Money management can be challenging for doctors, as financial literacy is not a part of medical curricula (or most other qualifications). Despite your high level of education and your high earning capacity, you have little time to look after you and your own future.

The good news is this—it is not as hard as you think once you have a financial blueprint in place. Are you ready to get off the exhausting earning-spending treadmill, work with another trained professional you can trust, and get control over your finance and life?

Here are a few common questions people ask and small tips to start your journey.

1. Why do some people lose money from the share market?

Tip – successful investing depends on discipline and sensible risk assessment

2020 is off to a troubling start and an 11- year bull market comes to an end. When panic sets in and people start to sell their shares, what could you do?

Investing in the share market is not a numbers game, it is a mind game. When the share market rises, you might hear from your friends and family about how well their shares are doing and how much money they are making. You hesitate at first, but then you might eventually buy shares yourself. Soon after, the share prices may begin to drop. When the prices fall below what you paid for them, and you realise that you are losing part of your original investment, you may feel an edge of panic set in. If the market continues to fall, you will probably feel even more anxious. When the market drops to a total of 35-40 per cent, it’s likely you will not be able to hold on anymore. You will abandon your goals of financial freedom or your dream retirement and you will sell the shares. However, the market will surely start to rise again and you will be standing on the sidelines, realising that the opportunity you might have had will be forever lost.

However, a few of us see opportunities and buy shares instead of selling during the pandemic to fast track our paths toward financial freedom. Buying shares when they are on sale – I call that the ‘Boxing Day share sale’.

2. How do I assess my current financial situation?

Tip: Net savings is an assessment of your capacity to grow your wealth and net worth is a snapshot of your wealth

Income – Expenses = Net Savings

Without savings, there can be no investment, and without investment, there can be no growth.

Assets – Liabilities = Net Worth

How to determine if you’re wealthy? Whatever you age, whatever your income, how much should you be worth right now?

Multiply your age by your realised pre-tax annual household income then divide by ten, and this is what your net worth should be.

For example, if you are forty-five years old, and make $200,000 a year, you would multiply $200,000 by forty-five. That equals $9,000,000. Dividing by ten, your net worth should be $900,000, and that doesn’t include inheritance. If your net worth is less than what it should be, you need to start working now to fill that gap.

3. What super is the best? Why is investing in super the most tax-effective way to prepare for retirement?

Tip – One size doesn’t fit all. The one that suits your friend may not be the one that suits your needs.

Having the right superannuation fund is crucial in growing your retirement savings. However, how do you choose the right basket for your nest egg? There are too many options – industry super funds, retail super funds, super wraps or self-managed super funds (SMSF). The challenge is to find out which super fund is best suited to your needs. What information are you relying on? Your friend’s suggestions, TV ads or professional advice?

Investing in your super fund is the most tax-effective way to increase wealth, as investment returns and the income from your super fund may be tax-free once you are at age 60 or over.

Apart from investing in your super fund for retirement, is there any other way to save the tax? Find out more.

4. What income replacement do I have in place?

Tip: Set up different sources of income and protect them

What is your greatest asset? You might say it is your house. How does the mortgage for the house get paid? Your biggest asset is actually your ability to generate income.

Your income comes from different sources. When you have a job, you make your money from employment, when you have your own business, you earn your money from the profit of the business. If you wish to stop working, then you would need the passive income that can fully cover your expenses, which we call financial freedom.

However, if you must stop working due to sickness or injury, do you have protection for your income? If you have a policy, when was the last time you reviewed it? Are you sure your income protection benefit will pay you the amount you need at the time you need it? The claims are the ‘moment of truth’ in any insurance product. Don’t wait until claim time to find out your policy is not claimable.

5. Why is it that no matter how much I make, it is never enough?

When your income increases, your lifestyle does as well, so you spend more money. Lifestyle inflation affects us all. You can have anything you want in your life, but you can’t have everything. More of one thing usually means less of something else. Life is the sum of all your choices at the end of the day. Shouldn’t you be making them wisely?

A good financial adviser brings wisdom, discipline, and understanding to the choices people make every day.

General advice disclaimer

This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.

Helen Nan, Financial adviser & Author of ‘Your Best Life’, http://yourbestlifethebook.com.au

Authorised Representative No. 1002520

Plan for Your Future Pty Ltd Corporate Authorised Representative No. 1280880

Alliance Wealth Pty Ltd |AFSL 449221 |www.centrepointalliance.com.au/AW

Reference list

Stanley, T & Danko, W 1996, The millionaire next door, Pocket Books, New York