Taking an active role in the financial planning process doesn't mean you have to become a financial expert. Awareness of your personal economic situation is the key to success.
“When I was young I thought money was the most important thing in life; now that I'm old I know it is.” — Oscar Wilde
As the editor of a business magazine for doctors, I found that taking an active role in the financial planning process doesn’t mean you have to become a financial expert. Physicians need to be experts about their own financial situation, objectives, feelings and attitudes. Awareness of your personal economic situation is the key to success.
Yes, most doctors earn a good income, but that income is, at best, stagnant. And too many are unprepared to deal with today’s repercussion of which there are many. It’s a fact: physicians are facing drastic changes in their personal and professional lives (i.e., Obamacare, falling salaries, climbing office expenses, malpractice insurance and judgment increases, ongoing debts, etc.).
It’s tough, but true — many doctors are clinically literate but financially illiterate. During their seven-plus years of medical education (medical school, internship and residency), physicians receive little or no financial education. And once a doctor gets minted, a hectic professional life makes it difficult to manage the excess of financial information.
So here are some fundamental money tips that I learned from the wealthier doctors I met during my association with Physician’s Money Digest:
Invest/save at least 10% of your annual income
If there’s one golden rule to financial security and satisfaction, it’s pay yourself first. For the average physician, that means saving nearly $25,000 per year.
Draft/update a will
When PMD surveyed doctors a few years about two out of three didn’t even have the protection of a basic will. For those who did, most were outdated.
When it comes to your family and finances, never let anyone else have the last word. Act now — there might not be a tomorrow.
Develop a personally suitable financial strategy
You’ll never reach your destination, if you don’t know where you’re going. A PMD survey a few years ago found that 80% of doctors don’t have even a fundamental wealth-building plan. Sit down with a pen and paper and make a beginning. No one knows your wants and needs better than yourself.
Discuss personal finance issues with your spouse at least once per month
My mother, who raised eight children, used to say, “silence is golden.” In this case, however, it’s destructive.
When addressing money issues with a spouse, I’ve learned that just getting started is the hardest part. If you’re like most couples, you each bring strengths and weaknesses to the process. You sink or swim together, though.
Pay off all credit card debt
The average American has over $15,000 in credit card debt. Since doctors mirror society, it’s reasonable to assume that they’re in same boat — and perhaps worse off due to their profession-specific financial pressures and challenges. No investment can top the return equaled by eliminating staggering interest rate charges.
Instruct your children on meaningful personal money matters
This is a subject not taught in school. Far too many of today’s children — and adults — are close to being financially illiterate. Thoughtful parents have the power to alter that condition. The endeavor really isn’t that intimidating. Like always, the fundamentals should rule.
Say “no” the next time someone contacts you with a “great investment idea.”
Doctors are scammers’ dream target. A financial advisor I respect once told me that many doctors he knows try to get rid of stock tipsters by sending them a check.
Send them packing instead.