Financial Serenity - Seven Simple Steps
By Doug Segan, MD, FACEP
1. Plan Now, Financial Bliss Later
If your goals are to provide for your family, pay your monthly bills, afford your children’s education and create a nest egg that provides for comfortable retirement and future travel then YOU NEED A PLAN and the time to start planning is now.
2. Become Financially Savvy
Having advisors is a wonderful thing, but this is one area that you cannot totally delegate to others. You must learn the lingo and the basics.
Websites of major financial institutions (banks and brokers) are useful sources of timely financial and investment information. One of our colleagues, Dr. James Dahle, has a blog that is an outstanding resource for the physician seeking to become a knowledgeable investor. Suze Orman is also a well-known financial advisor and writer, who presents very concise guides to understanding finance basics.
3. Live Within Your Means
Most emergency physicians earn an excellent salary that is well deserved based on the training that the job requires and the challenging nature of the work. An achievable goal is to save 25 percent of your gross (pre-tax) income.
Set aside as much of this money as you can in retirement accounts for which you and your partner qualify. There will usually be tax benefits and asset protection benefits for putting this money in your retirement accounts, but more importantly, once the money is in a formal retirement account, you are less likely to spend it.
4. Build Your Team
To be successful in the realm of financial planning, it helps to have a good team in your corner. It can be a challenge to find ethical advisors that charge reasonable fees and are motivated by a fiduciary responsibility to put your goals ahead of theirs. A good way to find these valuable advisors is to ask senior colleagues in the community for the names of experts that they have worked with for decades.
At the minimum, have a CPA on your team. A lawyer can help you write your will, assist with real estate transactions, and explain various options in your state for estate planning and trusts. An insurance agent who will educate you about the nuances of various policies without pressuring you to buy a particular product is a great asset to help you navigate this critically important marketplace.
5. Protect Thyself (Insurance)
In addition to medical malpractice insurance, most physicians will need auto and homeowners (or renters) insurance. An umbrella policy that supplements these polices provides a great deal of additional coverage at little cost and should be strongly considered.
Disability insurance is advisable for most physicians. This is a complicated product and it is important to do some due diligence to find the right fit for your situation. Life insurance is recommended if you have family members who are dependent on your income.
6. Investing - Simple is Smart
The vast majority of investors will be well served by the following guidelines: (1) keep it simple, (2) stick with very low cost index funds or Exchange Traded Funds (ETFs) from large discount brokerage firms, and (3) block out the noise of the talking heads on the financial shows.
Be skeptical of all advice (including this advice!). Have some exposure to the U.S. stock market, the bond market, and blend in a little international exposure. The exact mix will vary depending on age and your risk tolerance. Adjust your asset allocation yearly.
7. Protect Thyself with Asset Protection
There are simple, legal, inexpensive and ethical steps that the emergency physician can take now to protect assets from a large civil suit. The October 2012 and February 2014 issues of ACEP News (currently ACEP Now) have articles by this author that review some fundamental asset protection steps.
The laws concerning asset protection vary from state to state, so this is not an area of the law where one size fits all. For most physicians in most states, the single best asset protection and investment plan is to maximize your retirement plan contributions.
Dr. James Dahle, http://whitecoatinvestor.com (very helpful and a large source of valuable information)