“Personal Financial Advice for Doctors in India”
Being prosperous is something different than earning handsome money. Disciplined approach with a proper plan can lead you to prosperity; doctors are required to be more disciplined and careful in managing their finance. Purpose of financial advice is to make you achieve your goals and to utilize the resources in the best manner for your situation. For proper management of finance doctors should avoid common mistakes and remember some principles.
Common Financial Advice Mistakes of Doctors
Invest for obligation
We need to know the impact of investing in obligation, how a product can be good if someone is pursuing us, the person is interested in our benefit or in his benefit first. Investing a little amount of 1 lac per annum for 20 years in obligation can make us loose Rs. 36 lacs in 20 years. This is the cost of obligation.
Use of Insurance for Investment
If we really want to use our resources properly, we should know that insurance is for protection only and it should be avoided for investment. You should check the performance of your insurance plans before investing. Generally it gives lower than inflation.
Buy Insurance for Spouse and kids
Doctors should not buy insurance on the life of spouse or kids. We practically experienced that almost all the doctors we met had insurance in the name of kids and spouse, these policies were sold to them. If something goes wrong with the bread earner, who will pay the premiums, the policies will lapse.
Having Setup for Personal satisfaction
There is no use of setup if it is not giving you profits even after 5 years of establishment and if you don’t have proper business plan. You work hard for every penny and there is no point in wasting the money in paying liabilities only, there are many good buildings for investment.
Don’t define Retirement Age
Almost every doctor says that he or she will work till the last breath of his/her life, I respect the passion and zeal to serve but every person has physical limitations after some age. Would it not be better if you work for passion only, not for money after a certain age of your choice? So try to fix an age by which you should be financially free.
Identify your goals
In this process you need to write milestones of your life, these can be anything from down payment for car, own hospital, vacation, kid’s higher education, dream home, etc. You need to write the required value of these goals without adding inflation and the period after which these are due. Other than these you need to know your income and expenses on a monthly or yearly basis. Once you are ready with these you may move forward to plan for these goals.
Life Insurance Cover for Doctors
It is required only when you don’t have assets to back your family. You are the best guard for your family; the first step is to protect your family in case they loose you. In your absence also they need to achieve all the necessary goals and maintain same living standard, to empower them even after you, you should plan the amount which should be sufficient enough for them for their entire life. This involves required money to fund your kids, money for entire life of your wife from today and loan outstanding as on date. For covering your life the best plan is Term plan if your age is below 50 years. This form of insurance has the lowest premium and if you are covered properly, you don’t need to buy any other plan of life insurance. Apart from life insurance you should protect yourself with accidental cover and critical illness Cover.
As the head of family you need to protect your family from unknown risk from your profession. Improper cover can negatively impact the financial situation of family, while planning this you should consider the financial advice/strength of your patients and the limit of financial demand in case something goes wrong unfortunately with patient under you. Take a proper cover and you can negotiate the premium on this.
Invest for goals
Ideally you should match the right product with your need. One thing must be remembered, Nothing is good or bad, it’s your situation which decides that the product is suitable for you or not. Initially you should park funds for liquidity to meet any kind of emergency needs. This amount should be kept in a tax efficient manner and once you have liquidity for 6 months you should start investing for your goals like Home, Funding Child, Financial Freedom and your own hospital.
Check the total required savings for your goals with your suitable investment instrument and start investing. As you are ready with calculations you start investing. If you feel that you have already earmarked assets for your goals and you need to invest the surplus amount, always check your minimum required return with inflation and your Income Tax Slab. Compare all the investment instruments in India and start investing as per your requirement.
Invest wisely & Review Periodically
It is important to take investment decisions and it’s more important to review the performance of your investments periodically. One should review the performance of investments at least half yearly or preferably quarterly. The performance should be checked with the objective for which you selected the instrument while deciding the investment.
Tax Planning for Doctors
Take advantage of Tax Planning Ideas to reduce your Tax liability, at least what you can do is, invest in Tax efficient investment instruments and make better returns. Debt Mutual Funds, Bonds, Shares, Property, etc give you better tax adjusted returns. For the purpose of Tax planning you should hire some good professionals. Financial advice
You work hard to accumulate assets for your loved ones, have you ever thought, if tomorrow you are not with them, who will be owner of these assets? What we have observed that families know very less about assets and many cases the family will not be capable to hold the properties. Please empower your family, write a WILL or arrange the things in the manner that these are planned for your loved ones.
The process of financial advice is very simple and do remember that only careful management of resources make you prosperous.