Financial Planning for Doctors – What to expect?

Financial planning for doctors

I often hear from doctors that they have never tried any financial planning services, so they actually do not know how to move ahead, what to ask and what to expect.

Yes, probably this is the reason, most of the doctors do not approach any financial planner but are being approached and get sold into unsuitable products by their bank relationship managers, Insurance agents, and others.

Also, this could be the reason many doctors have lots of real estate in their portfolio, as they have never looked at their finances Holistically, and neither has gone deep into their actual requirements. (Also Read: Why Real Estate is a risky investment for Doctors?)

Financial Planners as a profession have been in existence for many years now, but still, the awareness about them is limited to only a few. By Profile, they are just like you (the doctors), and never advise without a diagnosis.

These are fee-only professionals who have a legal responsibility to act as Fiduciary to their clients.  These professionals do not earn commission from Product manufacturers but charge fees from their clients so there should not be any conflict of interest in the advisory. (Also Read: How Doctors should choose their Financial Advisor?)

When you are really concerned or not attentive to your financial health, and understand that your profession demands lots of your time and energy, it’s wise to outsource the Personal Money Management to a finance professional, as Building Wealth and Managing wealth both are equally important. (Also Read: How Doctors can check their Financial Health?)

After all, yours is also an ever-upgrading profession and you have to keep abreast with many latest developments which consume lots of your time.

This article is to prepare yourself with the broad concept of financial planning for doctors, so to make you ready to ask the right questions.

Financial Planning for Doctors – What to expect and How it benefits?

1. It’s about Goals and Habits:

Please do not confuse Financial Planning with Wealth Management or something where the Planner may advise on some investments to make your money grow.

Though these aspects are definitely looked into, it comes at the last stage of the whole process.

In fact, in financial planning, the whole focus is on Life and Financial Goals, and Investment returns are part of the process. Once you follow the process with discipline and stay focused on your goals, returns are just a by-product. (Also Read: How Young Doctors Should Set Their Financial Goals?)

The Process revolves around 3 areas – Goals, Plan, and Portfolio. The Plan has the basis of Goals and the Portfolio has the basis of the Plan. The destination and direction have to be very clear before we choose the vehicle to drive.

In medical terminology, the disease has to be diagnosed first, then only medicine can be prescribed. And if there’s no disease then the process ensures wellness not cure, which is the ultimate goal. You know it well, it’s not only the medicines that cure you but Diet and Rest are also equally important. The same goes with Money management & financial planning for doctors as well. (Also Read: Prescription or Treatment- what is more important?)

2.  Helps in Cash Flow Management:

The Financial planning exercise starts from cash flow and ends with cash flow. It looks at your Current Income and expenses, which reflects your lifestyle. And parallel to this the growth reflects in your Net Worth (Assets- Liabilities).

Make arrangements from the surplus you are generating towards savings and investments, so you end up having enough corpus to generate the same cash flow adjusting to the inflation when you do not have or choose not to have an active working life. (Also Read: Why Retirement Planning is important for Doctors?)

In the whole journey, it also makes possible arrangements for the Lump Sum money towards other important goals that come from time to time.

If the cash surplus generated is not enough for the other requirements, then the financial planner analyses the numbers and helps in weeding out the unfit products like High-Interest Loans, Low paying Insurances, rationalizing expenses, etc.

3. It Uncomplicates:

The moment you get your first salary in hand, the decision you have to make is whether to spend the money or invest it somewhere. 

Normally, one goes with the former. But after a few months of regular spending when you realize that there have to be some savings too, or when the accounts department asks for the Tax saving Investment proof, that is the time generally one starts looking for investment options. (Also Read: Deduction under Section 80C – All qualifying Investments and Expenses)

This is the time you tend to make mistakes and get into the wrong products in haste. Better be organized and proactive to search for a good financial planner yourself, else slowly and gradually you keep complicating your life.

And whichever life stage you are at, whether you have already made some decisions and have already done lots of investments, without giving a thought, or about to make decisions, a professional approach will always help. (Also Read: Best Investment Options for Doctors)

4. Preserve – Manage – Distribute:

Financial planning for doctors does not end with making a Plan and suggesting investments. It helps you look at your financial life holistically and guides you in Tax and Estate Planning too. Estate planning consists of writing WILL or the creation of a private trust, in other words, it is about Preserving, managing, and distributing the estate. (Also Read: Why WILL writing is important for Doctors?)

It’s not only about you but your family too. You need them to be protected in your absence, you need your money to be managed well in case of disability, you want your money to be distributed to your legal heirs properly and conveniently in case of your demise. So, there are so many aspects that may get ignored if you only consider Investments as the only solution to wellness.

Conclusion:

“It’s too overwhelming. This is why I do not consult a financial planner”, said a doctor friend. My agent tells me about a product and I buy it. It’s too simple.

I replied, and this is why you don’t know where actually your money is going and what product you have invested in, and for what goals. 

And this could be the reason many patients prefer to take advice from a Chemist and not from a doctor. The doctor asks a lot of questions and advises on some diagnostic tests too, whereas the chemist just listens and gives medicines. It saves both money and time. (Also Read: How and when Doctors behave like their patients)

Every professional advice has to be backed on sound information and that too for the benefit of the client/patient. And we both know that what is good for long-term health be it financial or physical. 

So, my friend, it is better to be organized soon, be in touch with professionals or repent later.  

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Manikaran Singal is the Founder and Chief Financial Planner at Dr Good Money. Manikaran is MBA Finance (Gold medalist), Certified Financial Planner and SEBI Registered Investment Adviser. Having 17+ years of extensive experience, he is managing clients across the globe. He has authored a book titled - "The Art of Being Good with Money" published by CNBC TV 18, India's Biggest Media House. He is a Regular Contributor in leading Media Houses and his articles keep getting published in different prominent business magazines and Journals. He is of the strong Opinion that Money Behaves the Way you treat it. and if you really want to get Good out of it, first you have to behave good with it.

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