Doctors perform highly specialized, challenging, high-responsibility work and are rewarded for it—not only through the satisfaction of improving patients’ lives but also with a high salary.
The flip side is that doctors are also hit with big bills, whether student loans, practice insurance or office rental.
For physicians, the trick is to balance this high income and their significant expenses to allow them to pay off medical school debt, save for retirement, stay on top of taxes and remain prepared for incidentals such as lawsuits. Below, we’ll share recommendations from financial planners that can help doctors make the most of their earnings.
What is financial planning?
Financial planning is when a professional looks at the assets you have on hand and your income and projects how much you stand to earn.
With the help of a financial planner, you can chart a course that not only helps you realistically reach your goals but also takes into account factors such as risk management and taxes.
Why do physicians need financial planners?
A medical career comes with unique financial planning challenges. Many physicians have their own practices, which means they have separate expenses and financial goals besides their household expenditures.
Physicians also assume a good deal of risk, implying high insurance costs that other professionals wouldn’t necessarily incur. These factors can work against one’s ability to save if they do not have proper guidance on how to spend, invest and save.
Finally, doctors are busy people who are already performing lots of mentally taxing work, so it’s best to let an expert take over the job of financial planning. Just like a doctor might not allow an accountant to assess one of their patients, physicians may not be the most qualified to make financial plans that support their practice and personal goals. Our advice? Delegate the financial decisions to professionals.
Five tips on financial planning for physicians
Saving for the future (and paying off debts) is vital but so is enjoying your day-to-day life. Professional planners give this piece of financial advice: Find some balance (and, yes, do some budgeting). This requires looking at how much you earn vis-à-vis how much you spend and separating your goals into short- and long-term categories.
Remember that physicians often experience burnout and fatigue, so being able to experience life outside the office and enjoy the fruits of their labor are key to making it all worth it. Smart financial planning helps doctors with their work-life balance.
Plan for retirement
The first step to planning for retirement is to envision how you wish to spend this chapter of life. Do you want to live on the beach? Spend time with the grandkids? Do both? The more ambitious your financial goal is, the more you’ll have to think smartly about how to put aside money.
Retirement financial planners recommend that even early-career or young physicians should start using a combination of investment returns and income to build a retirement plan, which will help them reach financial freedom. Financial advisors for retirement also recommend thinking about health and life insurance policies when planning for the later stages of life.
Prepare for risks
Medicine is a risky profession. Doctors have patients’ lives in their hands, which is why they must be insured.
If you’re a physician, think of insurance as an investment that protects your practice, livelihood and assets. This protection also extends to anyone who depends on your earnings, such as your family.
Consider risks in your life outside the office, too, and equip yourself with health and life insurance that supports you well and protects your loved ones. No one wishes to use their insurance, but anyone would be grateful for it in an unexpected moment of need.
Have a tax-efficient strategy
Like it or not, everybody has to pay taxes, so it’s best to be prepared. Financial planners recommend that physicians establish strategic plans that lessen their tax burdens for themselves and their families. Think of this as asset protection.
A financial planner can be handy when it comes to making these plans. As high earners, physicians often find themselves in high tax brackets, and they may be managing personal and business taxes. Separating these assets and navigating deductions can be complicated.
Physicians already have a lot on their plate, so a financial advisor or accountant can help lessen the stress of tax planning.
An important part of wealth management is putting your money to work for you. Work with an advisor to make an investment plan you’re comfortable with. A professional can help you look at your assets and make a plan to help them grow.
We don’t provide financial services, but we’re happy to point you in the right direction and get you thinking about the important questions that will determine your financial success as a medical professional. We’ll always have your professional best interest in mind, and that includes keeping you suited in premium, quality scrubs.