Doctors are amongst the highest earning professionals in the U.S. but when it comes to personal financial management, many are ill prepared and unnecessarily sacrifice portions of their wealth .
Here are four areas you may want to consider taking a closer look at if you are a physician.
1. Mismanaging Debt:
Medical school loans, mortgages, auto loans, and credit cards eat away at your wealth by taking away from your savings. Having a simple budget could help you set your living expenses and spending habits to a level that will help you avoid using credit, reduce your debt and will help you accumulate more wealth early on.
2. Misaligning Investments and Goals
From purchasing a second home to buying mutual funds or stock in Apple – it’s very important to understand both the risks underlying each investment as well as the expenses associated with each. Many physicians are unaware of how exactly the professionals involved in guiding their investment decisions and transactions get compensated for their recommendations. Start with your specific goals and their respective time horizons then research or work with an independent, objective financial advisor to find the best way to meet them.
3. Tax Management:
Maximizing your retirement plan contribution amount is likely the first and easiest action you can take toward minimizing your tax liability. With the help of a professional, you’ll also realize opportunities for tax-loss-harvesting, the use of charitable contributions, and other tax deductions. Many physicians earn high wages and pay more than they may need to in taxes.
Most doctors are painfully aware of the costs associated with liability and malpractice insurance, however many lack adequate coverage in other areas. Term-life insurance and disability insurance for instance can be very important.
Regardless of your profession, we all have different investment objectives, debt, time horizons, and risk tolerance levels. It is best to always consult with an experienced financial advisor, attorney or CPA for professional help in making decisions that are most suitable for you.
photo credit: Alex E. Proimos