By Bruce Bechhold, CPA, Walthall CPAs
The demands on medical practitioners today can seem overwhelming. It’s no secret that health care delivery is changing, and those changes are reflected in the financial issues that health care professionals face every day.
You must continually educate yourself about new research in your chosen specialty, stay current on the latest technology that is transforming health care, and pay attention to business considerations, including ever-changing state and federal insurance regulations.
Many medical professionals transition from medical school and residency to being on their own with little formal preparation for the substantial financial issues they now face. Even the day-to-day concerns that affect most people – paying college tuition bills or student loans, planning for retirement, buying a home, insuring yourself and your business – may be complicated by the challenges and rewards of a medical practice. It’s no wonder that many medical practitioners look forward to the day when they can relax and enjoy the fruits of their labors.
Unfortunately, substantial demands on time can make it difficult to accurately evaluate your financial plan or monitor any changes. Ongoing health care reform efforts that will affect the future of health care just add to the headaches.
Just as patients need periodic checkups, medical practitioners need to work with a financial professional to make sure their finances receive the proper care.
The average debt burden for a physician graduating from a medical school in 2014 was roughly $176,000. Many medical professionals not only must pay off student loans, but also have a strong desire to help their children with college costs, precisely because they began their own careers saddled with large debts.
Maximizing your personal assets
Much like medicine, the field of finance has been the subject of much scientific research and data, and should be approached with the same level of discipline and thoughtfulness. Making the most of your earning years requires a plan for addressing the following issues.
Your years of advanced training and perhaps the additional costs of launching and building a practice may have put you behind your peers outside the health care field by a decade or more in starting to save and invest for retirement. You may have found yourself struggling with debt from years of school and training.
Later, there’s the ongoing juggling act between making mortgage payments, caring for your parents, paying for weddings and tuition for your children, and maybe a vacation here and there. Because starting to save early is such a powerful ally when it comes to building a nest egg, you may face a real challenge in assuring your own retirement. A solid financial plan can help.
Getting a late start on saving for retirement can create other problems. For example, you might be tempted to try to make up for lost time by making investment choices that carry an inappropriate level or type of risk for you. Speculating with money you will need in the next year or two could leave you short when you need that money. And once your earnings improve, you may be tempted to overspend on luxuries you were denied during the lean years. One of the benefits of a long-range financial plan is it can help you protect your assets – and your future – from inappropriate choices.
Once the lean years are behind you, your success means you probably need to pay more attention to tax-aware investing strategies that help you keep more of what you earn.
Read Part 2 (Using Preventive care, Liability insurance, Disability insurance, Practice management and business planning, Practice valuation and Estate planning) in the December/January Edition.