Life Insurance and Trust Explained for NHS Professionals

If you're a doctor, you're working in the NHS and you've got a life insurance policy, you need to be checking if it's in a trust. If it's not in a trust, I don't want to say your advice has done a bad job, but that's like an obvious thing. You need to find out, is it in a trust? If the life insurance policy is in a trust, apart from it being paid entirely, it also reduces the amount inside the estate, so helps in bringing down what is taxable on the estate. If you've been struggling to save, some of you before the master class, you sent a message to me, said, part of my difficulty, saving money. I know I should be saving money, but I don't have the discipline. You don't need the discipline. What you need is a system. Now, if we go back to the seven steps around investing, I think we've covered most of it, but this is one key area most people miss out, is eliminate high interest debt. Someone came to me, he wanted to start investing, but he had a credit card debt and they were paying an interest of 22.5%. I thought, that's not good at all, 22.5%. And if you invest, how much do you think you're going to make? I said to him, the best investment you can make now is to pay off that credit card. I believe that if you've been in this masterclass, you've probably understood part of the goal. The goal is to make sure that at the end you understand how to start investing, tax efficiently. As a doctor or healthcare professional, I'm quite aware of that. We've got like physiotherapist, I've got like a medical radiographer and my mastermind, excellent guy. He's been in the program for more than six months now and he's doing great things. He's investing in stocks and bonds and he's done a bit of real estate as well. So I know that we've got nurses, other healthcare professional. If you're not a healthcare professional and you're finding the content useful, feel free to enjoy. But most people ask me, why do you focus on healthcare professionals, doctors? I said, why? Is because doctors have unique problems, Healthcare professionals have unique financial issues. Part of it is that you seem to have a high income, but never confuse high income with wealth. A lot of it's active. If you don't work, you get no income, there's no investment. You have this whole tax traps and at the end of day, you spend all these so many years, six years in med school, another how many years in residency and extra degrees and all that. So doctors find themselves in that situation where they also time poor. So not enough time to figure out what to do in my taxes, what to do with my investment. So the goal of the masterclass is to empower you to be able to take tax efficient decisions and make tax efficient investing. What makes this different? I don't think we need to spend too much more time on this because traditional finance obviously doesn't deal with issues like one of our most watched videos on the YouTube is 10 things you should consider before you leave the NHS pension. Your average pimply 17 year old YouTuber in front of a Ferrari in Dubai, probably rented, doesn't understand some of those things. They probably tell you well if you put money in a crypto you can make this amount of money. And some people are quite well meaning. Some people are also on YouTube making content, but they don't understand the unique challenges doctors, healthcare professionals face. And some people here are also IMGs like I'm an IMG, I moved to the UK almost 10 years ago. In 5 days time I'll be 10 years in the UK. And there are some unique issues because first of all discovering things like ISA, I just stumbled into it like 2017, 2016 and then started a deep dive into it, discovering things like mortgage, your credit score and all those kind of things. Sometimes these are issues, sometimes you don't even realize the importance of life insurance, income protection. I had a doctor, doctor, a consultant radiologist, she was an IMG anyway who developed optic neuritis. And you can imagine a radiologist trying to do her job but now struggling to look at screens. She had to leave medicine. Say one of our saving graces was that she had income protection insurance. So what that income protection insurance meant was that she was being paid even that period that she was unwell, she couldn't work, so she was being paid some money to replace a portion of her income. So that's income protection insurance. So lots of people don't know that they need to have these financial protections in place in order to be able to sleep well at night, even when you start investing so that you don't have to sell your investments at the wrong period when the market is crashing and we are right in the market looking for bargains, investing and you don't have to sell at that point. But if you find yourself in a financial tight corner and you don't have an emergency fund, you don't have the right Insurance, you might have to sell your shares at the wrong time. Even if you are just buying index funds, you're not doing any active investing. You want to be investing, stay invested in the market because time in the market beats time in the market. You do better by spending more time in the market than trying to time the right time to invest in the market. And there's a lot of data around this area. Okay, so that's what makes this difference. It's for medics, it's for people who want practical stuff. No fluff, no junk, no hype. Basically this is step by step, this is what you can do. Okay, so now let's get into the meat of the matter. We're going to start with, as usual, seven steps to take before you start investing. 7.

There are seven steps to take before you even start thinking of investing. As a doctor, healthcare professional.

Professional.

Now this is really important to secure your financial foundation before you start investing. Now I've covered the seven steps in a simple guide that I've made available for you in the link in the description. You can download it. It will help you to build a solid financial foundation, avoid common investing mistakes and also make tax efficient investment decisions. Start your investment journey the smart way. Download the guide now using the link in the description and good luck on your investing journey. Now let's get right back to the.

Episode because in my opinion, I think it's really important that you build a good foundation before you start investing. And I've given some of the reasons. One of it is you don't want to be stressed, you don't want to invest money and you can't sleep at night. You don't want to be panicky and anxious. I mean this is one of things people in the mastermind, some of the new investors in the mastermind, even some experienced ones, this is one area that managed to do a lot of work in like you learn how to be a calm investor, you calculated and you're not getting anxious, you're not getting excited because your knowledge is better. I'll give you an example. Let's say, okay Priya, I'm just going to ask you because you've been present and you've been amazing. So Priya, what's going to happen if we get like a medical student? Not okay, let's say an F1 doctor and we'll bring her to your theater room basically to run your list for the day. What do you think will happen?

Priya, F1s to do the whole list or just to observe, to run the.

List to do the surgeries.

I don't think an F1 can run the list in ophthalmology.

Okay, what about clinic? To run the clinic independently, no consultant, nobody to report to.

I think that'll be throwing them at the deep end. No, they can't do it, unfortunately.

Right. Because. Because they are not trained for it. Right. No, yeah, exactly. Thank you, Priya. If you got someone who wasn't trained enough thermology or if you got someone who wasn't a GP to run the list, of course they're going to be anxious. Of course there's a chance that there's going to be disastrous outcomes. So basically part of your anxiety around investing is because you haven't been training invest. Part of your anxiety around your taxes when you get your envelope is because you've not had the basic financial education. So what we want to do with the seven steps to investing is getting those seven steps in place so that you're no longer deficient in that aspect. Then you can focus on investing so that it doesn't take off the whole of your life. You've got a life to live. I want to play my piano, I want to write, I want to do whatever. I don't want to focus only on investing. You want to be a doctor, you want to go surfing, you want to go selling, whatever it is you do, you've got a family, but you need to put in that basic foundation. Okay. Now to make it interactive, I'm going to ask anyone who can come off the mic and tell me one or two of the seven steps to invest in. Seven steps to take before you start investing. I said it too many times, so I'm sure you know.

Yeah. One of these, that you have an emergency fund in place, number one.

Thank you so much. Have an emergency fund in place. Okay. Thank you for volunteering that. And what is an emergency fund? For someone who is brand new, they don't understand. What is an emergency fund?

Well, it could be between three and six months of your monthly expenses, how much you expend every month, your daily, maybe the bills you have to pay before you have to buy for your car, the things you do every month, about three to six months, lump sum of what would take you three to six months.

Excellent. That's brilliant. So have an emergency fund. Thank you for that. So one of the reasons I was able to walk away with my for my salary, GP job three years ago and not be worried about looking for the next job or something. I mean, money wise doctor came several months later. When I was getting too, too bored of just sort of twiddling my fingers. But it's having an emergency fund. Like Obeyemi was saying, having an emergency fund gives you a bit of gap. It makes sure that any small financial issue doesn't turn to a disaster or a catastrophe or an anxiety inducing issue. For instance, if your boiler blew up, I had this couple who are currently in the Mastermind financial coaching program and in one month their boiler blew up and their car had issues to fix. And they also had like family relative that they needed to help. And they, at the point they were already investing in the stock market. This was about the time when Donald Trump came up with his trade wars and the stock market was depressed. So many stocks were crashing down. So at that point, if they had to sell their investment to be a bad timing, they were going to lose money. But because they had a healthy emergency fund and they are both doctors, they, they were able to fall back on that emergency fund for that period and then build up back from there. Now the question is, what if one of them was ill? Then they had their income protection insurance in place to defend that angle. Okay, so thank you so much. You said have an emergency fund. Can someone volunteer another one? One of the seven steps before you start investing.

So I think you should set your goal and sort of assess your risk level.

Excellent, Priya, that's an excellent one. Well done. So set your goals. Set your investment goals. What are you investing for? Are you investing for your child's university education? Are you investing for retirement? What's your goal? Where do you want to get to? How much are you investing for? Because I will determine how much risk you need to take and assess your risk level. What is your risk tolerance? Risk tolerance is different from capacity to be a loss or risk capacity. Risk tolerance is psychological. Like, can you really be at a risk? Can you sleep well? Because I say you can either eat well or sleep well. Risk tolerance is looking at the aspect of, okay, are you really in a position, Sorry, it's talking about, are you, do you, do you invest and then you're worried? What if your investments go down halfway? Will you still be able to, you know, sleep at night knowing that, oh, the market is down now and risk capacity is a little bit different. For instance, if you are 31 year old, like registrar, and you're still active, you're working investing. If the stock market crashes now, you might not be too worried. Why? Because you can still keep investing for the next 20 years. But if you are a 57 year old and you're planning to retire by 60, you might have the risk tolerance. Psychologically, you might be willing to take risk, but capacity wise, you might not be in the position to bear that loss. Because if the stock market crashes and you wanted to retire at 60 and you wanted to start liquidating your investment, or what we call lifestyling, going from stocks to bonds, going from stocks to fixed income assets, it might be a very difficult one for you at that point. So risk capacity is very important. Okay, so these are some of the seven steps to investing. There are a few other things in the seven steps to invest in that I mentioned. One is obviously investing yourself first. That is what you're doing now. You're investing time in yourself. Some people, I think I told some people in my community that you can invest in S&P 500 and that's fine. But try to invest in SME first. Invest in yourself. Develop your skills, develop your knowledge. Just like you want to become a doctor or physiotherapist or nurse, you went to school and you trained and then that skill helped you to move to the next level. So learn how to invest. Learn tax efficiency. And investing in yourself doesn't have to be anything complex or exciting, expensive. You can read one book every year. If you read one good financial book every year, you're going to increase your financial IQ so much. If you're looking for a list of books to start with, I've made a video with the 12 books I recommend. You can start with any of them. In fact, one of those books, I think I've shipped more than 30 of it to people in my Mastermind community. This year I've shipped 30 of it. Send it to them. So the Psychology of money is one of them. Obviously the Money Wise Doctor is coming out later this year in October. So if you are in my mailing list, you probably get an email. If you're in the community as well, you get an email to let you know when it comes out. And I could even send you a free chapter to read. Okay, so read one book. Attend master classes like this. It could be one a year. One a year is more than enough. And number three, follow a podcast or a newsletter, something you can just get weekly to get a quick snacks, a quick bite or what's happening in the news. For instance, many of you didn't realize last year when the rules were changed around pension. One of the big rules that was changed around pension was that above 75, your pension becomes part of your estate. This was not the case before. If you're wondering what does that mean, that means you've not met our dear friend called IHT inheritance tax. So for every property you have in the uk, okay, when someone passes on and wants to leave their property to their family, the government wants a share of that, they want a percentage of that as inheritance tax. So you are taxed when you are living, you tax when you die. And that's why you need tax strategies to be tax efficient, to have systems in place. Can someone tell me in the chat, what is the percentage, what's the tax percentage of inheritance tax? How much tax is inheritance tax? What percentage? I think you guys know if you've been in. Okay, Albert said 40%. 40, Ada said 40%. So a whopping 40%. What that means is that okay, if you've got assets, if you've got your estate, you've got a house, you've got your life insurance and it's not inside the trust, if you've got your pension, if you've got all these things and they're just all over the place and there's no tax structure, there's no defense the government to say, well, 325000 tax free, anything above that, 40%. So if you happen to have a million in assets, including your house, if you've got a house, they will allow an extra 175000 pounds. It's called residential new rate band. So the initial one is nil. Red band, forget about the jargon, it just means the amount that is allowed before the tax. The new red band is 325000 pounds to go a property, you're allowed an extra 175,000 pounds. Even if your property is a million pounds in London. So this might favor those of you in the north, somewhere in Newcastle area maybe if you're pro, if you can get properties that are cheaper there. But the idea around this is that if you don't put measures in place then you end up paying more tax. But what, what changed last year was that the pension is now included as part of your estate. So if your pension pot is a million pounds, the government wants of that if you die after 75. So like I was saying, my dad is 75 going on 76 even though he hasn't got a pension. I'm, I'm basically, I'm his pension and I'm happy to do that. But let's say he had a pension around 74. You should, you should start saying, oh dad, are you still alive? Because after 75, whatever is left, the government wants 40% of it. Of course, you know that there are ways around this and that's part of the tax efficiency. For instance, your life insurance policy, putting it inside a trust, putting your estate in a trust, helps to reduce your inheritance tax because it takes those property outside your estate. And for the purpose of that, there can be no tax on them, there can be no inheritance tax. But of course discussions around the estate are not things I can cover, but these are basically understanding that, okay, there's something around it that can be done. So is the rate of tax less if you transfer access to estate while life. Yes. And there's also an administration of an estate. I'll give you a practical example, life insurance policy. So last term, two years or thereabouts, a very good friend of mine, we were childhood friends, he was also a doctor, he was a surgeon in London. He died. So he died at 36 years and it was sad because obviously he had family that was dependent on him and a lot of things happening. He wasn't married, but he's got like siblings and all that. He didn't have a life insurance policy in place. But imagine if he had a life insurance policy in place, let's say he had a 500£000 life insurance policy that gets paid out basically to his family. But if it is estate, basically, if it's just normal inside this estate, the government is going to want 40 of that. So they're going to need to surrender 40, that's 200000 out of that life insurance policy. In fact, the worst case scenario is that they wouldn't even be able to touch any of the money or the money in the bank account or anything until HMRC gives what they call probate, until they agree that all the inheritance tax has been paid. But if the life insurance policy was in a trust like mine, like most of you in the mastermind, like those of you in the Moneywise doctor community, you realize I always say your life insurance should be in a trust, even a trust. The trust is a separate entity. What happens is in that case, if the person dies or passes on the life insurance policy, the entire 500000 can be paid as quickly as possible without waiting for anyone direct to the family. So they get the entire 500000 and there's no inheritance tax on it because it's outside his estate. And what, what this means is basically if you're a doctor, you're working in the NHS and you've got a life insurance policy, you need to be checking if it's in a trust. If it's not in a trust, I don't want to say your advice has done a bad job, but that's like an obvious thing you need to find out is it in a trust if you don't have a life insurance policy and you want to get one, that's something you should be discussing with your advisor. We've got a free guide on life insurance and and one of my team members I've posted in group. You can download it for free. Understand the pitfalls, things you can avoid. Okay, Right. The other thing to also understand is basically if the life insurance policy is in a trust, apart from it being paid entirely, it also reduces the amount inside the estate, so helps in bringing down what is taxable on the estate. So these are some basic things. Okay. Now if you go back to the seven steps around investing, I think we've covered most of it said invest in yourself first. Conduct a personal financial audit, build an emergency fund, establish a financial defensive strategy. So that's things like life insurance, income protection, check your medical defense, make sure it's up to date. But this is one key area most people miss out is eliminate high interest depth. So I said to someone came to me, they wanted to start investing. Obviously they were in my one to one session. So they had a one to one session as part of the Mastermind program. So everyone in the Mastermind program guests one to one session every 60 days with me. So I'll make sure they're on track and all that kind of stuff. And of course they also attend any of the courses, deep dives you do for free. And he wanted to start investing, but he had a credit card debt and they were paying an interest of 22.5%. I thought that's not good at all, 22.5%. And if you invest, how much do you think you're going to make? It thought, well, if you went with the average market returns, the S P500 returned 25 last year. But some years it does less than that. Some average returns over the last maybe 30, 40 years, maybe around 9 to 10%. I said to him, the best investment you can make now is to pay off that credit card. Basically because the shop banker, if you pay off that credit card, you're not going to be sending 22.5% of your money to someone. That's part of why I don't have any cars. I have car payments, my house. And obviously everyone would have to do what works for them. But once I left salary job I don't want, I didn't want to be thinking of any car payments. I thought, well, if I love this car, if I want it and I can afford it, 40, 50, whatever amount, I'm just going to buy it and if I can afford it, then I don't want the car. Okay? So basically if you have a high interest debt, even if the debt that is 15%, okay, and your investment is not going to return above 15% per annum, you can't be sure you're not buying a bond that you can guarantee. In that case, you want to be thinking about paying off that high interest debt first before you start investing. Okay? That's one of the seven steps. Now the other step in the seven steps is define your clear investment goals. We've already mentioned that one and of course have your clear goals. Now I want to share a very clear strategy. If you've got a pen and a piece of paper or somewhere to write things down, write this one down. If you've been struggling to save, some of you before the master class, you sent a message to me, said part of my difficulty is saving money. I know I should be saving money, but I don't have, you know, I don't have the discipline. You don't need the discipline. You don't need the discipline. What you need is a system. And the system that I've shared for many years, I've used it for many years, maybe 15 to 20 years now I'll say 15 years roughly is what I call amass. So it's a framework. It's one of the frameworks you're going to see in the money wise doctor book. Their mass system is automated monthly allocated savings system. You don't have to remember that. I will explain it to you simply. It means rather than trying to save money, rather than trying to pay off your debt, you want to set up things to pay to be paid off automatically. You want to set up a direct debit or standing order. So how this works, let's say for instance, I'll use an example, sorry Priya, I'm using you again as an example. Let's say Priya ends £5,000, okay, £5,000 as an ophthalmologist per month. So rather than saying, oh, I'm going to pay, okay, every month I'm going to spend and then I'm going to try to transfer money into my investment account. Or let's say Priya is not investing yet, she's saving her emergency fund instead of Priya to do that. What does Priya do? Priya sets up a direct debit or a standing order to remove 20 to 25% of our income to go into a separate account. And this account, we call it the Freedom account, you want to buy your financial freedom, get ready to do the work. So this 20% goes into the Freedom account. And it's only for one thing. And wanting only is for helping Priya to get to her financial freedom. Now, depending on where Priya is, it might mean to pay down her debt. So that 20%, if Priya is in debt, that 20% should be going by direct debit to pay down the debts, should be going to the credit card company, it should be going to your bank, whoever you're owing to. 20%. Okay, why do I say 20? Traditional financial media will say 10, 15 traditional financial advisors will say all of that. And I said 20 because as a doctor, most times many of us are starting a little bit late. Some people are already you're starting your 30s, you're starting in your 40s, some people are starting their 50s. So you want to accelerate the journey because you also have a, an advantage. You have a steady income. Relatively, you have a steady income. And while doctors are not the highest paid people in the population, you're also not the lowest paid paid professionals. So doctors, dentists, healthcare professionals, you have a steady income. So if you can prioritize 20% of that going into your Freedom account for one purpose, to get your financial freedom. So if you have debt, you're paying off your debt. If you haven't got your emergency fund, you're saving up your emergency fund, which is three to six months worth of your living expense saved in a tax free account, preferably a cash ISA. Now if you've done all that, then that 20% should be going into your investment account, investing for your financial future. And if you're just buying index funds or ETFs, that 20% of your income, I don't mean gross, I mean net what you're getting into your account, that 20% of going into your investment fund, even if you're just buying ETFs, it can automate the same process every month. 20% goes from my account into my investment account, which I've also automated to buy a global index fund like the FTSE All World Index, which will buy, you know, the top maybe 2,000 companies in developing countries in developed world. Or it might go with S&P 500 which will buy the top 500 companies in the US which many people see as a representative of an average market index, but basically you automate the process. So rather than thinking I'm going to start investing, oh, I'm waiting for the right time to invest, you have an automated process working in the background that can now be compounding. Okay, I don't know if we have enough time to go into compounding here, but it's compounding while you're doing your job. And if you want to become an individual stock investor like me, I invest in individual stocks as well, then you have the funds to actually learn how to do it. And even if for some people their Strategy will be 80% in index fund, 20% in individual funds, so that way they're not taking too much risk, they're not taking unnecessary risk. But even if you think, well, I just want to buy ETFs, I want to buy FTSE, All World Index, or you want to buy a different fund, let's say you, you're looking for halal investments, so you want investment, let's say a Muslim and you don't want any investment for companies that deal with alcohol, pornography, all those kind of things, or you're not even religious, but you're an ethical investor. You don't want to invest in companies that do for sale fuel. You can buy index funds as well, or ETFs that are crafted just for that. We call them ESG. These are part of the things obviously we deal with in week two in the four week investment academy. So that being said, this is basically the seven steps I suggest you do before you even start investing. 7.

There are seven steps to take before you even start thinking of investing as a doctor or healthcare professional. Now this is really important to secure your financial foundation before you start investing. Now I've covered these seven steps in a simple guide that I've made available for you in the link in the description. You can download it. It will help you to build a solid financial foundation, avoid common investing mistakes, and also make tax efficient investment decisions. Start your investment journey the smart way. Download the guide now using the link in the description and good luck on your investing journey.

Well, I hope you found that helpful.

And more importantly, I hope it helped.

You to see investing in a new light.

This is just a small section of what we cover in the full masterclass. If you like me to drop more.

Of these clips, just let me know in the comments. Comment, invest and share this video as well with friends who may need to hear this.

And if you are ready to stop.

Winging it and guessing, guesswork is not good for investing. If you want to learn how to become a confident investor to learn how to invest properly, check out our Investing Readiness Scorecard with the links in the description.

It will help you determine whether you're.

Really ready to start investing and what you need to do before you even start thinking about investing to reduce the chances of you losing money. And until then, see you soon.

Bye bye.