Financial Planning for Medical Professionals..
The medical profession is held in awe and respect across the globe. It is a noble profession as Medical Professionals try to heal sickness, diseases, treat physical and mental trauma.
Acquiring Medical Professional degree is result of years of hard work in academics, many years of training and spending huge sums of money. Usually a Bachelor’s degree in medicine takes about 5 years. But in today’s world that might not be enough to have a successful career and many opt for a Master degree like an M.D. which usually takes another 3 years. And then specializations in various fields. Some might want to do specialized courses which again take time and are expensive. Some might pursue studies abroad which means higher investment. Medical Professionals also need to keep updating their skills and educating themselves. So compared to other professions, a Medical Professional invests a lot in his career and starts earning properly a little late in life.
Medical Professional economic cycle
He might start earning properly after the age of 28-30 years which is late compared to other professions. A Medical Professional can either begin his career by assisting another Medical Professional or working in a hospital. This means he begins on a regular salary late and hence his social life and events also gets delayed. A late marriage, a late kid and long erratic working hours do influence his financial life. He does not have much time to concentrate on planning his finances. Earnings peak between 40-50 years.
Medical Professionals have the advantage of continuing their practice for as long as possible. But this depends a lot on their reputation and health. Business does go slow for some Medical Professionals or starts cooling down once they finish some years in the business. Younger Medical Professional get more popular, they are more in tune with current trends in medicine and lifestyle. Some of them have more specialized degrees. A Medical Professional therefore cannot be lax imagining that he has a very long career ahead of him. He should have a retirement age in mind and plan according to that. If he can continue even after that age, he should consider it a bonus or can decide terms and conditions of his work which is a great advantage to have.
Medical Professionals love Real Estate
Many Medical Professionals in india invest in real estate for housing and setting up a practice. They are commonly overweight in real estate which might not be a good idea. They have to understand real estate is one of the asset classes – so there will be periods of outperformance and underperformance.
Job Vs. Practice
Medical Professionals have to decide whether they want to set up their own practice or work in a hospital or do both. Some also want to start their own hospital which means they are getting into a business, which are difficult ball game.
They need to understand pros and cons of each option and decide which works best for them. If one feels, he is not financially savvy but good in medical skills, he can set up a small private clinic and/or be a consultant Medical Professional in a hospitals. Setting up practice is not easy. There are numerous Medical Professionals and each is competing for the same market.
If you are a Medical Professional setting up a new practice, you should devote time to the starting the practice and it should start before you finish your previous employment, if any, so that you have steady source of income. You can partner with finance expert to understand the financing aspect of business.
When Husband & Wife both are Practicing Medical Professionals
Many times both husband and wife are medical practioners. They are self-employed professional who earn well but would not have done financial planning. This could be because they do not keep a check on how much they earn and personal and professional expenses get mixed up. They do not understand Investment Planning, tax planning etc. and end up making wrong investments choices or evading tax by hiding income. Many are so busy with erratic hours that they do not have the time or inclination to spend time on managing finances. Such Medical Professionals need to take following steps ;
1. Separate out personal and Professional Expenses
2. Create a Budget
3. Create an emergency Fund
4. Get Insurance cover for self and Family so that personal goals and professional expenses paid off in case of unfortunate event.
5. Make Financial goals like child education, retirement and work towards achieving them by investing properly and reviewing periodically.
6. They should take the help of a financial Planner if they are not comfortable doing this on their own.
Medical Professionals Financial Knowledge
Medical Professional are very intelligent. Some of them therefore think they can make great financial decisions too. But many of them make mistakes leading to financial losses. For example many Medical Professionals do not buy enough insurance at the right time to cover them and family. They realise later in life that their finances are not well managed. Buying insurance when you are older is expensive. Some professional do buy life insurance but ignore disability insurance.
Some of them are in huge debt due to students loans or loans taken for setting up their practice. They are not sure on how to manage these loans. Medical professional service never go out of demand whichever way the eonomy going. Therefore they can afford to take higher risk in their investment portfolio. But many of them are not aware of this and over invest in low risk-low returns products. Some of these product might have been mis-sold to them by agents who know their ignorance about such matters – like child future plans & pension plans. If the Medical Professional does not have the time nor the inclination for financial planning, he should invest in having a good financial planner who can manage his finances and give him sound investment advice as per his needs and goals.
Financial Planning for Medical Professionals
Medical Professionals should take the following steps to ensure that their finances are in a good condition-
1. They should not be tempted to splurge once they start earning money. Some of them feel they missed out on opportunities to have fun as they spent many years studying and started to earn well much later in life. They splurge on fancy vacations, new cars, eating out etc. It is important to keep a check on expenditure and concentrate on savings and investments.
2. They should ensure that they have adequate life cover and disability insurance cover so that financial needs of family and profession are taken care of in case of unfortunate events
3. Decent indemnity coverage is must.
4. In some cases practice is their biggest investment Medical Professionals have – you should know how to nurture, grow, save & ring fence that.
5. Medical Professionals have a very busy schedule. They are also called in for work many times post work hours. Apart from this they have to manage family, health, social engagements etc. It is important that they have a proper fitness schedule. They have to eat right and exercise so that they are in good physical shape. They need to switch off from their work every day for some time and pursue what they like so that they are mentally fit. This is important for a sound financial health.
6. They have to make a financial plan the plan should have financial goals listed and they should execute the plan to achieve these goals. If they do not have time to research and make one, they should hire the services of a financial planner. [hope Medical Professionals understand importance of professionals ] They need to have a proper investment plan. They should invest in a variety of assets including equity, mutual funds and debt so that their investment portfolio is diversified and they get optimum returns and long-term capital appreciation. They should ensure that their debts are not beyond their means.
7. They should pay off education loans taken and only then go for home loan or loans for buying property to set up the clinic. They should ensure that they understand their investments and performance of the investments rather than blindly following the advice of the financial planner. They should revisit the financial plan regularly and tweak it as per changes in their life situations and macro and micro economic conditions.
They should also invest in themselves by upgrading their skills, learning about latest trends in health care and networking with other Medical Professionals and professionals in the healthcare business.
Irony of Medical Professional lifeThe irony is Medical Professionals do not follow the rules that they establish – first diagnose & understand the problem and then prescribe appropriate medication. But when it comes to finance they prefer over-the-counter products. Many of them buy financial products without really understanding them as they are not in touch with this subject and due to lack of time rely on the insurance agent or the financial product seller who claim to take care of your investments but are just looking to increase their sales.