Why Every Physician Needs A Personal Wealth Plan
Sebastien Chevrier - Sep 14, 2016
As a medical professional, it’s never too late – or too early – to start thinking about your financial future. Graduating from residency after nearly a decade or more in school plunges many physicians into unfamiliar territory:
As a medical professional, it’s never too late – or too early – to start thinking about your financial future. Graduating from residency after nearly a decade or more in school plunges many physicians into unfamiliar territory: earning real money for the first time in years. And not just some money, but a truly significant level of income. For many, it is at this point that financial habits are established.
Faced with such sudden wealth, many young and enthusiastic MDs make the fateful mistake of letting their spending escalate without a plan in place which often results in overspending.
Enduring years of financial lack and going without makes this tendency completely understandable, but the impact can be quite unfortunate as debt continues to persist or escalate and other life/financial goals (purchase of a home, comfortable retirement at a reasonable age) become out of reach.
Why Financial Planning for Physicians?
As established forward-thinkers, physicians are a lot like corporate entrepreneurs. They start with a goal, then spend years with their heads down in pursuit of success. But as every entrepreneur knows, financial achievement over the long-term doesn’t just happen - no matter how much your business may be earning. It takes planning, and a willingness to reinvest in your ongoing success.
The reality is that the high earning potential of most physicians is all too often offset by a high risk for financial strain, caused by:
- delayed earnings,
- a large debt load, and
- a busy career that prevents a focus on finances
Paying down debt, and taking steps to invest for your future and eventual retirement may not sound like a whole lot of fun after years of hard work and discipline, but it’s not only smart, it can actually be easy – especially with the help of a Personal Wealth Plan. And the sooner you start, the sooner you will reap the rewards. It will help you realize your immediate financial goals and it will utilize the power of compound interest to make up for lost time.
Mapping Financial Success with a Personal Wealth Plan
As a comprehensive evaluation of both your current and future monetary states, a Personal Wealth Plan lets you map out your financial destination by showing you where you are now, and what steps you should be taking to get where you’d like to go.
Personal Wealth Plans consider a range of contributing financial factors, including:
- your cash flow situation (your income and spending)
- your net worth (your assets and liabilities)
- your financial goals and retirement plan, and
- relevant strategies for investing, reducing taxes, and mitigating financial risk
Filling out a Net Worth Template, for example, is a great way to start learning about the path to financial success. This handy resource lets you determine your personal net worth at any given point in time, by subtracting everything you owe (your liabilities) from everything you own (your assets).
Navigating the Road to Retirement
A Personal Wealth Plan serves as a framework for taking the guess-work out of what your financial goals should be at each stage of your earnings career, and how you can go about achieving them.
Building a Personal Wealth Plan begins with understanding your relationship with and attitudes about money as well as your vision for your future so that you can:
- identify and cultivate financial benefits (like your earning potential, assets, and positive financial habits)
- recognize and manage financial risks (including your debts, unplanned losses, and poor financial habits), and
- lay out your short term, intermediate, and long-term goals (including your desired retirement age and lifestyle, and any travel or philanthropical objectives you may have)
In a nutshell, a well thought out plan will help you get a handle on your spending, will ensure those student loans and lines of credit get paid down as efficiently and painlessly as possible, and will show you how solid investments and retirement contributions can pave the way to being able to retire when you want, with the money you need.
Unlike the corporate entrepreneur, physicians are in the unique earning position of never having to worry about sales drying up, or of relying on marketing to drum up new clients. This gives you an incredible edge that can pay enormous financial dividends - if you learn how to use it wisely. Taking the time to create a Personal Wealth Plan will give you the overview you need to develop and implement a winning approach to personal finances, for life.
Our upcoming information series will cover further essential financial topics for physicians, including Budgeting, Retirement, Investment, Debt Management, Housing Purchase, Insurance, Legacy Planning and others. If you have a topic you wish to learn more about that is not listed, please let us know and we will consider it for future topics. Sign up here for our newsletter to receive our upcoming articles in your mailbox.