This book explains how to create wealth by implementing sensible, safe and achievable financial plans created specifically for Australian GPs.
This book emphasises staying in control of your business and investments at all times, and avoiding the traps inherent in the financial planning process, mainly institutional bias in product selection and chronic short-termism.
This book encourages GPs to invest in their practices, their homes, direct shares and property, including practice premises. This book explains how the return on these investments will be better if the right structure is used: trusts, companies and self-managed super funds are critical components of every financial plan.
This book shows why GPs should not invest in managed funds and should steer clear of financial institutions and financial intermediaries wherever possible.
This book takes a very long-term approach to investing. It takes decades, even generations, for strategies to really bear fruit. Patience is crucial. Keep it simple and have faith in what you are doing. It does work. It just takes time.
The book details the financial plans of four GP clients at different stages of their lives and careers. We explore the issues faced by these GPs and verify the significant benefits of long term, even inter-generational, financial plans. The plans are simple to implement, and do not involve large fees to third party advisers, institutions and other intermediaries. The plans cover the practice itself, practice legal structures, superannuation, estate planning, risk insurances, investing in property and shares and asset protection.
This book stresses the unique nature of GP incomes: their height, stability, scalability and longevity combine to create a unique opportunity for every GP to acquire wealth and to establish a sound financial base for this generation and the next.
It takes decades, not years. And it has already been done by tens of thousands of GPs. The best time to start was two decades ago. The next best time is today.
No one is really sure what Donald Horne meant when he titled his 1964 classic “The Lucky Country”. It became a term of endearment, but Horne went to great lengths to dispel this positive view and to stress the critical aspects of his work. He was actually criticising Australia and dismissing its wealth as mere luck. Luck he did not think would endure.
Horne was not very prescient, at least in economic matters. For fifty-three years later, in 2017, Australia remains the Lucky Economy. Sure, there are problems. Some say two decades of unbroken growth has led to complacency, that we are becoming uncompetitive on the world stage, and desperately need better exchange rates (i.e. a lower $A) and a more productive workforce to just maintain our historically high standard of living.
What a depressing view. It’s not one we share. One question: where else would you want to live? Name a better country, with better prospects and standard of living?
Australia’s economy proved world class during the GFC. Our strong resources base carried the day. The consequential high dollar hurts manufacturers, harming exports and import substitutes, but it keeps inflation down and interest rates down, and has been a boon to import consumers (think cars, TVs, PCs). This combined with technology driven productivity gains means Australia has an economic record that is the envy of treasurers around the world.
Australia has a stable Westminster-based political system, a relatively independent civil service, an independent court system, an extensive social welfare safety net, an equitable tax system, a low incidence of governmental corruption, a world class public education system including world class universities, an educated and skilled workforce and an enviable climate.
Australia’s health system is first class. It’s not perfect, but its better than the alternatives. Australia is a nice place to live.
The Economist Intelligence Unit’s Global Liveability Survey examines 140 cities under five categories: stability, healthcare, culture and environment, education and infrastructure. Scores in each category and sub-category are weighted to give score out of 100. A score of 100 is ideal and a score of 1 is intolerable.
For the last few years Melbourne has topped the tables. But not only that, three Australian (and one New Zealand) cities feature in the top ten.
These were the top 10 most liveable cities for 2016
|8||Auckland, New Zealand||95.7|
We actually think Finland and Canada are too cold to count, and there is not much difference between living in Brisbane and Adelaide, Bendigo and Melbourne, and Busselton and Perth, so in summary we can safely say that anywhere in Australia is better than anywhere else as a place to live.
As our foreign trained clients are constantly telling us, there is no better place in the world to bring up children. The lifestyle, societal, educational and occupational opportunities are out of their world.
And this good ‘luck,’ as Horne dismissed it, is not really lucky at all. Modern Australian history is the product of a lot of people dedicating a lot of time and effort to making Australia a great place to live for most people. It is no coincidence that, during 2008, Australia’s net immigration was over 300,000 people. That demand continues to drive the Australian economy.
In the Lucky Country, medicine is the Lucky Profession.
Australian GPs almost always enjoy world class facilities and resources, funded by a generous National Health scheme that provides good health care to all Australians pretty much independently of their means. It’s not a perfect system, but it’s a pretty good system.
Medicine is the only profession underwritten by the Australian Government. Do you know any unemployed GPs?
Virtually every GP in Australia earns a very good living, with an almost guaranteed income in the top few % of the income population. The growing and aging population means this is not going to change in your life-time, and the net demand for medical services will rise and rise despite increases in the supply of medical graduates and the best efforts of the federal government.
It’s an unstoppable phenomenon.
But again, perhaps ‘luck’ is the wrong word for all this. Medicine is, of course, a most demanding profession. The entry requirements are sky high and it takes more than ten years of training to produce a fully qualified GP. It’s a gruellingly strenuous process. We believe medicine is the most demanding profession; the one dealing with the highest stakes and achieving the highest social outcomes.
The good news, though, is that medicine is one area where there is a direct link between effort and reward. Being a GP in Australia means you are in the highest paid profession in one of the wealthiest and most privileged countries in the world.
Our thesis could not be simpler: the height, stability, scalability and longevity of the GP’s income means that virtually every GP, no matter what their age or current financial position, can create and implement a financial plan to achieve long term financial security for both themselves and their family within a reasonable time.
It does not matter if you are 26 or 62, it’s not too early and it’s not too late; and it can be done.
This book tells you how.
A short summary of everything
If you are really stuck for time, the following points summarise the rest of this book:
- You can practice medicine until you are in your seventies if you want to, assuming your mind and body are up to it: so take good care of them and make sure they last the distance. You have worked hard to get where you are now. Make sure you enjoy yourself and get the most out of your career and personal relationships. It’s not all about money.
- Owning a practice is the best investment for a GP, assuming life circumstances allow it.
- Owning a good home in a major capital city is the next best investment. Own as many homes as the bank will lend you the money to buy and then pay the associated debt off as fast as you can. Keep the old home as an investment when you move up.
- Stay away from managed funds and other institutional investments. Focus on direct investments in a diversified selection of Australian shares, exchange-traded index funds and property. Own these investments through controlled trusts and super funds, and use a judicious amount of debt to speed up the capital appreciation process.
- Never sell a good property or a good share. Appreciate they are long-term investments, measured in decades, and even generations. Invest for your grandchildren
- Surgery premises are usually excellent investments.
- Never trust an investment ‘adviser’ who works for an institution.
- Take a conservative position on the taxation of practice income. GPs should generally practice through trusts, with all personal services income distributed to the GP who generated it; and making sure a reasonable remuneration is included in the GP’s assessable income, even when the practice is clearly a business for income tax purposes.
- Have adequate risk insurances in place, but do not over-insure. Hopefully you are not wasting your money. Just don’t waste too much.
- Don’t own valuable assets in your own name: if you don’t own them you cannot lose them, at least to a litigious patient. Trusts, super funds and, sometimes, spouses should own valuable assets; not GPs.
- Have a sensible will in place.
- Contribute as much as you can to a decent super fund or a SMSF every year no matter what your age. For most GPs this is all that is really needed to be financially secure.
- Handle debt with care. Never have consumer debt and minimise non-deductible debt. Make sure deductible debt is at the lowest possible interest rate and never pay mortgage insurance.
- Start retiring early, but never stop. Gradually cut back over the last few decades, making sure your costs are cut back too, and that your practice is always profitable. Change co-ownership arrangements and even change practices if you need to.
It all boils down to remembering the four basic rules:
- keep it simple;
- never trust anyone else with your money;
- never give up control; and
- choose direct investments.
Follow these four rules and you will probably end up quite wealthy.