Working out what you want - good financial planning

Posted by Neal Durling on 24 June 2015
Working out what you want - good financial planning

You've probably heard it said that good financial planning is based purely on facts and figures, and has nothing to do with emotion, right?

Well, no, actually! In this post I'm going to turn that idea on its head, along with some other standard 'truths' you might have heard.

In my opinion, money on its own is not the secret to happiness. I've learned this over almost 30 years in the financial services industry, advising people on their financial futures.

My clients often arrive in my office for the first time thinking that my role is to help them accumulate more cash reserves, or buy a business, or own a larger home or more expensive car.I can help you to do all, or any, of those things. But, in fact, my main job is to help you achieve greater emotional satisfaction in your life. Money is just a facilitator for that.

Let me explain.

At Medical Financial Group, we spend time getting to know you and what you want out of life, so that the financial decisions you make will help you to achieve your life goals. The first time we meet with you, we explore your values, goals, and vision for your future. If you have a life partner, we encourage you to bring them along so you can both express your thoughts about your future with each other.

We start by talking to you about what's important to you right now, then in the short term and longer term. We work through a systematic questioning process designed to reveal your own personal definition of "success". We then record your thoughts on an 'advice map' that's unique to you.

What's important to you? Maybe it's the best education you can afford for your children. Maybe it's having a successful practice but also having quality time with your family. Maybe it's a good home, or regular holidays, or being able to contribute to the community through research or some charitable work. Or maybe it's a combination of all of these.

Working out what you want is the starting point for everything. For many clients, this first session is a revelation. Often they haven't really reflected on their life goals since they stepped into university at 17 or 18. They've been so busy studying, training and starting a practice that they haven't had a chance to stop and think about the bigger picture.

With our help, you get an opportunity to take a breath and spend time thinking about what will really make you feel fulfilled. You may be surprised; my clients often realise that there's a gap between their financial behaviour and what they'd actually like to achieve. And husbands and wives are often surprised by what their partner has to say. It's a great opportunity to develop a shared vision for the future that incorporates both partners' priorities.

To enhance your financial future over the long term, it's vital to work out what you want and to put plans in place to help you achieve it.

Once we all understand what you'd like to achieve in life, we can work together to help make those goals a reality.

And the sooner you do it the better. One of the major findings of our recent white paper on financial independence for medical professionals was that many medicos wished they'd sought expert financial advice earlier in their careers, before they made major financial decisions and, in some cases, mistakes.

Planning early in your career can have a major impact on your financial success and happiness.

And here's where I turn another truism on its head. We've all heard the expression that 'hindsight is a wonderful thing'. Well, I believe that foresight is better. With help from a qualified financial adviser, you can avoid pitfalls and be confident that your hard work is actually moving you closer to where you'd like to be.

We can accurately model different scenarios before you make major purchases so that you can see their implications. For example, if you buy that luxury car you've always dreamed of, what will you have to give up? If you go into private practice, how many hours will you need to work to achieve financial viability? With our help, you can go into things with your eyes open and enjoy what you spend. Sometimes you may make different decisions as a result.

The best part of what I do is helping my clients work out what they want and how to get there.

Good financial advice isn't a couple of meetings and a few emails. It's about taking the time to get to know your client and having a conversation with them over many years. It's about establishing a relationship, asking the right questions, and providing options based on a sound understanding of the financial world and a sound understanding of your client's goals and values.

Here's my final reflection for this post. Some people say you can't put an old head on young shoulders and to an extent this is true. I think, however, if you're smart enough to seek advice you can reap the benefits of more insightful decisions while you're still young enough for them to make a real difference. And that can help to put you on the path to achieving the things that you really want. 

Good financial planning - it's an emotional thing.

Posted in: News Financial planning   0 Comments

2015 federal budget small business changes - will they help medical business operators?

Posted by Matt Connor on 11 June 2015
2015 federal budget small business changes - will they help medical business operators?

Released on 12 May, the Australian Government's 2015-2016 budget contains a number of changes for small business owners.

Read on to find out what those changes do - and don't - mean for medical business operators.

They aren't really changes until...
Although this year's budget provisions are a lot more palatable than last year, budget announcements don't come into force until budget bills pass through both houses of parliament. Last year, many of the government's announcements didn't make it through the Senate.

Governments will often bundle 'good' legislation with 'bad' in bills put to parliament. This is one strategy to push unpopular changes through a hostile parliament and senate.

This year, although the opposition has indicated that it will support the tax-related changes announced in the budget, it has also stated that it will not necessarily support all of the announced budget provisions. This increases uncertainty for small business operators about which of the announced changes will and won't become reality.

I expect we'll know in the next month or so which aspects of the budget will be passed. Bear in mind that, if passed, some provisions will have retrospective effect from budget night.

Definition of small business
A small business is defined as one that has a turnover of less than $2 million per year.

Bear in mind that turnover is calculated using what are called 'aggregate' rules for example, if you are part owner of a practice, your personal turnover as well as the turnover of the whole practice (not just your share) may be included to determine if you exceed the threshold.

$20,000 write-off
A key small business provision announced in the budget was the introduction of an 'instant' tax deduction for assets costing up to $20,000 for small businesses.

Be aware that this deduction applies only to tangible business assets, not to building works or fit-outs, or to a private use family car. It also applies only to assets valued up to $20,000 excluding GST, and does not apply to assets greater in value.

Reduced company tax rate
The treasurer also announced the government's intention to reduce the company tax rate to 28.5% for all companies with a turnover less than $2 million from 1 July this year. However, the 28.5% company tax rate will not affect personal services income providers (like medical professionals), as their business profit MUST be distributed and declared in the individual tax return of the individual who generated the income.

It may affect service entities that are Pty Ltd companies, but it won't affect trust entities.

$1,000 tax rebate
The budget also introduced a $1,000 tax rebate for business profits. My view is this is a very small adjustment and a drop in the ocean with respect to the tax that medical professionals pay.

Capital gains tax change
The fourth significant small business initiative is to allow businesses with an annual turnover of less than $2 million to change their legal structure without attracting a capital gains tax  liability at that point, However, a significant part of business restructure costs is stamp duty, which remains unchanged. Hence this tax concession is less appealing than it may at first appear.

So what's really in it for medical businesses?
My view? The $20,000 tax write-off is the only proposal that will have any material effect on the tax position of doctors and dentists.

Once we know for certain that it has passed into law, you can rest assured that Medical Financial Group advisers will be considering it as part of financial planning for suitable clients.2015 federal budget small business changes - will they help medical business operators?

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New white paper reveals financial challenges facing medical professionals

Posted by Neal Durling on 2 June 2015

By Neal Durling and Sean O'Kane.

Most people - including many medical professionals - believe that a medical career necessarily delivers very comfortable financial outcomes.

But the truth is more complicated than that, with doctors and other medicos facing four unique challenges that must be overcome if they are to reach true financial independence.

I explore these challenges in depth with my colleague Sean O'Kane in a new Medical Financial Group white paper: "Are you planning your journey to financial independence? A white paper for medical practitioners".

Our white paper shatters a number of myths about medicos and money, and gives you intelligent financial insights based on evidence. Sean and I dug deep into statistical data, read relevant articles from medical journals, and held a series of frank interviews with specialists themselves to put the paper together. I believe we now have a resource that is essential reading for any medical practitioner who wants to achieve long-term financial security.

Some of the fascinating findings we made in researching and writing the 12-page paper:

  • Medical practitioners often have higher earning potential than many other professionals once they start work, but they spend an average of 25% longer in training, so generally begin their careers later and often with a large debt incurred during training.
  • All practitioners interviewed said that providing a good education for their children was a top priority, and many worried that their family's wellbeing would suffer if they were unable to work due to illness or injury.
  • Many practitioners wish they'd sought financial advice from trustworthy advisers at the start of their careers.

And the four unique financial challenges for medical professionals that we uncovered? I'm happy to share them with you here:

1. Financial complacency/over-eagerness
Practitioners tend to fall into two camps either complacent that they are now earning good money so don't need to plan financially, or eager to finally enjoy the rewards of all their hard work so they want to spend now! Neither approach will set you up for long-term financial success.

2. Less time than other professionals
Medicos especially specialists are busy people, with little time to spare. And, because of your training and the nature of your work, a practitioner's earning life may actually be shorter than that of many other professionals. Both make it harder to research and implement a financial strategy.

3. Lack of financial understanding
By definition, medical practitioners are intelligent people. But finance is a whole new world. Some of our interview subjects told us of medicos who invested less than wisely, and lived to regret it.

4. Lack of trust
High-earning professional people often worry that they could be a target for financial experts. It's vital to find a credible, transparent financial adviser whom you feel you can trust.

Our full white paper gives more information about each of these challenges and how you can overcome them. The paper also contains words of wisdom from your colleagues about their own financial journeys, plus advice characteristics that most doctors value.

Download your free copy of the white paper now -  I promise that it's intelligent, relevant, and shouldn't take you longer than 15 minutes to read.

 

Posted in: News Wealth Creation   0 Comments

Six key financial factors for Doctors entering Private Practice

Posted by Matt Connor on 14 May 2015
Six key financial factors for Doctors entering Private Practice

If you're a doctor looking to set up in private practice, you'll need to address a range of financial factors.

At Medical Financial Group, we work closely with our clients so that they can achieve the best business and tax outcomes.

Whether you're setting up a new medical or dental practice, buying into or joining an existing practice, we suggest you think about the following:
  1. Doctors may consider different types of business structures for their working arrangements. There is no one-size-fits-all - suitability will depend on the aims and needs of each individual. The structure you choose should be guided by your personal circumstances. These include where you work, as well as the infrastructure and staffing requirements you need to operate.
     
  2. Keep it simple as you consider which structure best suits your needs. Bigger, more complex business structures are not necessarily better. Unless there are complexities including shared costs for rented rooms, hired equipment, etc. it may be best to operate as a sole trader.
     
  3. Even if you are entering shared arrangements, we would generally advise avoiding partnership entities as they involve joint and several liability.
     
  4. Whichever structure you choose, the income individuals receive is classed as Personal Service Income (PSI). PSI's underlying rules dictate all structuring and tax administration for any type of service provider including doctors and dentists. The Australian Tax Office defines PSI as a reward for, or the result of, your personal efforts or skills.
     
  5. While PSI is generally taxed in the same way as any other income, a key difference is fringe benefits for private use exemptions. Fringe benefits are an extra benefit that supplements an employee's wage or salary, for example a company car, private health care, etc. The most common benefit for a separate structure (in contrast to a sole trader) is for the private use of a motor vehicle. Under a separate structure, if you need a car for work and another as a family car, this can save you tax.
     
  6. Keep in mind that your key consideration should be to protect your assets as well as put in place thorough tax planning arrangements. These should comply with the law while achieving the best tax outcomes and enabling your business to operate more efficiently and profitably.

At Medical Financial Group, we take a proactive approach to our clients' tax and accounting needs. Please feel free to contact us with any questions you may have via phone: (07) 3363 5800 or email: info@medicalfinancial.com.au
 

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Should you buy property with your self-managed super?

Posted by Sean O'Kane on 30 April 2015

Borrowing money to buy property through your self-managed super fund (SMSF) is becoming increasingly popular in Australia. Lots of medical specialists seem to be doing it, but is it right for you?

This kind of investment has risks as well as potential benefits. Before you decide to buy property through your SMSF, you need to think carefully and feel confident that this step fits into your overall financial advice plan.

To help guide your thinking, we've put together the following up-to-date summary of potential benefits and pitfalls of SMSF property investment.

For more detailed information, and a chance to speak to one of our financial planning partners in person, click here to register for one of our free upcoming evening seminars in:

- Cairns, 21 May, Shangri-La Hotel
- Townsville, 4 June, Rydges Southbank
- Brisbane, 18 June, Fireworks Gallery, Newstead

Reasons to consider using your SMSF for property investment
- Up until retirement, investment income associated with the property (i.e. capital gains, rent) is taxed at a top rate of only 15%.
- If you still own the property after you retire, you will pay no tax on either capital gains (if you sell) or rent (if you keep it).
- You can invest in paying off the mortgage on your own commercial property rather than paying rent to someone else.
- Historically, property has provided good investment returns.
- Properly managed, debt can be used to create wealth.

Possible pitfalls of using your SMSF for property investment
- It's not about negative gearing (as it is if you buy a property in your own name). The loan with a SMSF has to be paid off. In our experience this means you need a minimum of 30% deposit for commercial property and 40% to 50% for residential
- The quality of your property investment is always important. Location plays a big role, and an inferior property will still be that whether it's purchased using super or not.
- Australia's Reserve Bank and economists have recently expressed concerns that the property market is overheated.
- Buying a property through an SMSF is complicated and can be expensive to set up and manage.
- Property is 'illiquid' (can't be easily converted to cash), so you need to invest for the long term.
- For smaller fund balances, buying property can lead to an undiversified portfolio, increasing your investment risk.

If you're considering purchasing a property through your SMSF, seek professional advice to make sure this move is part of a broader plan to enhance your financial future.

For further information, contact Medical Financial Group
Tel:  (07) 3363 5800
Email:  info@medicalfinancial.com.au
Web:  www.medicalfinancial.com.au
 

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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)