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How Should Doctors Take Care Of Their Financial Health - Outside View by PersonalFN
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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.


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