Financial planning for doctors: Start early to ensure a successful future

The correlation between a high-income occupation and net worth is not inherently a positive one. When I think about this truism, I am reminded of medical practice, one of the noblest professions in the world. The concepts of finance and accounting are alien for many doctors, since you of course go to medical school to learn medicine—not business.

“This is about planning for a second stream of income during your golden years, so that you work because you want to and not because you have to.”
-Yogin Sabnis, CFP, managing director at VSK Financial Consultancy Services Pvt. Ltd., Mumbai, India

Many doctors are majorly focused on investments and have a product-centric approach rather than managing their personal finances holistically. That’s where an expert financial planner can help (more on this in my previous mdCurrent-India article at:

Key Point: Ensuring a secure financial future starts with early planning. It’s important to limit the amount of debt you accumulate at one time, invest in equity mutual funds during the early working years, plan for retirement, prepare for contingencies, and buy adequate life, health, and indemnity insurance.

Here is some advice that is especially helpful for physicians in order to achieve financial freedom and security:
1. Do not pile up huge debt. If you’re like many doctors, you had or have educational loans to repay during your early working years. Then you require a home loan as you start your family. You may also require a commercial property loan for setting up a clinic/nursing home for a private practice. Do not make the mistake of taking out too many loans at once.

What you can do is borrow for one purpose at a time. For instance, focus on repaying your outstanding educational loan. Then take a home loan for your residential property and rent a commercial property for your practice. Once you have cleared off a major portion of your home loan, you can consider borrowing to set up a clinic.

2. Save and invest in equity mutual funds for the long term during your early working years. It’s important to get into the habit of investing in a savings and investment plan in your early working years irrespective of your loan liabilities. It is important to adopt an attitude of earn-invest-spend rather than earn-spend-invest. Invest small chunks of your savings portion regularly in equity mutual funds in the form of systematic investment plans (SIPs) for long-term wealth creation. They are the best asset class to beat inflation.

Adopt a goal-based investing approach for items such as your children’s education, their marriage, your annual vacations, etc. Defining the target amount and the[s2If !is_user_logged_in()]…

[/s2If][s2If is_user_logged_in()] time frame will help create investment discipline and will serve as a roadmap to help you achieve your important financial goals.

Power of compounding
Retirement age
Amount invested per month Investing age 50 55 60
10,000 30 91,98,573 1,70,22,066 3,08,09,732
10,000 35 47,59,314 91,98,573 1,70,22,066
10,000 40 22,40,359 47,59,313 91,98,573
Note: Assumed equity mutual fund returns at 12% compounded p.a.

The sooner you start your SIPs, the better. For example, if you start investing Rs.10,000 every month from the age of 30, you will be on track to accumulate an impressive Rs.3 crore by the time you reach 60. However, if you start investing even 5 years later than that, at the age of 35, you will achieve a corpus of Rs.1.7 crore. That is a huge Rs.1.3 crore difference compared with the total achieved when you start 5 years earlier.

3. Plan for retirement savings from your early working years. Many people give thought to retirement planning only in their late 40s or early 50s. Many doctors do not give too much thought to retirement, as they think they will work as long as they live. Many doctors do work that long, which is good for the community. But saving for this stage of life is not about retirement planning as an alternative to working. This is about planning for a second stream of income during your golden years, so that you work because you want to and not because you have to.

Remember that inflation is likely to eat into your retirement savings. If you start planning and saving as early in your career as possible, time will be on your side and your retirement savings will compound and grow.

4. Prepare for contingencies. It’s important to plan for the worst while hoping for the best. For example, you may experience a health emergency in the family or your medical practice may not yield the desired results initially, which can throw cash flows out of gear. To tide you over in such unforeseen situations, you should be sure to establish a contingency fund.

While there is no rule of thumb for the amount, a good place to start is with a contingency fund that is equivalent to 6 months of household expenses (including equated monthly installments [EMIs] and your insurance premiums). Liquidity and safety, rather than attractive returns, should be the key factors in managing this fund. Hence, the best places to park an emergency fund is in a savings bank account or flexi fixed deposits.

5. Buy adequate life, health, and indemnity insurance. Life insurance is necessary to protect your family financially if you should die. It’s important to protect your family goals such as your children’s educational or marriage expenses and to provide for your spouse’s living expenses throughout his/her lifetime. Term insurance is an ideal option, as it offers the best combination of coverage and cost.

Given the exponential rise in healthcare costs, having medical insurance also is a must. It is prudent to begin buying adequate health insurance for yourself and your family early on in your career.

Professional liability insurance or indemnity insurance also is a must for doctors. It covers legal liability arising from errors and omissions on the part of registered medical practitioners while providing professional services.

A qualified financial planner can offer you guidance and comprehensive advisory services to help you achieve these goals, while ensuring that the strategy is in line with your overall goals and wants.

If you have questions about this topic or any financial topic specific to Indian physicians, please email Yogin Sabnis, CFP, at Questions of greatest interest may be answered in future columns.


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  1. dr suresh chhatwani
    Posted Jan 2013 at 12:16 pm | Permalink


  2. Dr Vinod Uplaonkar
    Posted Feb 2013 at 7:09 pm | Permalink

    Sir if we start what r the most attractive policy which one to go for

    • mdCurrent-India staff
      Posted Feb 2013 at 7:39 pm | Permalink

      Dr. Uplaonkar,

      We have asked Mr. Sabnis your question, and he replied as follows:

      The best insurance product is the “Term Insurance”. It is devoid of any investment element and hence enables you to buy as much insurance as you need.
      The next step is to shop around and select a company which will quote the lowest premium.
      This is the best way to go about getting yourself insured.

      If you need more information specific to your situation, you can also contact him through his email ID at the bottom of the article.

  3. yogesh khanse
    Posted Jun 2013 at 7:09 am | Permalink

    read the article was very informative………….
    Would appreciate if could have a few insights on how to manage the cash flow and get the maximum output from the existing cash flow

  4. suyash bhandekar
    Posted Jun 2015 at 7:00 am | Permalink

    Really good info…

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