It's a classic scene from James Dean's iconic movie, Rebel Without a Cause: two alpha males in hotted up cars driving towards a cliff. Whoever jumps first is the chicken. The trick is knowing when to make your move, so you don't end up plunging into the ocean like Jimmy's rival!
It often feels like you're playing a similar game watching interest rates drop. If you've got a mortgage, when do you flinch?
The first thing everyone wants to know is, will interest rates go any lower? While there's no way to know for certain the answer is, probably not. The current Reserve Bank cash rate is 1.5 percent - the lowest it has been in more than 40 years. While it is possible rates could go lower, most economists believe we have now bottomed out and the next movement - when it comes - will be up.
The short answer is no. Even if rates were to be cut by another quarter percent, the current rate of 1.5 percent is extraordinarily low and represents a huge opportunity for mortgage holders. There's very little to be gained by holding on for the possibility of another rate cut - it's time to jump out of the car!
The greatest opportunity mortgage holders have is to pay off large chunks of their principal while the interest component is relatively small. To do this, you have to resist the temptation posed by Splurge Fever and pour as much surplus cash as possible into your loan. Doing this will mean you'll be in a much stronger position when interest rates start to move north - and they will! It's only a matter of when.
The other thing to consider is fixing a portion of your loan as a hedge again further rate rises. What percentage you choose to fix is a discussion you should have with your financial planner, based on your individual goals and what level of risk you are prepared to accept.
Interest rates this low are extremely rare. While the fact it's been 40 years since they were last this low doesn't mean it will be another four decades before we see these conditions again, it does mean it's extremely rare. The smart move is to take every advantage possible of such a unique set of economic circumstances. Don't end up plunging into the deep, dark Californian ocean!
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We recently moved into our new office in Fortitude Valley, just down the road from our old base.
We're in the process of finalising our interior fitout and we'd like to invite you to be a part of it. A glass wall in our office will shortly be covered in an opaque film and we'd like to cover it with words to inspire us.
Our passion is helping you plan for financial independence, but we want to hear about what your passions are. We'd like to invite you to submit three words that describe what you're passionate about via this survey form. It can be anything you like! Whatever gets your juices flowing.
On 27 March we'll close the survey and use a selection of the submitted words on our new wall. It's your chance to genuinely make your mark on our new office!
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So you've finally finished your medical specialty. The long nights of study are over (for now!) and you've got a shiny collection of new letters after your name. And of course, along with those letters goes a bigger pay packet. Time to reward yourself for all that hard work and start living a life of luxury, right? Well, maybe not...
Unfortunately a little extra income often brings with it a damaging illness. Fluids won't help and paracetamol is useless. It's splurge fever, the almost uncontrollable urge to make lifestyle purchases now that you've got a little extra coin.
Splashing out on holidays, fancy gadgets, expensive clothes, even upgrading your car or home can all be symptoms. And if you're not careful they can quickly add up to a cracking financial headache.
So what can you do?
The good news is splurge fever is easily treated. The bad news is the best cure is prevention (what, isn't there a pill I can take???). And in the world of finance when we're talking about prevention, what we mean is planning.
There's no reason why your extra income can't mean rewarding yourself or even looking at upgrading your home or car, as long as it's part of a planned, well-managed process.
The biggest financial danger for new specialists is uncertainty. Yes, you will likely be earning more money. The big question is how much more? Unfortunately many new specialists overestimate their new income and commit to spending that becomes like a weight around their neck.
It might not be as exciting as splashing out on a new private movie room for your house, but my advice to new specialists is to follow a four-stage process for approaching this new stage of their career:
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Your practice is finally where your dreamed it would be, way back when you first started it. A loyal base of regular patients, an excellent reputation and a great team of doctors providing outstanding patient care.
Things are going so well you can even afford a Practice Manager - and it turns out, they're fantastic too! They take care of everything. Suppliers, accounts, administration, IT, staffing - all the things that used to distract you from focussing on patients and developing your junior doctors. You rely on them for everything.
And then one day they're gone...
It doesn't matter why. All that matters is that the practice that used to run like a formula one racer, is now spluttering like a clapped out old Commodore. What do you do?
The reality is, it's always hard to replace a good Practice Manager - that's why they're so valuable. But there are ways to ensure your practice is able to keep functioning if you suddenly lose the one person you rely on for everything. And the first part of that is don't rely on one person for everything!
Few practices have the resources to employ a Deputy Practice Manager, but you can ensure that as many essential tasks as possible are covered by at least two people. When discussing practice procedures with your Practice Manager, insist that at least one other person has a thorough understanding of all their essential responsibilities. You can't clone your Practice Manager, but you can ensure backup for all the things that keep your practice running.
A good Practice Manager will be able to document the key elements of their role. This isn't just important if they suddenly decide to backpack through South America for 12 months if your Practice Manager has a serious illness or needs to deal with a family emergency, it's important that other staff have an easy-to-understand guide that allows them to pick up the ball. And that means it's also important to
It's not out of line to insist there's a specific plan in place to deal with the absence of your Practice Manager in fact, it's just good business. Your Practice Manager should be able to produce a strategy to deal with their temporary absence and even facilitate a smooth handover to a new person in the role. It's also critical that this strategy isn't just something they've discussed with you it's needs to be documented in explicit detail.
Good practice management software isn't cheap, but it's a vital investment. If your Practice Manager is suddenly out of action, the right software can help smooth the transition to a new staffing set up. A good software program will maintain patient records, billings and receipting, and will be very intuitive for new users.
A good Practice Manager can help take your business to the next level. And when you find that special person it's natural to entrust them with the essentials of running of your practice. But it's critical that you always plan for the worst-case scenario and that means ensuring that no one in your practice is irreplaceable.
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The mere mention of the word is often enough to trigger a boredom-induced coma. But how about insurance where you get to share in the profits? That's a little more interesting.
The reality is that any responsible financial strategy includes good-quality life insurance, income protection, and total and permanent disability insurance. So why not consider obtaining these products from an organisation focused solely on benefiting its members?
PPS Mutual is a new provider in the Australian market that does exactly that. Profits get returned to the people purchasing its products as bonuses.
What's more, PPS Mutual products are only available to a select number of professions, including general practitioners, medical specialists, dentists and dental specialists. That means the products have been specifically tailored to meet the needs of professionals.
If PPS Mutual sounds familiar, it may be through a colleague who has worked in South Africa where they have enjoyed great success amongst the medical fraternity for over 75 years. PPS Mutual is South Africa's largest mutual financial services company, with assets in excess of $3 billion. In the last 10 years alone it has assigned $2.2 billion in profit-share to its members.
Medical Financial Planning is fortunate enough to be part of a small, select group of advisors that have been accredited by PPS Mutual to give advice on their products.
As with any financial decision it's important to look at each individual's specific circumstances to determine if a particular product is the right fit. It's also important to note that Medical Financial Planning will always consider a broad range of products to ensure our clients receive the most appropriate option for them.
For many doctors and dentists, the PPS Mutual products may offer a genuinely compelling alternative to the traditional insurance providers.
Once you've learnt more about PPS Mutual's products you might even find yourself dropping the word "insurance" into conversations with your colleagues. Just make sure you follow up quickly with the interesting part before they pass out...
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