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As a physician, what key elements are missing in your plan to get on track and stay on course for success?
There’s no denying that physicians have a greater opportunity to earn a great living and build wealth than most people. However, they also face several challenges, such as the initial delay in starting their careers under a mountain of debt. Their ability to earn a high, six-figure income is their most valuable asset. But they must quickly convert it into capital that can accumulate and preserve. If they are to achieve financial independence within a shorter time horizon. Without a comprehensive financial plan to guide them in their financial decision. Even high-earning physicians can fall well short of that goal.
Now, more than ever, physicians need a fully integrated financial plan. Managed through a collaborative effort by a team of advisors. The financial planning process, guided by your goals, needs, priorities. And attitude about risk, should coordinate all of the financial disciplines, including wealth accumulation, risk management, asset protection, wealth distribution, tax planning, estate planning and charitable planning, with customized strategies for each.
The Essential Components of the Physician’s Financial Plan
Clearly defined financial goals. Your entire financial plan springs from your goals. If financial independence is your goal, you need to define what that looks like and what it means, quantify it, and set it to milestones; otherwise, there is no way to know if you’re on the right track, or on track at all.
A retirement strategy integrated with other priorities. Physicians want to be able to do it all – buy the house of their dreams, educate their children, and live a good life. The biggest mistake most people make, however, is to plan for these goals independent of ensuring their financial independence. The retirement strategy should focus on both the accumulation of capital and the distribution of capital for creating lifetime sufficiency.
Risk Management
A comprehensive risk management plan to protect family and assets against all contingencies, including a disability, the death of a breadwinner, professional and personal liabilities, and catastrophic losses. The plan should be funded with maximum coverage for each risk using quality insurance products. Physicians should carry excess personal liability coverage through an umbrella policy.
A long-term investment plan utilizing an asset allocation strategy customized to their investment objectives and risk tolerance. A well-diversified, global portfolio of equities should anchor the strategy for the best opportunity to achieve steady, long-term growth.
A tax reduction strategy utilizing provisions of the tax code to minimize the impact of taxation to the greatest extent possible on income and investment returns.
An estate plan to preserve assets, lower estate settlement costs and provide for a smooth transition to family members. Special attention should be given to legal protections during incapacitation – i.e., Power of Attorney, Medical Directive, Living Will.
Conclusion
Finally, a comprehensive financial plan requires a process to implement, monitor, evaluate and adjust as physicians move through their life and career stages. If for no other reason, this is why physicians need to work with a high quality, independent financial advisor – one who works with other advisors to be able to create a comprehensive plan and to coordinate its full implementation. A good financial advisor can also be a financial coach, helping physicians to stay disciplined, stay on course and to avoid the financial and investment traps that snare a lot of people.
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