Splurge fever - the silent financial killer

Posted by Sean O'Kane on 7 February 2017
Splurge fever - the silent financial killer

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...

 

Can you feel your financial temperature rising?

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?

 

There is a cure!

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.

 

How to fight the fever

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:

  1. Have patience - delay making any big financial decisions until you're established as a specialist and have a clearer idea of what your long-term average income is likely to be.
  2. Set goals - understand clearly what you want to achieve financially and what the costs are.
  3. Consider all possibilities - model different financial scenarios with realistic returns to see the bigger picture and assist with decision-making.
  4. Make a plan - develop a financial strategy to get you where you want to be over time.
With a small dose of planning and an injection of self-discipline, you can avoid falling victim to splurge fever.
Posted in: Wealth Creation Budget Financial planning Planning Financial independence Risk management   0 Comments

Help! My Practice Manager just walked out!

Posted by Mary Young on 23 January 2017
Help! My Practice Manager just walked out!

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!

Make sure there's a backup

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.

Have a good procedures manual

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

Have a formal contingency plan

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.

Use quality software

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.
 

Posted in: News Owning a medical surgery Profitable practice Staffing Planning Risk management   0 Comments

Don't just protect your financial future, profit from it

Posted by Neal Durling on 9 January 2017
Don't just protect your financial future, profit from it

Insurance.

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...

Posted in: News Wealth Creation Financial planning Insurance superannuation Planning Investment Financial independence Diversified portfolio   0 Comments

Don't have a nightmare before Christmas

Posted by Matt Connor on 13 December 2016
Don't have a nightmare before Christmas
'Twas the night before Christmas and all through the house not a creature was stirring, except...

...for the GP who'd woken in a panic because she knew there was something she should have done before her practice closed for the year, but couldn't remember what it was!

Like everyone else doctors deserve a good break at Christmas. And by December the last thing most medicos want to think about is practice administration. But if you don't tie up all your loose ends, you could find yourself with a serious New Year's headache - and not the fun kind!

There are a few simple things you can do however, to make sure you finish the year in good shape and hit the ground running in 2017.

Communicate your shutdown period

Letting your patients know is obviously step one, but don't forget your referral partners, suppliers and anyone else in your network. Sending a small gift with a short note is a great way to get the word out and also build good relationships.

Get your bills sorted

Your practice may be taking a break, but that doesn't mean your invoices are. Make sure you're fully across anything that is due before you're back in the New Year. It might be painful, but sometimes the easiest solution is simply paying bills early.

Take care of wages

Another way to start 2017 on a sour note is to neglect to pay your staff over the break. Set up an automatic payment for any wages that are due during your shutdown.

Do some business planning

This one may be a little unpopular - after all, you're supposed to be relaxing and recharging! Unfortunately, the end of year shutdown is one of the only times you can turn your attention to your finances and business processes without having to balance it with patient demands and practice administration.

Set aside a few days to really interrogate your financials. What services are the most lucrative? What expenses are really dragging you down? Think about how you run your practice. Are there any opportunities to introduce new systems or software to improve efficiency?

Commit to a day or two - perhaps somewhere between Boxing Day and New Year's Eve - and really interrogate how you do business.

With a little foresight and planning, the only thing that will wake you in the middle of the night will be the sound of Santa's sleigh touching down softly on your roof.

Posted in: Budget Owning a medical surgery Staffing Planning Risk management   0 Comments

The case for Global Equities - their place in an investment portfolio

Posted by Neal Durling on 17 November 2016
The case for Global Equities - their place in an investment portfolio

Do you know Australian equities make up less than 2% of the world equity market? The Australian domestic market is limited and dominated by the relatively big four banks and resource companies. 98% of the world's equity market capitalisation is made up of businesses not listed in Australia and many industries don't exist here at all.

Despite this, it is understandable that many Australians focus on investing in their local market. This is a theme throughout the world. But to ignore global markets is, in my view, a missed opportunity.

As an experienced financial planner, my advice is a well-diversified portfolio is particularly relevant for higher income earners such as medical specialists, who are looking for leverage opportunities to build wealth, or to invest to provide (inflation protected) income in retirement.

This is the subject of our upcoming Christmas event on Thursday 1st December 2016 at the Fireworks Gallery in Brisbane. Come and join us as we celebrate Christmas and address the benefits of developing an investment strategy that leverages global equities to create long term wealth.

What sets global equities apart

1. Access to a broader range of industries and high-growth companies

As stated, the Australian market is quite limited. By investing in the global equity market, you can tap into a bigger and more diversified pot of investment opportunities and growth-oriented companies.

Growth-oriented companies tend to generate significant positive cash flows and earnings, but reinvest more of this into capital projects for future growth. You might say they are operating in fields that have stronger growth opportunities than traditional industries and can leverage retained profits more effectively.

More traditional companies, such as those which dominate the Australian market, tend to distribute more of their profit as income. Often this is because they don't feel able to maintain a strong return on capital by reinvesting it within their business.

What's more, because of the more expansive playing field, global fund managers are able to employ a broader range of strategies and ways of investing and managing money. This may lead to higher growth potential and a better financial solution than investing solely in the Australian market.

2. Lower income and higher growth returns

While global equity funds tend to provide lower income because they are reinvesting more, they often provide higher growth than Australian equities.

Generally speaking it is not unusual for Australian funds to pay 5.5-6.0% in dividends, whereas a growth orientated global fund would usually pay significantly less than this. That said, in developing an investment strategy, there are real benefits for high income earners to invest in a global equity fund that takes a long-term 'buy and hold' investment approach and provides lower income in the pursuit of higher growth.

This is principally because this kind of investment strategy results in:

  • lower taxable income (making this an effective tax planning strategy) for those already paying high rates of tax
  • higher potential for growth with capital gains being more concessionally taxed by the Australian Government.

Including global equity exposure in an investment strategy creates a more diversified portfolio compared with an Australian only strategy.

In short, it can be a very solid, long-term, tax-effective strategy.

3. The option to hedge

The final reason concerns hedging. You can choose to invest in a hedged version of a global equity fund to reduce the fund's exposure to foreign currency movements. Currency movements can represent gains or losses on global investment portfolios depending on which way the Australian dollar and other currencies move.

Because we tend to consume in Australian dollars, hedging can provide a more stable or "accurate" portfolio return for most investors. This is because you end up with a return in Australian dollars which is influenced less by currency fluctuations.

However, investors may choose an unhedged version for a portion of their portfolio if they think the Australian dollar is going to devalue or for protection in down markets. While this is by no means guaranteed, when global stock markets trend lower due to uncertainty or unfavorable sentiment, the Australian dollar tends to weaken as currency flows back to the traditional safe havens. This can result in a degree of insulation from market volatility when the return is converted back to a weaker Australian dollar.

Looking for financial solutions or tax planning advice when it comes to investing? If you're interested in finding out more, attend our upcoming Investment Insights event in Brisbane on Thursday 1 December 2016 - click here to register your interest.
Posted in: Financial planning Investment Global equities Hedging Diversified portfolio   0 Comments

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The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

The financial planning services are provided by Medical Financial Pty Ltd trading as Medical Financial Planning (AFSL 506557)