by Jon Collier, Financial Adviser – Head of Advice (NZ) at MedCapital
A lot of general practitioners have had it tough, recently. With fewer patients visiting clinics, and both clinics and patients finding it difficult to switch the traditional GP model online, incomes are down.
I’m an Authorised Financial Adviser who works with doctors and I know that some general practitioners have had to cut back their hours and are making less money. Spouses who work in another industry may have lost some – or all – of their income too. When you’ve got a family to support, this can be really difficult.
“‘Stop buying your daily coffee,’ is an adage that I hate.”
General advice about how to manage your personal finances when your income has dipped often focusses on the small things. “Stop buying your daily coffee,” is an adage that I hate. As New Zealand moves into level three and takeaways become an option again, cutting back on coffee is not something anyone wants to hear.
What you should do – what everyone should do – is re-visit your personal financial plan. It has never been more important to sit down and take a good look at your personal finances.
“If you fail to plan, you plan to fail.”
There’s another adage I don’t mind so much: if you fail to plan, you plan to fail. I’ve known a lot of doctors in this camp. Life gets in the way and because a doctor’s expertise lies in a different and often all-consuming area, they’ll take the easier path of whatever is right in front of them to then ‘set and forget’ big expenditures like mortgage rates and insurances.
In an ideal scenario, you’ll have created a good financial plan to grow your wealth (possibly with a financial adviser) and you will have revisited this annually, making adjustments and making sure the plan aligns with your goals. If you haven’t created a plan yet, the best time to start is now.
Start by asking yourself: What are my personal and financial goals over the short, medium and long-term? What do I want? Even if you have been through this exercise before, it’s important to review these in light of Covid-19. For example, people often tell me they want to travel overseas and we now know this is likely to be heavily restricted at least for the remainder of 2020. Your long-term goals should be more set, things like when you’d like to retire and what financial position you’d like to be in when you do.
“There’s many options out there and so you should take the time to find the best rates and structures on the market.”
There’s two very common problems I see among doctors when it comes to financial management.
The first is that they have no plan at all. What they’re spending is based purely on need – the doctor needs insurance and needs a mortgage, so they’ve gone down normal routes to set those up and then they’ve forgotten about them. Or, they have amended them only when someone has engaged with them on an individual basis – for example, you’ve fixed your rates, then the bank has written to say those rates are about to expire and offers another rate, which you take up. There’s many options out there and so you should take the time to find the best rates and structures on the market.
The second problem I often see is people are unsure how to adjust their financial plan if they do have one, leading to decisions which negatively impact longer term goals and objectives. So much has changed since the global pandemic began. As well as working to pull your income back up if you need to, you should be acutely aware of what your expenditure is and you should look at that in light of what your plan is, including why you originally set things up as you did.
“If your income has gone down, you must look at your expenses.”
If your income has gone down, you must look at your expenses. Mortgages, life and health insurances, fire and general insurances like home, contents, car or business related. Then there’s KiwiSaver and other investments (like a property investment portfolio). Add this all up and it’s not uncommon to see financial products and services represent more than 70% of a doctor’s monthly expenditure. Which brings me back to: why should you forgo your $4.50 per day cup of coffee, that you really enjoy, without looking at the bulk of your expenditure first?
Avoid a ‘slash and burn’ approach, which is likely to leave you exposed and be to the detriment of your future wealth creation. It’s all about balance and reviewing your plan holistically.
Note: This article is for general information purposes only. The information is given in good faith and has been prepared from sources believed to be reliable, accurate and complete at the time of preparation, but its accuracy and completeness is not guaranteed. Any information, analysis or views in this article, represents my opinion at the time of publication and are subject to change without notice. It does not constitute personalised or legal advice and to the maximum extent permitted by law, no liability or responsibility is accepted for any loss or damage, direct or consequential, arising from or in connection with this article or its contents.