Medical Practitioners are all familiar with the old saying, “Doctor, Heal Thyself.” To put it briefly, it means to take care of your own illnesses before you try to heal others. Gavrilov & Co would not presume to discuss this old adage in medical terms. However, it does put us in mind of fiscal instead of physical health. And recently we posted that we were expanding our accounting help for medical practitioners. So, this blog is dedicated to them. However, many professionals will find they are equally susceptible to these chronic financial illnesses.
Medical practitioners have recently sought our help after contracting financial ills. It’s this simple; you cannot “heal” thyself of financial ills without the essential training and knowledge. And Gavrilov & Co is here to help.
Medical Practitioners: Are You Risking Fiscal Illnesses?
As financial “medics” we do not blame our “patients” for being ill. So, very intelligent doctors, dentists, physician’s assistants, nurses and healthcare professionals for their financial diseases. We’ve included several of these ills in this blog. At Gavrilov & Co. Here, we are accountants, tax specialists and business planners. As accountants and business planners, we are especially trained to look out for these financial diseases and prevent them. We do this whenever a medical practitioner takes a financial check-up with us.
You see, we know that even the brightest of physicians can miss out on financial education. And we know that very few–if any–medical schools teach even the most basic courses in maintaining fiscal health.
Know Your Risks for Chronic Fiscal Diseases—And Learn Some of the Symptoms
Thus, brilliant doctors can take financial risks without even realizing they are gambling with their future. In spite of the fact that some doctors do manage to attain some financial education. Still, other factors can cause them to risk fiscal illness.
Like all of us, medical practitioners “do not always make the best money decisions.” In spite of the fact you might know better, sometimes other factors cause anyone to make illogical financial decisions. As a physician and a financial expert, Dr. Cory S. Faucett states, “Our fears, past experiences, misconceptions, and peer-pressure influence our behaviors.”
Chronic Fiscal Disease Number One: Medical Practitioners and Their Dream Homes
Whatever your level of income, buying a house will be a major expense. And it’s not just about the building itself. So don’t be tempted to buy more house than you need. Watch out for down payments. Look carefully at insurance, taxes, inspections, and closing costs. And we haven’t mentioned loan initiation fees and home homeowner’s association fees. Owning a home can be more costly than you suspect.
Getting a great deal on your perfect dream house is not enough. There are ongoing maintenance expenses. Do not forget you will have taxes, utilities, landscaping, and a really big house will require staff. You may find you need a gardener or a maid. After all, you are dedicating yourself to your patients.
From Gavrilov & Co–a Caveat: Do not listen to “doctor discount” talk. It actually can mask additional charges or higher rates.
By the way, the millionaires we have known live in nice, but modest homes.
Symptoms and Treatment: Chronic Fiscal Disease Number One
And here are some of our conclusions about housing for medical practitioners:
- Never purchase a mortgage that is more than twice the amount of your annual gross income. Actually, 1 x your salary is even better.
- The most severe symptom of this disease includes 5 bedrooms with en suite bathrooms, 2 living rooms, Italian marble, and a huge swimming pool.
- But the worst symptom is never mentioned. It is a social commitment to matching the neighborhood’s glamorous lifestyle. This is an unspoken promise.
Chronic Fiscal Disease Number Two: Medical Practitioners And Automobile Leasing
Just check out how Dave Ramsey refers to automobile leasing. He has christened it as the “fleecing of America.”
Likewise, our aforementioned financial expert, Dr. Cory Faucett sees it as particularly disturbing for a doctor’s lifestyle.
- Who really needs a new car every 1-3 years? The most sensible choice is a 3-year-old pre-owned car. This is one you can pay with cash.
- “That is the sweet spot. A 3-year-old car has almost all the best technology and safety features at a discounted price. Cars used to be unreliable after a few years. Now some brands are just getting warmed up at 50,000 miles.”
Chronic Fiscal Disease Number 3: No Umbrella
An umbrella protects you. In this case, we are indicating a financial umbrella that protects you from storms called lawsuits. People, including neighbors, workers, and even friends, view you as rich. You are an automatic target for lawsuits.
This is not just in reference to your medical practice. That’s a separate entity. Home accidents by workers, neighbors, acquaintances, and friends occur every day. Many strange accidental events can befall you in the best of neighborhoods.
- For example, a man can fall off his ladder while fixing your rain gutters.
- What if your teenager runs over your neighbor’s prize show-dog?
You have an MD after your name. So, you are much more likely to be sued than someone with comparable wealth if they do not have the MD status.
The experts at Gavrilov & Co join Dr. Faucett and other financial experts who recommend several million dollars of umbrella coverage.
“These limits will pick up where your home owner’s and auto insurance leave off.” It’s about risk and you have to manage risk because a vicious lawsuit could financially ruin you
Chronic Fiscal Disease Number Four: Neglecting Disability Insurance
Another financial pitfall we see looming before medical practitioners is a mysterious avoidance of disability insurance. Look at it this way, you are your biggest asset. Consider:
- A disabling illness or injury would be disastrous to your financial situation.
- Your training and certification would not pay the bills if you could not work.
Therefore, your finances would collapse. You insure your house and car. Why would you not insure your income?
Chronic Disease Fiscal Disease Number Five: Under-Saving
Some medical practitioners seem to be allergic to savings accounts. Suppose you make so much money that you do not even feel like you need to save it. It happens.
Symptom 1: Endless Money Attitude
Physicians about to contract this chronic fiscal disease see all their cash as disposable and renewable income. They tell us, “You can always make more, right?”
We meet some physicians with exactly that attitude.
Symptom 2: Low Quality Savings
And we meet others who think they are doing spectacularly well by saving 5-10%. Now that is a better savings score than a lot of Americans. But it is not enough to maintain a wealthy lifestyle after retirement. Dave Ramsey recommends 15%.
20 % might be sufficient if you’re sure you want to work for 30 years.
Symptom 3: Lack of Investment Understanding and Slow College Loan Pay-back
Another symptom of this disease is a lack of understanding of investment value. Many doctors also seem to pay only minimums on their student loan debts.
Taking the Cure for Under-saving
The cure for this chronic financial disease is to save a higher percentage of all that lovely money.
Did you know that a savings rate of 35-40 % will give you financial independence in 20 years? You could retire at 50 instead of 65. Of course, your paid-for house might not be that 8 bedroom mansion. You won’t be leasing the latest car. But you’ll still be wealthy. After a short time, due to your nice income, you won’t even notice that “high” savings rate. What you will notice is an increasingly large nest egg.
Chronic Fiscal Disease Number Six: Poor Allocation of Your Assets
We see several different variations of this disease. On the one hand, here is the nervous type. He is the medical practitioner afraid of losing money. They only allocate money to CDs, short–term bonds and money markets.
Put simply, they are almost neurotic about losing money. They play it safe. We suspect they are allergic to buying companies or investing in real estate.
On the other hand, another type of misallocation afflicts other medical practitioners. They are the aggressive type. They are compelled to allocate funds to small start-up small companies. Or they are involved with market timing, and stock picking.
The Medical Practitioner’s Anatomy of Asset Allocation:
Let’s look at a good definition of asset allocation from the Doctors Financial Resource. “Under this approach, investors divide their money among different asset classes.” This may include “stocks, bonds, and cash alternatives, like money market accounts. These asset classes have different risk profiles and potential returns.”
We can show you how to balance risk and reward by allocating your portfolio assets according to your personal goals, risk tolerance, and your ultimate investment horizon
Our Prescription for All Medical Practitioners: A Flu Shot for The Above Chronic Financial Diseases
Now hear this, not only from us. It is from every financial guide out there for medical professionals. For good financial health, take care when you allocate assets. Two things will dictate your financial future:
- Your Savings rate.
- Your Asset Allocation.
Thus, medical practitioners take care and time deciding which specialists they refer to their patients. Likewise, we advocate taking some time to decide where you allocate your dollars. And we are here to help. Ethically. Confidentially. And Compassionately. Now that you know the six big illnesses that are currently afflicting medical practitioners.