Finance Tips (and Tools) for Physicians

 

Managing finances is often a headache for many people. Even though most doctors earn a reasonable level of income, it helps to practice good money management habits.

Here are a few personal finance tips and tools to help you manage your money.

Track Your Finances

Keep track of how much you make, when you will be paid and how much you spend. List all your expenses, their costs, and when they occur. A little organization goes a long way. Each month, there are fixed expenses, such as rent or mortgage, insurance and car payments. These usually come due at about the same time every month and cost about the same each time. Then, there are the variable expenses which may be one-time expenses such as car maintenance or a recurring expense taken out at various times and amounts such as subscription or tax payments (see below). Know how much money you will need to make all these payments.

The traditional way is to use an Excel spreadsheet - which may work for some people while others prefer pen and paper or a ledger. Alternatively, there are pay-to-use tools that can help you manage your money. These include:

Mint (www.mint.com) is a budgeting app by parent company Intuit. The app creates a picture of your spending in real time. It automatically updates and categorizes transactions. Add in your own categories, track bills, split ATM transactions into the purchases made with that cash, and set budgets that alert you when they start to top out. This service enables you to check your credit score for free.

Wally (wally.me) is an app that provides insight into where your money is going. If you want to track your personal expense, this app can provide with what you need. Instead of manually logging your expenses at the end of the day (or week or month), Wally lets you simply take a photo of your receipts. In addition, if you enable geo-location on your device, it fills in that info which is convenient and saves you the hassle of filling in the relevant details.

Pay Bills On Time

Pay your bills when they come due. Many people tend to want to hold onto their money until the due date is near. Unfortunately, this may give them a false sense of how much money they actually have available. Use your money and/or credit cards wisely, and be sure to avoid late fees, overdraft fees, and declined charges. To help you pay in a timely manner, sign up for automatic payments, but only if you’re sure you will have money in your account. If you find that you have too many bills due at the same time, you may be able to contact the company to change your billing cycle.

Plan for the Future

Set goals if you have plans to buy big ticket items such as a house, a new car or pay off student loans. There are a few items to consider:

- Do you have any money left over after your bills are paid? If you find that you are scraping by each month, take a hard look at your expenses and see what you can cut out.

- Is your rent/mortgage payment too high?

- Are the subscriptions services you have worth the expense each month?

- Are you eating out/entertaining too much?

Exercising discipline can be the key to achieving your goals. If you find yourself with a surplus after all your bills are paid, set aside a portion of it for your savings. Even if it is a small amount, every bit brings you closer to your goals.

Brian J. Knabe, a doctor and a Certified Financial Planner with Savant Capital Management says that there are certain expectations of wealth and lifestyle associated with the medical profession. In addition to entering the workforce later, he says that many physicians feel the pressure to live up to those expectations. Agreeing with Dr. Knabe is Dr. David Rosen who adds, “I have found that what is unique amongst physicians versus other highly educated and paid professionals is that they are never taught about money during their training, they don’t talk about it, and are actually encouraged not to.” Dr Rosen is a board-certified anesthesiologist with nearly two decades of residency experience specializing in obstetric, trauma, orthopedics, and regional blocks, who helped found the Midwest Anesthesia Partners. He explains that physicians finish their education after years of studying and inevitably start spending with abandon and usually “don’t think about saving, retirement or the impact of delayed investment.”

Both physicians acknowledge that many physicians are extremely confident and this serves them well in medical practice as it helps them to make good decisions for their patients. The downside of this overconfidence can be damaging financially. Dr Rosen adds, “They think that since they are knowledgeable in medicine, that knowledge translates into their finances.” In many cases, physicians are “more apt to listen to and act on a tip from a colleague regarding a hot stock, than actually do research, or even consult with a professional advisor.”

Insurance

Dr Knabe advises physicians to remember that the value of future earnings is a young physician’s largest asset. Be sure to invest in disability insurance to protect your financial future.

Aside from obtaining insurance to protect yourself should you become injured or disabled, you should also consider malpractice insurance. According to a 2010 American Medical Association report, 61% of doctors over the age of 55 were sued for malpractice. Although 65% of the claims are dismissed or dropped, they still cost doctors an average of $22,000 per suit. Sometimes, when a claim does go to trial, the average cost increases to in excess of $100,000. For this reason, be sure to purchase a good malpractice policy from a reputable insurance carrier.

In addition, physicians have a one in five chance of being on the wrong end of a lawsuit that’s outside of their practice. According to Dr. Knabe, physicians are viewed as having deep pockets so they are more vulnerable to lawsuits. This is why, to minimize risks, he suggests that physicians should make sure they are insured in all areas, “including a substantial umbrella policy.”

Travel expenses

For regular physicians who make house calls and locum tenens physicians (before you take on an assignment), find out if you have to pay for travel out-of-pocket. These can include tolls, mileage, car service, gas, hotel and other unforeseen charges. Note that even if you are have these expenses reimbursed, you may still need to foot the bill upfront.

Record-Keeping

Use your smartphone as your digital assistant. Keep all your information about your assignments, speaking engagements or house calls in one place: a schedule of confirmations, travel itineraries, status updates, all through e-mail. Having your e-mail available on your phone in addition to using an app like Evernote (www.evernote.com), for example, helps keep you organized with all your information together. If you have receipts, paperwork, or notes that need to be kept together with a certain worksite, you can take a photograph and have access to all your documents on your phone and on your computer.

Taxes

One of the top priorities for physicians is to manage their taxes. Tax implications can vary depending on income level, family size, and property ownership. Typically, an employer pays one-half of your social security and Medicare taxes. Don’t think of taxes only at “tax time” when it’s too late to do anything about it. Most doctors file their personal taxes on a calendar year basis which means that you pay on April 15th for everything that happened between January 1 and December 31 of the prior year. It may be worthwhile engaging a financial advisor and tax specialist throughout the year to see what you can do to pay no more than what you owe.

If you are a locum tenens provider, you are an independent contractor. This means you are responsible for federal income, Social Security, and Medicare taxes. Depending on whether you own a corporation or file as an individual you will use different IRS forms. You may also have to pay tax estimates in quarterly installments. This is so you don’t find yourself with an unmanageable amount after you file your taxes.

Whatever your particular circumstances, if you still encounter financial challenges, consider hiring a financial advisor. While this is an added expense, financial experts may have some creative solutions for your situation and should be able to personalize their advice for you.

 

References:

Smart Money Tips For Young Doctors and Medical Students, Kimberly Palmer, February 14, 2011; KevinMD.com, www.kevinmd.com

Financial Planning for Doctors – 5 Must Have Components, Laura Willard, July 10, 2015; GuideVine,

www.guidevine.com

Finance Tips for Locum Tenens Providers, Lexx Healthcare, Lexx Healthcare,

lexxhealth.com

Most Doctors Will Face Malpractice Suit, AMA Says, Emily Walker, HREF, HTTP, www.medpagetoday.com,

Target, External, Medpage Today, Staff Writer, August 5, 2010; ABC News,

abcnews.go.com

Apps:

Mint Budgeting App

www.mint.com

Wally.me Finance Tracking App

wally.me

Evernote Finance Organization App

www.evernote.com Here are a few personal finance tips and tools to help physicians manage their money.