Financial planning for doctors differs from others as their professional goals, regularity of income, retirement age, etc., are not always in sync with other professionals. Owing to hectic schedules, doctors do not pay much attention to managing their finances. Here is how doctors can ensure their financial well being.
Goals are ongoing events: Identifying and prioritising goals is a must as doctors have both personal and professional goals. like buying a car, a home, continuing education, technology upgradation, etc. They must plansuch goals every two-three years.
Identify the optimal income: Professionals like doctors do not always need a fixed income to take home each month. The nature of profession makes it vulnerable to some irregularities in the regular income flow. Hence, have a fixed source of income through fixed contracts and arrangements. This is the income for regular expenses and paying off the EMIs. Keep a check on number of patients to attend, fees to charge and decision of additional workplaces for the practice.
Strike a balance between investments and loans: Paying an EMI and investing for goal achievement should not be a see-saw. After a successful practice of few month, one will be able to identify the minimum expected income each month. The expenses, systematic investments and EMI should be planned in the said limits only. Any income above the same can be put to work in liquid funds to deal with immediate emergencies or to shift the same to other investment channel to plan for future goals.
Building a balanced portfolio: The portfolio should ideally be constructed considering the risk-taking ability and the time frame for the defined objectives. A large built-up of real estate portfolio should be avoided by doctors as the returns are uncertain and it blocks a major pie of the portfolio. Build a portfolio of financial products with proximity of returns and that can be liquidated to realise goals.
Insurance is your another equipment: Being into a sensitive practice it is important that each doctor takes a cover of professional indemnity customised for their profession so as to insure from any uneventful situation arising of the regular practice.
Loans are only first-aid: Loans are not to be a part of your portfolio for long term. They should be a temporary arrangement only. Any loan that offers a tax benefit is a better option. With variety of loans available for doctors, one should be cautious of not getting into a debt trap. Taking liabilities should be planned in a phased manner to ensure it does not exceed 50-60% of the total minimum projected income each month. Loans that do not yield any tax benefits are at a higher interest rates should be closed. Provision of this should be done with the additional accumulation of income each month and paid in parts or full based on available surplus.
Retirement is just a number: There is no defined age for doctors to retire as the practice can be prolonged for some fields till life time. It is rightly said that the money made in this profession keeps growing at an increasing pace with accumulated experience. This gives doctors the liberty to look at dimensions of wealth creation, estate planning and donating for a social cause by setting up the charitable clinics. This situation gives them a different tangent to look at their goals which is very different than others while planning for their golden years.
Bottom line: Create a complete financial timeline with clearly-defined objectives and projected cashflows. This will help in realising your life goals and keep you fit financially. Taking care of the financial health needs a 30-minute exercise every week. Ensure healthy wealth while taking care of health.