X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
How Should Doctors Take Care Of Their Financial Health - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

How Should Doctors Take Care Of Their Financial Health
Aug 28, 2017

Doctors are often called angels sent by God. They are on call 24*7 and many a times forget their own well-being. Their job takes a toll on not only of their physical health but on their mental, emotional, and at times long-term financial well-being as well.

Doctors who run their own clinics or hospitals do not have a steady flow of income and their cash flows are rather erratic. The source of their income is variable.

One of the biggest challenges doctors face is planning for their financial goals and knowing how to achieve these comfortably.

Dr Mehta, a dentist, runs a clinic in Mumbai, visits some of the hospitals for OPD a certain day, and is a lecturer at a medical college. His monthly cash-flow is inconsistent and rather uneven. He plans to get married in two years, but does not have the sufficient funds to pay for the wedding. Additionally, he has an outstanding education loan to be repaid. Fortunately, none in the family are dependent on him right now.

Here are Dr. Mehta's financials...

Particulars Income & Expenses
Fixed Income per month 1,00,000
Variable Income per month 50,000
Rent per month 30,000
Salary to the employees per month 25,000
Overheads per month 10,000
Outstanding Education Loan 3,00,000
Cash Profits (without variable income) per month 35,000
Cash Profits (without variable income) per month 85,000
(Note: For illustrative purpose)

Though his fixed income of Rs 12 lakh annually earned as a lecturer is sufficient to run his business, there is hardly surplus left for contingency or uncertain circumstance that may arise. If in any month he makes a variable income of Rs 50,000, he is able to save a large chunk (Rs 85,000).

Fortunately, as he is at the start of his career, provides him with the time and advantage owing the earning potential during the economic life cycle, and here's what he should do...

Repay debts:

The key is to first clear off all the debt as soon as possible, and then start planning for other goals in life.

Doctors usually enter the earning phase of the economic life cycle in their late 20s or early 30s, compared to other professionals. To top it, many are burdened with debt (education or mortgage loan) - not all are privileged with heirloom or legacy.

Set goals efficiently:

For Dr Mehta, investing in mutual fund schemes with an aim of capital growth to fulfill financials goals would be ideal. But selection of schemes would play a crucial role.

Many in the pursuit of working towards a better lifestyle, turn reckless spenders, lose track of their finances and become financially ill. They tend to miss out on planning the important goals such as wedding expense, buying a house, kid's education, etc. Essentially, the day you start making money, earn a livelihood you should start planning for the vital life goals.

Engage in retirement in Planning:

Doctors, like Dr Mehta, should calculate their retirement corpus and start saving for their golden years.

Often professionals like doctors ignore their post retirement life. Most doctors wish to serve till their last breath. However, life is uncertain. With the rising competition, clinics/ hospitals continue to burgeon up and there is no guarantee about the frequency and loyalty of new and seasoned patients.

Retirement planning should begin as soon you start your career and not wait for the last days. The earlier you start; the advantage of compounding and rupee cost-averaging will help grow your money. If you don't plan for your retirement, and work towards building up the retirement kitty needed, you are unlikely to have live a blissful retired life.

Plan for contingencies:

Owing to the variable income, Dr. Mehta should plan or make provisions for a rainy day as well.

A contingency fund, also known as a contingency reserve or emergency fund, is savings that you set aside as an emergency fund. It is best to maintain a contingency reserve of minimum 6 months of monthly expenses to a maximum of 24 months.

This will enable you to cover expenses in case a contingent event does occur. While creating a contingency reserve, calculate necessary expenses, such as household expenses, utilities, medical expenses (if you or your family member is on regular medication), travel expenses, EMI on loans, and children education expenses.

Finally, here a few points to remember:

  • As doctors do not have a specific retirement age, engaging in prudent financial planning well in advance, is a must. As nothing is certain in life, wait till the last moment is pointless.
  • Besides, focus on reducing or eliminating debts, if any
  • Classify your financial goals as: short-term, medium-term and long-term
  • Save for and maintain a contingency fund to counter any unfortunate emergencies
  • Be in full control of your personal finances in the interest of your long-term financial wellbeing

Doctors advising the best health for their patients should also keep a check on their own financial health.

Get your financial health check today and live a healthy & wealthy life.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "How Should Doctors Take Care Of Their Financial Health". Click here!

  

More Views on News

Two Meetings That Nailed the Idea of Owning Brilliant Smallcaps Without Buying Them (The 5 Minute Wrapup)

Mar 22, 2018

Certain blue chips hold the potential of delivering returns comparable to small-cap stocks. With these stocks, you can get the best of both worlds.

What They Forgot to Tell You About Sensex at One Lakh (Profit Hunter)

Nov 29, 2017

Stocks that could beat Sensex returns in the long term.

Aditya Birla SL Frontline Equity Fund: Can Its Frontline Performance Sustain? (Outside View)

Aug 17, 2018

With a growing size, the fund is slowly moving towards a point where it may start feeling capacity constrain. Investors are curious if the fund can still sustain its frontline performance.

Bet You Never Thought HDFC Bank Could Lose its Head (Profit Hunter)

Aug 17, 2018

It could be extremely risky for investors to assume that this banks will never pose any risk to the sector or their portfolio.

Are Your Bank Deposits Riskier than Your Bank Stocks? (The 5 Minute Wrapup)

Aug 17, 2018

Left on their own, the banks would possibly have to mark down the value of deposits by 90% to 100%.

More Views on News

Most Popular

This is a Must-Have Stock for Your Portfolio(The 5 Minute Wrapup)

Aug 8, 2018

Tanushree just released the permanent wealth blueprint report. This report includes three safe and steady stocks. I like one in particular. Here's why

Trading in These Times: 8% Gains in 3 Days!(Profit Hunter)

Aug 9, 2018

Here are 2 stocks you can buy right now! And there are plenty more opportunities to come...

Banks are Raising FD Rates and That's Good News(Vivek Kaul's Diary)

Aug 7, 2018

Lending to the retail segment remains strong, whereas lending to the service sector has picked up dramatically.

Why HDFC Equity Fund Disappointed Its Investors(Outside View)

Aug 9, 2018

Though popular, HDFC Equity Fund is not among the best performers anymore. Here is the reason behind its underperformance that has left investors disappointed.

HDFC AMC Makes 65% Listing Gains! Should It Attract Mutual Fund Investors?(Outside View)

Aug 8, 2018

PersonalFN explains if investors should invest in schemes of HDFC Mutual Fund looking at the listing gains of HDFC AMC.

More

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Aug 17, 2018 (Close)

MARKET STATS