Navigating your financial future: Advice for doctors

When most people think of a successful careerist, including medical professionals, they think of someone who can afford a lavish lifestyle and its entrapments—a home in a gated high-rise community, a swanky car or two, and the best educational institutions for their children.

If these successful careerists are queried on their savings, generally they have purchased a few insurance policies and perhaps some stocks and mutual fund policies, mostly to oblige a friend or relative or based on the advice of a colleague or friend.

However, if you look in greater detail at the investments these careerists have made, you may find that their life insurance is woefully inadequate, health insurance has not even been considered, and the investments are[s2If !is_user_logged_in()]…

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Key Point: Financial planning is a holistic, ongoing process. A qualified financial advisor will assist you in identifying your financial goals, will work with you to create a time frame, and will help you leverage your investments and savings to achieve your goals.

In addition to these common issues facing most successful careerists, medical professionals have additional challenges:

  • In this age of specialization, doctors start their careers late. It’s likely that you were well into your 30s before you really started earning. Chances are that you had already married and started a family by this time.
  • You may have (or had in the past) the liability of educational loans.
  • When doctors start earning, their incomes quickly zoom, which may trigger a spending spree.
  • It is in the nature of the medical profession to give advice, more so than seeking out advice from others; therefore, many doctors are reluctant to seek out and follow financial planning advice.

Dangers of financial DIY

When it comes to financial planning, many doctors tend to take the do-it-yourself (DIY) route. However, this is not always the best option. Here’s why:

  • They take advice from their chartered accountants (CAs), who are more focused on tax savings. In the process, diversification may be sacrificed.
  • They take advice from friends or colleagues who boast about one of their smart investment decisions that made a pile of money. Unfortunately, these same people never disclose their failures.
  • Some doctors do not think beyond real estate when it comes to making investments (it’s possible that the cash element in the income influences this decision).
  • It’s possible to fall for get-rich-quick schemes touted by various agents because of having money to invest but little time to research the best investments.

If you are a die-hard DIYer, here are some questions you should consider:

  • Have I given a thought to my basic life goals that require money, such as my children’s education and my retirement?
  • What investment strategy should I adopt to achieve these milestones?
  • For mapping out the strategy, am I aware of the various investment types, which give different kinds of returns with different risk parameters
  • Do I understand the impact of inflation?
  • Am I aware of power of compounding and whether my investments cash in on this principal?
  • Do I plan my taxes?
  • When I invest to save taxes, do I have my life goals in mind?
  • Do I understand the difference between “good” loans and “bad” loans?

A qualified, competent financial advisor can help guide you in answering these questions and others.

What a financial advisor can do for you:

  • Most people react emotionally to money, so when it comes to managing your finances, a professional advisor can guide you in a fact-based, neutral manner.
  • An advisor will see the whole picture. He or she will encourage you to articulate your financial goals, will work with you to create a time frame, and will help you leverage your investments and savings to achieve your goals, while keeping in mind your likes and dislikes toward certain investment products. In the process, the advisor will also educate you so that you understand the logic behind every decision.
  • A good advisor will make sure that you stay on track through constant contact and reviews. Once a plan is implemented, the advisor wants to make sure that life changes such as buying a house, getting married, having a child, changing careers, market downturns and upturns, etc., are all taken into account and will recommend and implement changes to your plan accordingly. This approach will help you identify your overall financial objectives and map out a strategy to reach them. It will also ensure diligence and execution.

Financial advising is not just portfolio management; nor is it just tax planning. It is a holistic, ongoing process that helps you preserve your wealth and grow it in a risk-adjusted and tax-efficient manner. This strategy will help you fulfill cherished goals and pass on the legacy to your loved ones.

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

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One Comment

  1. Namrata Kotangale
    Posted Nov 2013 at 8:02 am | Permalink

    Dear sir,
    If I want to take services from such financial adviser,
    could you please suggest some institutes in pune who can help me.

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