As a financial planner, I have helped professionals from all walks of life, get wiser with money. One breed of professionals who needed my constant support is the doctors, especially women. Having spent most of their life studying human anatomy, developing saving and investing skills is the last thing on their mind. Managing a house, attending patients calls, surgeries or deliveries at odd hours is what a woman doctor does in a day.
To help her navigate through financial decisions, I have collated an 8 point rule book for doctors to follow at any stage of their career.
1. Draw a Salary: Draw a salary however, big or small from your earnings so that there is consistency in the income. The expenses are more or less fixed hence if a certain portion is put aside month on month then it becomes easy to manage larger expenses as the practice grows.
2. Create Wealth: When a doctor starts early in her career the earnings would be limited and she would be tempted to put back all the earnings in the practice / clinic itself. But the doctor should take care to see that a small portion say it could be Rs 500- 1,000 is put in a regular type of an investment. It could be a systematic investment plan of a mutual fund or a recurring deposit of a bank. This would be useful if she takes a break in the career at a later date.
3. Let the Doctor Beware: Bankers are always on a look out for someone who can write a big fat cheque without asking many details about a financial product. Doctors can be an easy prey especially if the banker is visiting during the working hours. So whenever time permits, read business papers and get updated about the current financial products through credible resources or through an independent financial planner.
4. Build an Emergency Fund: There should be atleast 6 months expenses set aside as cash or in short maturity financial instruments. As the practice grows and fee income increases, start setting aside an emergency fund as well.
Investing for Emergency Fund: Invest in a mix of fixed deposits, short-term debt funds and cash in the bank. Create flexi-fixed deposits for 6-months-1 year tenure.
5. Change Your Risk Profile as Practice Grows: Start with a conservative risk profile and can gradually change it to being moderate which would help the investments to be allocated in a way which can give better performance.
How to Invest: You can start off in investing in a debt fund and gradually do a strategic allocation in a phased manner in an equity or a balanced fund. This is a good way for somebody who is risk averse but would like investments to create wealth over a long term.
6. Cover up for Un-expected Mishaps: There should be a limited liability insurance taken for small business and more so for the doctors since it would protect them from professional risks.
How to Cover: The liability insurance should be availed for doctors who have their own practice.
7. Invest for Retirement from Day 1: It is very important that a self employed professional plans early for her retirement since there are no employer benefits such as gratuity, pension or employee provident fund contributions.
How to Invest: Open a public provident fund account the day you get your first income. The PPF account can be opened at leading public sector and private sector banks.
8. Invest in Yourself: To begin with, doctors should make their own financial plan whereby they can use their savings for professional development like attending conferences. Own savings after accounting for this, should then be aligned with family’s financial goals. This will not leave any chances of money disputes as well.
How to Invest: A lumpsum amount can be invested in short term debt funds for an year or so. This can be withdrawn for attending conferences or other professional courses. If the professional development expenses are some years away, doctors can consider investing on systematic basis in a balanced fund as well.