Introduction: This is the White Coat Investor Podcast, where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011. Here's your host, Dr Jim Dahle.
WCI: Welcome to White Coat Investor podcast number 81, Medicine and Finance in the U.K. At some point in our financial lives, it will be time to buy a home. A physician mortgage can be a good vehicle for a young doctor who’s just out of school and has a more effective place to use their money than on a big down payment. These loans allow doctors to secure a mortgage with fewer restrictions and a lower down payment than a conventional mortgage. But if you’re further advanced in your career or deeper into your journey to financial freedom, buying a home with a conventional mortgage and then, later on, potentially refinancing that loan to a better rate with a shorter time frame could be a great move.
Wherever you are in your financial journey, make sure you use the mortgage that will be most financially beneficial for you. Hop over to our recommended tab to learn more about all of your mortgage and refinancing options at whitecoatinvestor.com/mortgage.
You can do this and The White Coat Investor can help.
WCI: Welcome back to the podcast today, we got something special going on today on the podcast, but before we get into that, we've got something special going on this whole at the White Coat Investor. This is continuing financial education week, not only am I making recommendations for books you should read but we also have a special deal on our online courses. So if you've been waiting to take one of these because you wanted a discount, now is the time. We haven't had a discount on any of those courses since July, I believe, I think was the last time we had any kind of a sale. This week are having another sale and you can get a discount on both the Fire Your Financial Advisor! course as well as the online version of the White Coat Investor conference we had last March in Park City. Both of them being available at a discount so check that out today. You only got a couple days left before that goes away.
WCI: Our quote of the day today comes from Morgan Housel, who said, “There are over 2,000 books picking apart how Warren Buffett built his fortune but none are called ‘This guy's been investing consistently for three quarters of a century.' But we know that's the key to the majority of his success.”
WCI: Our special guest today is a U.K. doc, so let's get into it. Welcome to the White Coat Investor Podcast, today we have a special guest, we have Dr. Nikki Ramskill, who we are keeping up late at night in order to be on the podcast because she is located in the U.K. She blogs at thefemalemoneydoctor.com, which is, as far as I can tell, is the first money blog written by a physician in the U.K. Welcome to the show, Dr. Ramskill.
Dr. Ramskill: Thank you very much, I'm so delighted to be here.
WCI: I'm excited, not only that you're here but that you have the great British accent, I love having it on the show, makes for a change from what we normally have.Dr. Ramskill: Well, I'll do my best.
WCI: Let's start at the beginning, let's have you tell us a little bit about your upbringing and family.
Dr. Ramskill: Great. I come from quite an ordinary family, really. Nobody in my family is actually a doctor or a nurse or anything medically related at all. I was the first person to go to university so it was very new for all of us, to be honest, when I first decided to go into medical school.
Dr. Ramskill: However, my sister, my mum, my dad, they're all very service based professions that they're in, so I guess it wasn't a million miles away from deciding to become a doctor. I was good at Science at school so it led on from there, really. I don't think it was a particularly extraordinary upbringing at all; it was a very nice, middle class, living in London, brilliant.
WCI: Are you still in London?
Dr. Ramskill: I was until about a year and a half ago and then I decided to move out of London and I now live in an area called Milton Keynes, which is probably around an hour and a half, two hours drive from London, but it's got very good train connections so I can be within 45 minutes of London if I wanted to be.
WCI: That's great. Tell us a little bit about your education and training.
Dr. Ramskill: The way that you become a doctor in England is that you start off by doing your medical school training and you can go into medical training literally from the age of 18, if you wanted to. That's how I got into medical school, I started at the age of 18. You can then do a five year degree program and then, if you want to, you can do an extra year where you gain an extra degree as well so I actually did six years in the end. And then at the end of six years, I went to a couple of hospitals around London, where you rotate every four months into different areas so I started off in a very surgical based specialty. Did lots of general surgery for four months and then went onto medicine before finally doing a little bit in A&E and moving onto other medical specialties as well.
Dr. Ramskill: So you do that for two years. I did a little bit of GP, which is the profession I've now decided to go into. A little bit of obstetrics and gynecology. The idea is in the first two years after medical school training, you have a broad base to which you can then choose a specialty on that. It's quite early, I think it's probably quite different to how it is in America, from what I gather, you have to another degree before you go into medical training, is that correct?
WCI: That is correct, we typically here will do four years of college or university preparation in something, may not even be medically related at all, followed by four years of medical school and then three to seven years of residency and fellowship training after that. It sounds like you get to seeing patients a lot faster than we do.
Dr. Ramskill: Really quickly actually. There's a big emphasis on getting medical students literally from the first year they start. So you could be 18 years old and you could be seeing your first few patients. Obviously very heavily supervised, you're not allowed to do anything on your own but what a lot of the medical students have now, is they have a long case where they will follow a patient right the way through their patient journey from, if they're in the GP surgery, right the way through to if they get admitted to hospital.
Dr. Ramskill: Medical schools are now moving away from the old fashioned model where you do a lot of book work for three years and then after that you go into clinical work. They want to become much more integrated so you're actually finding your feet in a hospital setting and you're getting to know what the hospital feels like very very early on, which I think is a good thing.
WCI: Sounds like you did this two year rotating internship in the various specialties, do people typically do a residency of any kind after that or can you go be a practicing general surgeon after finishing that internship?
Dr. Ramskill: No, you can't. So once you've done your first two years, you then have to pick a training program. For example, my first specialty that I decided to choose was obstetrics and gynecology, so OBGYN. I went straight into that after my second year following my first two years out of medical school. The idea is you stay in that program for seven years, at the end of it you come out as a fully qualified consultant and then you can start working independently in the U.K. and then you can also start private work as well.
Dr. Ramskill: Each specialty has their own length of training so you could be training to be a surgeon for many many years before you actually come out the other end with your CCT, which is our consultant certificate and then actually start working as an independent physician. It's quite a lot of training after you've got out of medical school, to be honest. The medical school bit is the easy bit, it's the specialty training afterwards is much more intense. And often leads to burn out and you get a lot more doctors deciding to leave specialty training, or even delay going to specialty training because they know that they get almost locking into the training program for however length of time it needs to be.
Dr. Ramskill: And that's what happened to me. I decided at the end of my fourth year in obstetrics and gynecology that I was going to leave because I just couldn't face the intensity anymore. I couldn't face the stress, the litigation risk. It just work for me, it didn't fit for the lifestyle that I wanted so after taking some time out I decided to go into family medicine, which is a much shorter training program and it's actually three years. You can get out the other end and then I'll be a fully qualified, independent physician, once that's finished.
WCI: Are you in your family practice training now?
Dr. Ramskill: I am, yes. I've done just over a year. I've got around 18 months left before I fully qualify, assuming I pass all my exams. The difference, for me, is that because I had so much previous experience in obstetrics and gynecology, I actually had a slightly shortened rotation, so rather than be three years, mine's actually two and a half, so I get out six months fast than my colleagues who started at the same time as me. For me, now, I'm very much looking forward to getting to the end and drawing a line from my undergraduate training and being out there fully independent and choosing whatever it is that I want to choose afterwards.
WCI: Tell us about practicing medicine in the U.K., how is it different from the U.S.? What do you like about it, what do you dislike about it?
Dr. Ramskill: There's loads of differences. Obviously with the U.K., we've got the NHS, so for patients, at the point of care, they don't actually have to pay for anything, they don't have to hand over their credit cards or put any money down to see a doctor. I love that aspect about our country. I absolutely love the fact that the NHS is there and it means that when somebody is absolutely in their time of need, they have the ability to see somebody quickly.
Dr. Ramskill: The only downside with that is that when you've opened up healthcare as a free for all, waiting lists become much much longer, so I think one of the things that very starkly different between America and the U.K. is that, in America, from my understanding, you generally get to see your specialist much much faster than people in our country would be able to.
Dr. Ramskill: Just to give you an example, I have a patient literally in the last week who urgently needed to see a neurologist for symptoms that she had. The earliest appointment that he would offer her is three months away. If that's urgency, can you imagine what it's like if it was just a routine appointment? I think that's one of the biggest differences is that in the U.K., we've got this service that, yes it's free, but it also comes with the drawbacks and because it's free, everybody then has to go into the queue and they have to wait.
Dr. Ramskill: So they often get people who'll often have this strange hybrid between private medicine and the NHS, where they'll go into private medicine for things like MRI scan or the physiotherapy and then they'll plug themselves back into the NHS again when things start to become quite expensive. I don't necessarily think you have the same kind of thing as that in America, although I know you have different levels in insurance, don't you?
WCI: Yeah, it's a terrible complicated mess.
Dr. Ramskill: Yeah, I've been hearing.
WCI: Anybody that thinks the problems easy to fix doesn't understand the problem in the U.S. We've definitely got some health care issues here. Do doctors choose whether they're going to be in the private system or whether they're going to work for the NHS or how does that work?
Dr. Ramskill: Until you become a consultant in the U.K., you have to stay in the NHS. There are options of some people going into private medicine, I'm not really sure how moral that is, I think most people would generally wait until they get through their NHS training. They come the other side, the have their full qualification as a consultant, they get on the GMC register, fully qualified as a GP or a consultant and then they can practice privately. And I know of many that have decided to go straight into private medicine.
Dr. Ramskill: The only problem with that is that you rely on the NHS to be your source of referrals. If you come out the other side, you go straight into private practice and then you're competing with other physicians that have got much more reputation, much more experience, you may struggle to get your private referrals. So I think what a lot of people do is they use the NHS as kind of spring board and once they've got a name known for themselves, they've found their feet for a while, that's when they start going into private medicine. They do that in addition to the NHS hours, so that often means working weekends or late nights to accommodate what the patients want.
Dr. Ramskill: GP is a bit different. GP training, you can actually go right into private medicine as soon as you've qualified, there are lots of companies out there offering telemedicine, where you can sit in front of a Skype screen and talk to your patient that way and that's all basically private sector type stuff but people generally stay in the NHS, they don't tend to go private but it does exist.
WCI: What do doctors get paid in the U.K.?
Dr. Ramskill: It's a good question. It depends very much on the kind of job and specialty that you do. Obviously if you're a surgeon or you work in obstetrics and gynecology, you're probably looking at £80,000 to £90,000 a year when you first start and then it goes up from there. However, you're not getting people coming out of medical school with six figure salaries, it doesn't happen. Unless you become what's called a locum doctor, where you're basically slotting yourself into the hours that in whatever hospital needs them or GP surgery that needs them.
Dr. Ramskill: I do know of people that are on six figure salaries when they first start but they are working on a zero base contract so they're literally having the hours until maybe that day or they can book them maybe the week so some people don't like it because they don't like that lack of consistency. GP's will probably be on £60,000 depending on how many sessions they decide to do. You get paid per session so a morning or an afternoon and they replicate that over an entire year's worth of sessions and then you get paid as per that. It depends on the GP surgery, the tariffs, it's quite complicated.
WCI: This is all dictated by the NHS, by a scale that they have put together?
Dr. Ramskill: Yes, there is a scale and it's like a banded scale, basically. The NHS England do dictate the kind of salary that people would get. In hospitals it's much more prescriptive, however, in the GP surgery, because the GP surgery's are controlled by the GP's themselves, so they own the business as such, they can decide how much they pay people. There's kind of like a recommended amount and then they can decide if they want to negotiate with that individual about how much they get paid.
WCI: Super interesting to get a glimpse behind the scenes of how it's done elsewhere. What about during that rotating internship, how much do you get paid during that period?
Dr. Ramskill: Not a lot, if I'm honest. It depends on whether you're in or out of London. In London, you're probably looking, I'm generalizing here because I don't remember the figures off the top of my head, you're looking at £23,000, £24,000 when you first start and then by the time you get up to registrar level in London, you're probably looking around £27,000, £30,000 and then you'll get extra, depending on whether you do out of hours sessions.
Dr. Ramskill: The contract recently changed so you had our previous health secretary, Jeremy Hunt, he changed the contract so that out of hours became much later. So you wouldn't start getting paid out of hours work until after 10 o'clock at night and you wouldn't get paid out of hours work on a Saturday, that would get classed as normal working hours and Sunday was the only day of the week that is technically classed as out of hours. Suddenly there are a lot of people doing lots of late shifts, lots of weekend shifts and they're not being compensated in the same way that they used to be, so things have changed in the last few years as well.
WCI: Was that the change made in 2016 that led to all the doctor strikes?
Dr. Ramskill: Basically, yes, that's exactly what happened. We had a series of strikes, basically led by some of our peers and it eventually got to the point where even emergency medicine was being affected. It wasn't to the detriment of patients, they've never shown that more patients died or anything like that at all, it was purely just that it inconvenienced a lot of things. So a lot of appointments had to be canceled, a lot of elective surgeries canceled but the consultants were generally very very supportive.
Dr. Ramskill: So what they did is when the junior doctors had these days out of work, they took up the slack, so they carried on call bleeps, they made themselves present on the wards, they did a lot more hands on type work in order that the junior doctors could do this strike. Unfortunately, it led to a few compromises but the contract went ahead regardless much to a lot of people's dismay, I guess.
WCI: Do you ever find yourself looking around at other countries and wishing you were practicing there, in the U.S. or Canada or Australia or New Zealand?
Dr. Ramskill: I've thought about this a lot and I was doing obstetrics and gynecology and feeling very very stressed and sorry for myself, I fantasized about it a lot. In fact I did a lot of reading on quite a lot of American sites, actually, about doctors burnout and how doctors want to leave medicine. It gave me some comfort knowing there other people out there that felt the same.
WCI: That we're just as hosed in the U.S. as you are in the U.K.?
Dr. Ramskill: Yes. So many people have written blog posts and forums, things like that. It was just really comforting. Once I left obstetrics and gynecology, though, and decided to go into family medicine, I felt a sense of relief, it was almost like I was almost choosing how I was going to live my hours at work. The nice thing is that once I finish my training, I'm no longer then bound by having to do hours, having to answer to anybody, I can pick if I want to work two days a week, three days a week or however I want to do that, I can do that myself, so I love that sense of freedom.
Dr. Ramskill: Working in another country to me, now, is not as appealing as it once was although we are still considering Australia because it's the closest healthcare system to our own, so I'd probably fit in there much more quickly. America has always put me off a bit because I had to do extra exams for it so it's never really made me want to go there because of the amount of work you actually have to do to get into medicine.
WCI: I've actually got that same problem if I go to Canada, for some reason, as an emergency doc in Canada, you have to have five years of post-graduate training and I've only got three. I actually looked into it at one point but that was a little bit too big of a burden for me to want to get over.
Dr. Ramskill: Yep, agreed.
WCI: In the U.S., our medical students, our docs are starting their careers saddled by massive amounts of debt. The average is over $200,000 in medical school loans and I'm starting to see people with $300,000, $400,000, $500,000, I think my record's over a million. How are people paying for medical school in the U.K.?
Dr. Ramskill: Same thing, they're taking out loans. What's actually happened is when I started my medical school training, fees for one year were only about £1,000, which seems ridiculous now that I think about it. The loan that I took out was to basically maintain a semblance of a standard of living while I was training so that I didn't have to then work loads of extra hours on top of it to support myself. Now, people are paying £9,000 plus a year to stay at medical school, which is still-
WCI: Did you say nine or 90?
Dr. Ramskill: Nine thousand.
WCI: Nine thousand, still sounds like a deal to docs out here, I'll tell you that.
Dr. Ramskill: Exactly. In fact there was one girl that I lived with, she came from Florida and she chose to come to England because it was so much cheaper to practice to become a doctor out in England, so that's what she chose to do. She chose to up sticks and came to the U.K. to get her qualification. It's still cheaper than it is in America. I think a lot of people over here don't seem to really appreciate that and there's a lot of people, I'm going to use the word winge, I don't know if you use that word in America but I feel like people moan a lot about how much they are paying in fees, when actually, when you look around the world, it's not that bad.
Dr. Ramskill: And then what happens is you get given a loan which you don't actually have to start paying back until you actually start earning money and if you never get the threshold of how much you need to earn before you have to start paying back, you never have to pay the loan off. So it's got a very different set of rules than other loans that you would expect to be paying right from day one. You don't actually have to physically have to pay them back until you start earning.
Dr. Ramskill: I think there's a lot of miscommunication about how loans work for student so I try and correct that whenever possible and try and reassure people that for us, having a loan for our medical training is actually not that big a deal. It doesn't affect buying houses or anything like that. For us, it's a bit different. I think in America, having student loans is a lot more burdensome, isn't it?
WCI: It's a big deal, I think you just made a lot of my listeners very, very jealous. Let's talk a little bit about you, this is a financial podcast, you write a financial blog. Where are you at in your financial life at this point?
Dr. Ramskill: For me, at the moment, I had a bit of an epiphany three years ago where I realized that I was in quite a lot of, not debt related to my medical training, this is debt that I accumulated from university right the way through up to when I turned 30 and for me, it was more of lifestyle. It was, I am a doctor therefore I need to need to live a certain standard of living and then you're overspending and you're getting into that cycle of spending creep and you're spending more because you've got that status as a doctor, it's like, I'll always be able to afford to repay it even though I wasn't really earning that much money.
Dr. Ramskill: So for me, I'm now correcting the mistakes of around 10 years worth of overspending, which is quite a feat given how much I actually managed to accumulate. But I'm on the track to do it probably in the next two years, I'll have it all paid off and then I'll start building my investments and my savings up. I'm in that transition period between getting rid of that mistake that I made when I was in my 20's and then moving forward in my 30's in a much stronger position.
WCI: Very cool. For those that are just tuning in, we're talking to Dr. Nikki Ramskill, a doc in the U.K., who blogs at thefemalemoneydoctor.com. Speaking of which, tell us about your blog, what's it target audience and what are you trying to accomplish with it, should men read it too? What about doctors, should doctors read it?
Dr. Ramskill: Okay. When I basically educated myself around all things personal finance, I was starting to notice in my colleagues and in my patients, big money issues. For example, I would be in A&E and there would be a patient that needed six weeks off to heal a broken leg and they'd look at you and say I can not have the time physically off of work because I can not afford to have time off of work. That is replicated amongst so many different people that I've seen now and it doesn't make for great healing, if I'm honest. Then you're worrying about whether you can afford to do something, you're not going to be able to heal properly, I think there's a lot of stress and anxiety.
Dr. Ramskill: Likewise in my medical colleagues and other professionals, I've noticed that you're working all the time to pay the bills but then you're also working to pay off debt and you never really making any traction and you're never really making any savings or investments. That whole security of your future is also pushed back and back and back and I think there's a huge problem brewing for people in their 30's and 40's, we're a generation that have been almost lost through a gap.
Dr. Ramskill: For me, it was all about how can I write about personal finance in a fun way that comes not from a financial expert but comes from me as a community doctor, looking at the things I'm seeing every day, the things that worry people on a day to day basis to try and make their retirement, make their financial future much, much better so that they can reduce their own stress and anxiety and improve their mental health.
Dr. Ramskill: For me, it was about speaking to women because I've got a very strong female background in female medicine but men do read the blog too. I've had some male followers that commented and spoken to me about it, so it's not like men can't read it, it's just that the people that I've generally targeted are women like me, essentially.
Dr. Ramskill: I initially hadn't been targeting at doctors specifically, because for a long time I had this fear that I was teaching people to suck eggs and thought perhaps I was one of the only doctors that didn't really get personal finance. For me, it was I could speak to other people that are perhaps in the same position but now I'm learning more and more through podcasts like yourself, that there are actually a lot of doctors out there that don't know how to manage their money, it's not just me. I'm now looking to breach that gap and now starting to talk to my colleagues and just to get the word out there a bit more about how they can improve their own finances, which then in turn, means that they're happier, more secure doctors as well.
WCI: Very nice. I appreciate you doing that, it's certainly an important mission and docs just get so busy focusing on medicine that they don't have the time or don't put in the time to really understand their own finances, so despite their high incomes, they still just as badly as average Joe.
Dr. Ramskill: Absolutely.
WCI: I read one of your recent blog posts and you talked about how to save money as a wedding guest. Do you think weddings have gotten out of control when a blog post like that needs to be written?
Dr. Ramskill: Absolutely. Weddings have just become so ridiculous, in my opinion. Not everyone's going to agree with me. To a lot people it's a huge deal, getting married, and I understand that but when you see that people are spending at least £30,000 on a wedding, that's literally one day to say you're getting married and you're having a party with your friends. That, to me, is just such an excessive amount of money that you could then be putting towards something like buying your first home, paying off debt, all these other things that you could be doing with that money rather than putting it onto a party.
Dr. Ramskill: When I started looking at that, I wrote a whole post around how you can save money on weddings and I spoke to friends about it and how much they spent on their weddings and it was a real eye opener. Then now getting into my mid 30's, I'm getting a lot of friends that are now getting married and I've been invited to a lot of weddings in the last few years and I read a post recently about how much people are spending on being a guest. Actually, when you think about it, it's a lot of money. Just on the day itself, you could be spending £200 if you are buying drinks, if you need to get taxis, if you need to get a hotel room for the night.
Dr. Ramskill: Even more if you're having to get a plane journey over to another country so I joined a friend for a wedding in Mexico. Cost me over £1,000 to be there for a week. We tried to make it like a holiday while we were there as well but that's a lot of money to ask of somebody to come and join them for a wedding. I think writing about being a guest and how you can make it cheaper for yourself absolutely is needed because more and more of us are having for fork out so much more money to be able to watch our friends get married. It's just becoming a bit silly, I think.
WCI: It certainly has. I saw a post the other day that was going around on Facebook about some lady that had asked the wedding guests to pay for the wedding itself. I was surprised when they basically turned her down and her GoFundMe page didn't raise any money but people certainly get pretty crazy about celebrating a special day, that's for sure.
Dr. Ramskill: Yeah and I think you have to remember that when you are boiling it down to it's finest ingredients, it is just about you and your partner and getting married. Then the party is the nice bit that you have on the end but you really don't have to spend huge amounts. No one is really going to remember what favors you have on the table and what the food was like or anything like that. To be honest, as long as people have food in their stomachs and they've got lots of alcohol, the one's that I've had great times at, I don't really think it matters how much you spend.
WCI: If you put enough alcohol in there, nobody will even remember the food, right?
Dr. Ramskill: Exactly.
WCI: Let's change gears a little bit, let's talk about saving for retirement in the U.K., what's the social insurance program there like? Ours is social security, which basically pay into and anytime you have earned income and then get something back at some point, after age 67. What is it like in the U.K. as far as retirement goes?
Dr. Ramskill: Retirement is one of those strange situations, where, as I already mentioned, people in their 30's and 40's got lost a little bit. So for a long time, there was no responsibility on the government to make sure we were all paying into a pension in our day to day jobs. We pay a small amount in national insurance and then as we build that up with time, the government will then give it back to us when we get to our retirement age. For many years, the retirement age has been climbing.
Dr. Ramskill: For me, my official retirement age, according to the government, is 68 and that's probably going to get higher. That's a minimum, I would say, at the moment for me. I'm only looking at around £8,000 a year, if I stuck with the state pension. That's the bare bones of how much they would be willing to give you. Beyond that, it was really up to the companies that you worked for to get your pension organized for you and people could opt out whenever they wanted to. In fact, most people had to opt in to get into a pension. Of course, when that it's £200 coming out of your pay packet every month, you don't want to do that because you can see that £200 going on childcare or other things that you need desperately right now.
Dr. Ramskill: In the last few years, however, things have completely changed in that you now have to opt out of a pension. You're automatically enrolled into a pension as soon as you start working. The only issue I have is that there only taking around 1% of peoples' salaries at the moment, obviously it depends where you work, some people are only doing the bare minimum. Other people like me, working in the NHS, I have a lot more coming out of my salary. I have over 9% that I personally contribute and then my employer puts in more than that for me as well, to make sure that I have enough money at the end.
Dr. Ramskill: If you're only contributing around 1% of your salary, you're still not contributing enough and they're now pushing it upwards. From April 2019, basically people will be paying around 3% as a minimum contribution and what the financial industry are now worried about is whether people are going to start opting out when they're being pushed. It remains to be seen how it will change that my hope is that people won't notice the difference and they'll just keep paying into it but we all know that not everybody thinks logically when it comes to these things and if they need the money for childcare or whatever else they need, I can totally see people totally opting out of these things as they have to pay more.
WCI: Inertia is a powerful thing, sometimes if you just force people to opt out, they won't because it takes effort, it's an amazingly powerful way to run a retirement program. These are traditional pensions that the employer is in charge of the investments and they provide a guaranteed benefit to the participants, is that what these pensions you're referring to are?
Dr. Ramskill: Essentially, there used to be a thing where you got a guaranteed amount at the end and it was based on your salaries, it was a final salary pension. It doesn't quite work like that now, it depends on who you work for. For the NHS, for example, I get an average payout at the end, so it's not whatever I'm on my final salary on, it's over an average of time I've been working for the NHS. It very much depends on who you work for. Most people will end up with a lump sum that they can they decide what they want to do with, you actually can take 25% out and you can do what you want with it. A lot of people reinvest it or they do something with it. Some people pay off debts that they haven't paid off at that point. Other people might just like to downsize their property.
Dr. Ramskill: Things are changing and I suspect they will keep changing as time goes forward. At the moment, it's generally, either you have the option of taking a lump sum or you get a monthly amount that you can use for your pension. What often happens is people don't really know that because they're not finding out their statements, they're not getting them sent to them, so they don't really know how much they've got to retire on. There will be a lot of people that will just be hoping and praying that they have enough money at the end, to be honest.
WCI: Do you also have any retirement accounts, tax advantaged investing accounts that you can use for retirement, like the 401Ks or the IRAs that we have in the United States?
Dr. Ramskill: Yes, so we've got an ISA. What an ISA is, is a tax free amount that we're allowed to allocate however we like. So there's quite a few different ISAs available, so you can have purely stocks and shares ISA, where any money you put into it is tax protect and then any money that is accumulated in those stocks and shares is also tax protected as well. You've also then got some other types of ISA. There's one that's called the Lifetime ISA, which is what people can use for first time property payments, so if they have an amount that they've saved up, the government will match up to 25%, from the top of my head. Essentially that money can be used to put down a down payment on property, or if they don't want to do that, they can then keep it and that can then be another retirement pot, if you like, at the end.
Dr. Ramskill: But when you are putting together all of these types of ISAs, you're only allowed up to £20,000 in a year. You've got the stocks and shares version, you've got a cash version, there's this property one that I've just spoken about and you've also got a child's version as well. You can put one in for your child right from an early age so you can build up an amount of money for them as well. It's quite flexible in that sense. But you've got some restrictions in it, you can't have more than two of these things because you'll push yourself over the allowances, so you have to decide how you want to allocate your £20,000 a year. For most people, they don't have that money in the year, so it makes no sense but yes, there is that nice tax free lump sum that we can all utilize if we want to every single year.
WCI: What about if you want to get some investing advice, you want to hire a financial advisor. What does that cost in the U.K.?
Dr. Ramskill: Depends on how the financial advisor wants to be paid. Often the advice is that you shop around and you ask the question, how do you like being paid? Some will charge an hourly rate, could be anything from £75 an hour plus. One website I looked at was up to £350 an hour, if you want to do that, although they do say the average is around £150 an hour. You could have a financial advisor that just charges this set amount for whatever it is that they're doing for you. Some want a monthly fee and some want an ongoing fee so they'll take a percentage of your investment pot or whatever you have with them. That might be 1% or 2%.
Dr. Ramskill: The problem is that a lot of financial advisors won't take you on unless you meet a certain threshold. There is quite a big pool of people out in the U.K. who would not be able to access a financial advisor because they simply don't have enough assets for them to manage for them. They're just left to deal with it on their own.
WCI: We have a bit of a problem in the United States with commission salesmen masquerading as financial advisors. They basically call them financial advisors but the way they're paid is with commissions off of mutual funds or off of life insurance products. Do you have that same problem in the U.K.?
Dr. Ramskill: Used to but from what I've been led to believe now, actually that's not allowed anymore, so that's actually been stopped. Obviously it doesn't stop a lot of companies from charging fees on top of what they're already putting into the pot for you. So if they've chosen to do an active managed fund for you, that person gets their fee and also the financial advisor's charging a fee on top of that so, even though they don't get their kick backs, they will get their money elsewhere. They'll get it through their regular fees or how much they charge you to put together your portfolio. It's not quite the same way in this country from what I've been told from my financial advisor colleagues.
WCI: Seems a little more transparent anyway.
Dr. Ramskill: Mm-hmm (affirmative). Absolutely.
WCI: Are low cost indexed mutual funds available in the U.K.? How do you invest when it comes to buy some stocks from the U.K. or stocks from the U.S. for that matter?
Dr. Ramskill: These are my favorite types of investments, actually. We've got index trackers, exchange traded funds, the same as you do. We can use online brokers for it. I use my broker called Hargreaves Lansdown, there are loads more out there but essentially I can pick and choose what I invest in and I can choose the S&P 500 if I wanted to and put it into my portfolio, so I can have a nice coverage of both the U.K. and of America. We definitely have low cost passive index trackers that we can invest in as well. You can start from £25 a month and you can build it up that way or you can invest lump sums. It's very flexible, you can decide which way you would like to go, depending on your financial situation.
WCI: Do you have any idea what the expense ratios are on those exchange traded funds?
Dr. Ramskill: For the ones that I'm in, they're very, very low, 0.08%. We're talking that kind of ballpark and that's my criteria for picking a fund in my portfolio. It has to have a very, very low ongoing charge, basically. I have seen some of the active managed funds. Recently, I was looking at a couple of ethical investments because that's becoming a much bigger deal now, I think, for people in the U.K. Maybe in America as well, I don't know. There a lot more expensive at the moment because they're new and the demand's not necessarily there yet so you're looking at 0.9%, 1% something like that for those kinds of funds. I always try and keep it as low as I possibly can and if I can get it around the 0.08% figure, then I'm happy.
WCI: You're saying .8%, not .08%, huh?
Dr. Ramskill: I mean .08%.
WCI: .08%, okay. That's about the same price what we're paying in the United States. My understanding was, and perhaps not as much in the U.K. as in other parts of Europe, that it's just very difficult to find low expense ratio mutual funds. I've seen a few people on U.S. based forums coming from Europe that have had a lot of trouble finding inexpensive mutual funds. Is that all relatively new change in the last few years?
Dr. Ramskill: Not really sure I can speak for Europe but from what I've been seeing is that it's a huge explosion of mutual funds. You've got Vanguard, for example, I know you've had them in America as well and they're huge now. When you talk about index trackers and mutual funds, people say Vanguard, I think it's becoming more of a thing. Certainly as long as I've known about it for the last three years at least, it's been a thing, I'm sure it's been like that for a lot longer than that before I was even aware of how to invest in stocks and shares.
Dr. Ramskill: Maybe it's different in Europe. It doesn't feel like there's a restriction in the U.K., it might be that the access that they have is difficult. With Hargreaves Lansdown, I've got access to so many options so maybe the probably is that there's a restriction is what they're allowed to invest in from their own country? That might be the problem.
WCI: That may be the case. I just don't know enough about it to really say much more on it. It sounds like you're set up pretty well in the U.K., you've got a lot of great options, you've got some nice tax advantaged accounts to use; you've still got a pension system in place and there's some social insurance in place. It sounds pretty nice.
Dr. Ramskill: I think so. We've got a really good system set up. People are cared for if they have a problem. There have been issues lately in the change in how benefits work in our country, so people being switched over from their usual benefit system to what's called Universal Credit, which is basically one size fits all and unfortunately the payments have been taking their time to get through to people, there's been multiple issues with technology. Unfortunately, some of our poorest people are becoming massively affected by it, having to use food banks more and more.
Dr. Ramskill: Even though we have all these great tax advantaged accounts and pensions, the poorest of our country are still really struggling, and if anything, things are getting worse for them. I know of a few colleagues that I've worked with who've had to use food banks. That's where you have a parcel of food given to you which will last you one to two weeks and that it, that's what you've got to live off of. I think for the poorest in our country, I think things have got a lot of improving to do and it's largely down to a change in government, I think, although I don't want to get into the politics of it.
Dr. Ramskill: I certainly think there's a lot more emphasis on people looking after themselves, rather than living on government handouts. That's certainly the way it comes across. It remains to be seen, really, how this Universal Credit system's going to work for people but certainly at the moment, it seems to be a bit of a shambles and a bit of a mess.
WCI: I think the political changes in both countries have had some similarities in the last few years. As the pendulum seems to swing back and forth between progressivism and conservatism as it probably has done for millennia. We're starting to run out of time here but I wanted to give you a chance to ask what else do you think physicians and other high income professionals in the U.S., basically the audience of this podcast, should know but don't know?
Dr. Ramskill: I've been thinking about this question. I think, for me, coming from a doctors' perspective, there's spending creep is one of the biggest things that people need to be aware of. I'm sure the people listening to you are actually really savvy when it comes to this but maybe not. I think professionals are extremely guilty of spend creep. We start working our professional lives and we think that we have to look the part, drive a particular car, live in a particular neighborhood, have a certain sized house to look successful, look like we're doing a good job.
Dr. Ramskill: Actually this is one of the biggest problems because we get stuck in this cycle of having to pay more for things that we don't really get huge amount of benefit or joy from and then we get ourselves stuck into this system where we have to work to be able to the bills and the credit cards. We're not taking care of our futures, so for me, I think it's very important as a professional to guard against that as much as possible and to encourage others not to do that as well. You don't have to wear a particular outfit or carry a particular bag, something like that in order to look like we're doing really well. It shouldn't be like that, so I don't know if that's something that you have spotted in people as well or whether you think that's getting better but I certainly still see it around me.
WCI: I think it's an ongoing problem for docs and really for everybody, but docs just have the income to make the mistakes in a much bigger way, I think.
Dr. Ramskill: Yes, I agree with you. The more money you have, the bigger the mistakes come. Agree with that one.
WCI: Dr. Ramskill, thank you so much for being on the podcast today. For those who would like to read more of her writing can find that at thefemalemoneydoctor.com and I really appreciate you taking the time out and I know it's middle of the day here but it's a little bit later in the U.K. and I appreciate you staying up late and talking to us tonight.
Dr. Ramskill: No worries at all, it's absolutely fine, it's been great, thank you very much.
WCI: Thank you.
WCI: I hope you all enjoyed that as much as I did. I thought that was wonderful to have somebody from another country that's not only a physician but also interested in finance on the show, so I hope that was great for you. I always enjoy talking to Brits just because I like the accent. We've got a new thing going at the White Coat Investor, you can actually call in using your computer and leave us a question that we will play on air and then answer. You can do this by going to www.speakpipe.com/whitecoatinvestor.
WCI: If you don't want to remember that, just go to the White Coat Investor Podcast page on the main site and there's a link right up at the top that you can click on and record your own message that will be used on the podcast. Don't use that to send us feedback or to send us hate mail or anything like that, I think we only get 20 of them a month. If you actually have a legitimate question, write it down and read it, so it comes out the way you want it to and we'll use it on the podcast. That will be a lot of fun to get some more fresh voices on the podcast.
WCI: At some point in our financial lives, it will be time to buy a home. A physician mortgage can be a good vehicle for a young doctor who’s just out of school and has a more effective place to use their money than on a big down payment. These loans allow doctors to secure a mortgage with fewer restrictions and a lower down payment than a conventional mortgage. But if you’re further advanced in your career or deeper into your journey to financial freedom, buying a home with a conventional mortgage and then, later on, potentially refinancing that loan to a better rate with a shorter time frame could be a great move.
Wherever you are in your financial journey, make sure you use the mortgage that will be most financially beneficial for you. Hop over to our recommended tab to learn more about all of your mortgage and refinancing options at whitecoatinvestor.com/mortgage.
You can do this and The White Coat Investor can help.
WCI: Head up, shoulders back, you've got this, We can help. See you next time on the White Coat Investor Podcast.
Disclaimer: My Dad, your host, Dr. Dahle, is the practicing emergency physician, blogger, author and podcaster. He is not licensed accountant, attorney or financial advisor, so this podcast is for your entertainment and information only, it should not be considered official personalized financial advice.
