

I am a doctor living in a regional town, married with 2 young kids. My financial five year plan began as I achieved my career goal of completing specialist qualifications and getting my 1st consultant post.

Until 2016 we had been pretty responsible with money. We brought far less home than we could afford in 2008 (on a combined income of $110K).

My income was unaffected by the GFC and increased annually. Interest rates also dropped steadily since home purchase until today!

The extra income earned through pay rises went directly into increased mortgage repayments. We never reduced our payments when rates dropped.

Eventually, we were paying double minimum repayments. Increasing them further didn’t seem to provide as much advantage in time to pay off the loan, so we paused further increases.

Here we entered a bit of a drift state. We were doing well with the mortgage and had no idea how to work out if we needed to put extra into superannuation. I liked the idea of investing but didn’t know where to start and didn’t have a lump of cash to start with.

We could generally pay for our reasonably modest lives (for a doctor household) without having to worry. I didn’t always pay off the full credit card every month, but would often use it to smooth spending over the year. For example, paying for a holiday on a credit card, and then paying it off over 2-3 months. Not ideal I know!

We saved cash for both our cars when we needed to replace them. His was second hand (and a complete lemon, costing the same again in repairs). Mine was an ex-demo but only $20,000 and paid out of savings.

As my income jumped with the step up to consultant, we also became parents and I reduced my hours to part-time.

Time to See a Financial Advisor?

With a very good income, and now very grown-up responsibilities, we decided it was time to see a financial advisor.

I made every mistake in the book. I didn’t do any checks and booked in to see one that offered advice without charge.

The advisor-sold us lots of insurance, which as a single high-income household with small kids we definitely needed. But he also convinced me to move my super over to a wrap account with (in retrospect) extortionate fees and PITA paperwork that they needed me to sign every few months.

I was aware I should avoid fees but advisors are excellent salespeople. He was using a lot of finance lingo I sort of understood, and I think I fell foul to the Dunning-Kruger effect. A little knowledge can be very dangerous! He convinced me “you get what you pay for”.

Between work, having and looking after babies, and our trip around Australia, I didn’t have a lot of free time to review the situation.

YOLO

We had long planned to renovate the house, which was poorly laid out and a bit small for our liking.

After years of delaying gratification, I had a huge YOLO moment and suggested to my partner we should travel around Australia and renovate the house at the same time.

The Return to Reality before the Five Year Plan was Set

We returned in December 2016 for our first Christmas in our shiny, renovated at MUCH expense home. As a result of the huge reno, we were now 90% leveraged. We had no savings. The credit card was maxed out.

At the time it didn’t feel as bad as it sounds, I knew it was temporary and there was still regular income, which was about to increase significantly. In retrospect, it was irresponsible pushing this close to the edge!

Financial Situation @start of 2017 (Beginning of 5 Year Plan)

Super ~ Just over a year’s gross salary accumulated between both our accounts

House – 90% leveraged, low-interest rate though

Savings – 0

Investments outside super– 0

Credit card debt ~$5000

Getting Back on Track

Even at the time though, I knew we had to get back on track fast.

With returning to work, my income would receive a massive boost. I wanted to swing back to my financially responsible self and maximise this to get back on track.

I picked up the Barefoot Investor, read it cover to cover and made notes. That night I started reorganising bank accounts, opened a RAIZ account and worked out a fortnightly direct debit we could afford.

I have had an interest in finance, but finance became a new hobby for me over the next few years. I read blogs, books and listened to podcasts.

Long-term Goals – Smart Goals

  • Retirement age 55 financially independent with $2.5M in assets between us
  • Kids education savings – Decided to put enough aside to cover worst case (most expensive) of medical school fees for both kids. if they don’t take part in tertiary education, they can use the money for a house deposit or business start-up.
  • Never work full-time again
  • Increase options/freedom to travel
  • Replace the cars when they need replacing

Five Year Plan – Financial Goals

Long term goals need to be broken down.

I started with a 5-year plan, before breaking them down and identifying annual goals.

5 year goals:

  • Save money in offset to fund an investment property~$600,000
  • Purchase investment property before my 40th birthday in 2020
  • Invest $125 per month towards the children’s tertiary education
  • Get the kids to Lapland!

Plan to Achieve the 5 Year Plan Financial Goals

  1. Increase income whilst improving control over income
  2. Reduce Spending
  3. Save a deposit for an investment property
  4. Research how to invest in property successfully whilst saving
  5. Research Lapland and find out how to do it without going bankrupt!

Five Year Plan: Increasing Income

Although I was returning to a wage well above average household contact, we had a lot of catching up to do! To find out why I decided to invest in property 1st, review my property vs shares article. To meet my goal of purchasing an investment property before 2020, I had to hustle.

Options to Increase Income

-Extra Shifts

Extra shifts are available from time to time at my regular work, but this was unpredictable. I worked overtime shifts when they came up and we didn’t have plans.

-Locum Work

Locum work was the obvious way to increase income dramatically, quickly and reliably. There are loads of rural hospitals all over Australia that are desperate for staff, I happen to really enjoy working in them. By working in different hospitals, I got to experience different patient populations and perform a lot more clinical work than I do in my day job. I find it renews my enjoyment of practising medicine.

Locum doctors also get control over when and where they work. Over the future, increasing the control and flexibility appeals to me.

Being paid in pre-tax dollars for my locum work also meant I could park those dollars in our offset account for up to 21 months, significantly reducing the interest incurred by the mortgage each month. The interest saved could then be used to pay the offset down further.

-Start a Blog

I was considering starting to write a blog to document my transformation from 90% leveraged broke doctor, to a financially responsible wonder woman fully in control of life. Again, the location flexibility of blogging appealed. If I could produce an income blogging (and that was a big if) I could maintain a modest income whilst we travelled further as a family.

But at the time, my 1st priority was getting cash flow in fast. There was no guarantee of producing any income with a blog, and if I did get to produce income it would grow very slowly. The idea of blogging was put on the backbench until 2017.

Five Year Plan: Reduce Spending

We had a chaotic banking system before I read Barefoot, even incurring overdrawn and dishonour fees occasionally.

Barefoot to the rescue. I opened multiple offsets, reorganised my accounts and stopped paying bank fees. Most importantly, my partner and I agreed to separate a set amount each pay to go to our own splurge or fun account.

Next, it was time to look at cutting costs.

The biggest costs for many are housing, transport and groceries. Cuts in these areas can often be the most significant moves. I wasn’t wanting to cut spending on housing, our vehicles are 10 and 20 years old, so already pretty cheap. Grocery spending was reduced by buying things cost-effectively (in bulk and on sale).

I started listening to the Choose FI podcast. It is an American pod, so not all the content is completely relevant to Aussies. But their philosophy resonated with me, and Brad and Jonathon’s enthusiasm has a way of catching on.

One by one I worked through our expenditures, identifying wastage and eliminating as much as I could find. Every time a saving was made, savings were increased by a corresponding amount.

I did find repeating this process twice a year helpful, as I became more comfortable with cutting expenses as my mindset gradually shifted.

Five Year Plan: Save a Deposit for an Investment Property

It may seem a little strange that instead of saving for a house deposit I opened a RAIZ account and set up a direct debit to invest in the stock market.

We are generally advised not to invest in the stock market for less than 7-10 years, and not before saving an emergency fund.

I had a bad case of impatience, and couldn’t wait to get started!

I reasoned the date for property investing wasn’t set in stone. If it had to be delayed because of a market crash it wasn’t the end of the world to me. But in the meantime I could take advantage of market growth (hopefully) and save that property deposit faster.

It was a risky move, and it could (and probably should) have bitten me on the arse. But it didn’t, I got away with it. In fact, I’m such a jammy git I withdrew the whole lot (~40K) days before the COVID crash. Beginners luck! I am definitely becoming more risk-averse as time goes on!

At the same time, we aggressively paid down that pesky credit card debt in our mortgage offset account.

We have been credit card debt free since early 2017, and at the start of 2022 so damn close to fully offset our mortgage I can almost taste that (PPOR) mortgage-free lifestyle (2023?)!

As regular readers are aware, I brought our first investment property in July 2019, 6 months before my self imposed deadline. There was a lot of media doom and gloom at the time, and I was pretty scared I could be making a mistake. Knowing there were no further steps I could take to reduce the risk, I took the plunge.

The property has performed well so far, even before the COVID boom. It has been constantly tenanted (touch wood) and we ended up purchasing a second investment property in 2021.

Five Year Plan: Research how to invest in property successfully whilst saving

I always liked the idea of being a property investor. After learning about stock market volatility, I liked the idea of diversifying retirement income.

I had never taken the plunge before because

  1. Didn’t think we could afford it
  2. I didn’t know where to start and didn’t want to get ripped off.

I read every book on property and investing that I could find and was overwhelmed by all the different approaches.

Thankfully, I was pointed to the Property couch sometime in 2017. I devoured the episodes and felt confident I had found my guide to buying property for investment. Initially, we planned to do it all ourselves to save some money.

But the more I learned, the less I knew! Eventually, I had to admit to myself I needed professional help.

5 Year Plan: Take the Kids to Lapland

This was my Carpe Diem goal. I’m a bit obsessed with my kids and a pretty cheesy mum.

Once it occurred to me I could take them to Lapland, a quick google search later I was hooked on planning. We have family in the UK and had planned to go back to visit, and decided our Lapland adventure could be a great side trip.

Personal goals should be planned around major life changes and events. Kids are small for a limited time frame, and it won’t be too long before they’re too old for certain experiences.

But these are very expensive trips. Holiday companies offer 1 day excursions to Lapland (Rovaniemi, Finland) to reduce the cost as accommodation can be pricey.

We booked bargain flights to Helsinki, where we caught the Santa Claus express overnight train (Oh, yes). I found a charming Airbnb log cottage that belonged in a fairy tale. I hired a car (with snow tires!)

We saw all the sites, met Santa, took an exhilarating sled dog ride, saw reindeer and had so much fun just playing in the snow. We even caught a brief glimpse of the Aurora in the 5 nights we stayed.

It was still expensive, and some parts were absolutely a rip off (like the ice restaurant). But this was an experience of a lifetime and I am absolutely thrilled we did it.

Looking back, the pandemic was beginning in China as we were playing in the snow. I could not have imagined how life could change, and the ability to travel has been lost for so long. I am so glad we did not delay this trip in order to save more money!

Financial Situation @start of 2022 (End of 5 Year Plan)

Super ~ Just under two year’s gross salary accumulated between both our accounts (nearly doubled)

House – 90% offset, even lower interest rate

Savings – equivalent to 18 months spending in offset

Investments outside super– $85,000 between Pearler & kids education funds

Credit card debt ~0 of course

Summary of 5 Year Plan Achievements

It really is impressive how far a strong salary when you stay focused can get you in 5 years. It’s gone pretty quick! We have 90% offset our mortgage from being 90% leveraged. We have invested inside and outside super and purchased two investment properties. Limited ability to spend our money as a result of COVID travel restrictions and intermittent lockdowns have accelerated the progress as well.

What achievements have you got planned over the next five years? Five years is a long enough period to make a huge progress towards your financial goals. Have you written down a five-year plan? What is your Carpe Diem goal? What will be your situation in 5 years – and will you look back at how far you have come with wonder?

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

2 thoughts on “My 5 Year Plan Complete: Financial Progress since 2017

  1. Thank you for sharing. Congratulations. I really enjoyed reading this. It gives me hope…I am
    planning to retire in 5 to 8 years (I’ll be 55-58). You’ve achieved so much in only 5 years. Very impressive.

    • Wow you’re so close! That’s awesome. Feels a bit weird sharing so much about me. But I love reading all the details on others blogs so figured others might enjoy a bit more detail on my journey too. Happy new year and good luck!

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