Financial freedom for physicians-or anyone else-is not really a simple concept. But for this article, we are going to give you some quick and simple advice that could start you on the road to financial freedom. That sounds impossible. It isn’t. Unfortunately, the simplest advice below is easier said than done. This is especially true in the busy world of physicians and other medical practitioners.
A Little Backstory on Financial Freedom for Physicians– from a Bird’s Eye View
In this case, the bird’s eye view is the accountant’s view. Let’s look at the work-life of Doctor X.
- Firstly, he puts in a 14-hour day for clinic hours.
- Then, he works as a hospital about 16 times a month.
- He strives to pay alimony and child support payments, on time.
- Also, he has mortgage payments and a second car, boat and camper payments.
- Insurance payments, professional organization payments, country club payments
- And he tries not to worry about the mounting credit card debt from 3 vacations per year. (He could have claimed quite a few deductions for business expenses on at least one of those vacations when he spoke at a medical association meeting. But he has little knowledge of the tax code. And he’s always too rushed to save receipts.
Basing Financial Predictions on Dr. X’s Lack of Expense Plan
In the bird’s eye view of his financial statement, an accountant knows that Dr. X is collecting every hour of work, every patient he can. The accountant can predict Dr. X is also spending every dollar as fast as he makes it. And he is spending it without any plan for the future. An accountant can predict that Dr. X will pay high taxes, never retire early, or perhaps never retire at all. You see, he would need to be saving 30-40 percent of what he is making in order to maintain his lifestyle during retirement.
Meanwhile, Dr. X wonders why he is a victim of almost pathological chronic fatigue. He’s always rushed. And even he has noticed that he is moody and irritable. Perhaps that helps to explain his recent divorce. Famed blogger and physician, Dr. Kevin, M.D has publicly stated that physicians like Dr. X can be frankly “dangerous to their patients.” That makes us cringe a little.
Financial Freedom for Physicians: Creating Better Doctors
A medical practitioner who has financial independence has eliminated financial anxiety from his or her life. As accountants, our tax squad and executive accountants at InventWealth see a lot of doctors. We see the anxious ones with no plans for financial freedom. And we see happy ones. The most relaxed and happy medical practitioners are not always the richest today but they will be the most comfortable retired ones tomorrow. Now, let’s look at the fiscal characteristics of today’s relaxed and happy physicians :
- They are not very much like sad Dr. X above.
- They are not in debt, but they are adequately insured.
- They pay their mortgages, budget their luxuries, and have no consumer debt.
- Also, they have the money to hire adequate assistants, like good PAs, scribes and RN’s.
They are engaged in saving money, and they have set goals for investments.
In fact, some happy doctors have discovered joy by turning down big opportunities. They have decided not to be bought out by a big hospital. They have found the freedom and family time at the heart of taking fewer shifts or even days of work.
What Could Financial Freedom Mean to You?
Thus, InventWealth agrees with KevinMD: Financial security “makes it easier to do the right thing for patients. Therefore, “financial security can actually make better doctors.”
It is a horrible reality that many doctors have “no other way to support themselves and their families in the lifestyle to which they’ve become accustomed except to see an ever-increasing number of patients at an ever-increasing pace.” It’s not too late for Dr. X. He just has that pace and patient acquisition syndrome. And we have a cure for that syndrome: Your Financial Plan. For InventWealth , there is no better feeling in the world than showing doctors the pathways to financial freedom and independence. (We know you were too busy to learn about finances in med school. So we are the specialists who are here to help. We can give you firm advice on your personal and business finances, taxes and accounting. See more details in one of our previous blogs.)
An Injection of Joy for Medical Professionals
Financial independence helps medical professionals renew their commitment to practicing medicine. And here are your keys to that joy and financial freedom.
First Key: Avoid Growing Into Your Income
This simply means that you cannot spend what you make. That’s a bad habit. You cannot secure your future if you spend your bank balance every month. Instead of growing into your income, we suggest you save a substantial percentage of your income. You could be comfortable and still save 20-60 percent of your gross income. Then you can pay off your debts and still purchase income-producing assets.
Second Key: Front-load Your Wealth Building
In previous blogs, we have suggested that right after residency, you won’t miss the money that you could save. Live more like a resident and less like the ritzy new doc on the block. InventWealth has an idea we call “Pay and Pack.” We advise you to pay off your loans and pack dollars into your retirement accounts. Keep in mind that you can splurge later in life when long hours will not be as easy as they are when you’re more youthful.
Third Key: Make a Solid Financial Plan
InventWealth can help you assemble the data to come up with a plan for next year, 5 years from now, and 10 years from then. “Written plans have incredible power. Create a spending plan — a budget. For a physician, a budget shouldn’t really feel confining, but rather freeing. It allows you to spend your money on what is most important to you since all of us have a limited income.” In addition to writing, you can also try reading a number of significant, short books, designed for medical professionals. They will help you understand the power of financial freedom.
InventWealth can show you that the power behind automating some details, such as savings. In that way, your investments happen almost effortlessly. You will never miss the money you are saving if it is not easily accessible in that immediate checking account.
Fourth Key: Buy the Proper Insurance for Financial Security
To put it briefly, medical practitioners often purchase incorrect insurance. We have mentioned this previously in our blog but it bears repeating. (Like whole life insurance, but that’s a topic for a different blog.)
We have seen medical practitioners squander insurance dollars on everything from dishwashers to i-phones. Yet these same physicians scrimp when it comes to health insurance, term life, disability, and personal liability insurance.
Here’s one of our favorite financial tips for physicians: We suggest medical professionals create a nice, fat emergency fund for relatively minor expenses– like appliances and insurance deductibles. With that fund, you can avoid finance charges and reduce the price of premiums.
Fifth Key: Find the Right Financial Adviser
This doesn’t mean you have to choose the most expensive adviser out there. Just realize that a really good adviser will encourage you to learn about money as avidly as you learned about medicine.
We advise you to find good advice at a cost that is fair. Then learn from your adviser. You see, a carefully chosen accountant who is a business advisor is also a teacher. You can get the crash courses in personal finance you missed in med school when you consult with InventWealth. First, we are more than accountants and tax experts. Secondly, we are financial coaches who help you
financially create your future as well as plan for the present.
And finally, we are very fond of showing our clients that when you learn how to manage the big expenses. Then, you can follow a financial plan. The result is that financial freedom gradually falls into place. To begin taking steps in the right direction, please visit our web-page designed expressly for medical practitioners.
It has been said that “if you love what you do, you never work a day in your life.” That’s how the owners and staff of InventWealth feel about the practice of accounting. And that is how we want our medical practitioner clients to feel about their work. We specialize in helping medical professionals discover the best pathways to financial freedom in both their personal finances and investment opportunities.