Overview
I’ve said it before, but it’s worth repeating: Physicians have a training and career path unlike any other profession. There are always exceptions to the rule, but what other profession requires the depth of training that physicians endure? Where else is your income virtually guaranteed to at least triple almost instantly? This is why much of the mainstream financial advice doesn’t always mesh with the situation of the typical doctor. So the first step towards a solid financial foundation is to be aware of this reality and consider the best way to weed out bad advice from the good. In my (admittedly biased) opinion, I think the most effective resource is a financial planner who understands the unique financial condition of the physician. This needs to be someone you trust and is willing to explain your options instead of dictating the narrative for you. Here at Physicians Financial Design, that is exactly what we do. But regardless of whether you decide to work with us or go at it alone, the following article should help you formulate your foundation for a solid financial outlook.
The Process
When I sit down with a physician to discuss their financial situation, they are often surprised by the fact that most questions I ask (especially in the beginning) aren’t financial questions at all. This is because the foundation of a solid financial plan shouldn’t be rooted in numbers, it should be driven by the plans and values that you have for your life. I call this the Why Factor. Just like most patients probably come to you with a chief complaint (their “why” for being there), most physicians come to me for some specific reason. To better understand what drives you and what will keep us on track once we set the plan in motion, I like to understand the two things that motivate everyone: 1) Things that bring us joy and 2) Things that scare us. I call this the Excite or Fright Factor. Dialing this in can be the key to setting the right plan and the successful execution of the plan. From there, the financial aspects start coming into clearer view.
The Purpose
The quickest way to get from Point A to Point B is a straight line. When it comes to financial questions, one of the biggest mistakes that many people make (not just physicians) is that they don’t establish their “Point B” before they put their head down and start plowing forward. This results in a lot of zigging and zagging before finally reaching the destination. The more effective route would be to establish your end point and then work backwards to find the most efficient path to get there. A simple example of a common goal would be to retire at a certain age. However, without establishing the age and expected lifestyle at retirement, how can you plan the path to achieve it? A more immediate goal like buying a house, eliminating debt, or planning for your kids’ college might be at the top of your list. Regardless of the “what”, let’s establish the “why” and then establish the path.
The Path
Once you have your sights set on an objective, now it’s time to establish the path towards your purpose. You’ll first want to make sure you have protected the things you already have (including your future income). Next, if you have debt, you’ll want a plan for eliminating that. Investing is another important aspect that is necessary for achieving financial stability. In another article, I’ll discuss in more detail some strategies for investing, but it’s imperative to have a financial plan before you start! Also, as part of your personalized strategy, you want to make sure you consider the tax implications of all your decisions. You also want to make sure you take advantage of special programs for physicians when it comes to things like mortgages, insurance, and student loans. Again, if you don’t have an advisor who understands these, you may be missing out.
The Performance
With a clear pathway to success established, it is now time to put the plan into action. Usually a plan has some vital and immediate first steps. For many, this will probably include putting some insurance in place to protect things like your income, your property, and your liability. Other first steps may include setting up account automation for investment contributions or debt payments. From there it becomes a systematic, step-by-step process to help you execute the plan in place. And remember, nobody’s 30-year plan ever plays out exactly as expected. Don’t be afraid to adjust along the way. Just make sure you don’t let your emotions take over when a financial hurdle gets thrown your way. Working with a financial planner can assist in working through these obstacles as they present themselves and help you to avoid making the big mistakes that can derail a solid financial plan.
Recap
In the next article, we will discuss some of the specific strategies that physicians can use as part of their plan, however, the most important piece of any financial plan is simply committing to having a plan in the first place. Hopefully this article has inspired you to either speak with a financial planner or at least do some self-exploration for establishing your goals to get you thinking about a pathway to achieving them. You didn’t wake up one day and suddenly become a doctor – you put a plan in place and executed the process over many years to realize this goal. Your financial plan will be similar in that it will take some time and some energy – just less studying and clinical hours! If you feel that you could benefit from a financial planner who works specifically with physicians, I invite you to click on the big yellow button below to schedule your initial meeting for free!
Thanks for reading! For more articles geared toward young physicians and their money, click here or check out The Money Malpractice Podcast on any of the major platforms.
Until next time…KEEP SAVING LIVES AND KEEP SAVING MONEY!
Disclosures
• RichMark Private Wealth Management. LLC is registered as an investment adviser with the State of Michigan, and only transacts business in states where it is properly registered, or is excluded or exempted from such requirements.
• Content should not be viewed at personalized investment advice. Market events and other factors may affect the reliability of the potential outcomes. Simulated growth is purely hypothetical and does not represent actual performance.
• Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio.