This article will help physicians to get more detailed analyses of the various complex issues which are related to their financial planning during the period of medical buyouts for the physicians. When physicians receive a lump sum payment, then it can suddenly bring plenty of financial planning issues at the forefront to the physicians, which would require a complete re-evaluation of their more comprehensive economic strategies. So if you are a physician, then this article will help you to understand the considerations which you need to be aware when you are considering to shift to a new clinic, or you are undergoing a practice buyout by a new company.
Why is financial planning for physicians different?
Physicians do face many specific challenges when it comes to financial planning for their personal and professional life. Physicians do spend more than a decade for their medical college studies, specialization, residency, and fellowships. With this need, many of the doctors end up with serious students loans to be paid off during the initial phase of their practicing career. They tend to saddle between these debts and their unique personal financial challenges for a considerable duration before getting stabilized.
The primary question is whether physicians face any unique financial challenges when compared to other professionals? Do they need any special tools or financial vehicles to stabilize and secure their financial future?
Listen to what Dr. Brian J. Knabe says who is a doctor as well a reputed financial planner as “the individual challenges in terms of financial planning for physicians may not be same as for anyone else, but the combination of them surely is." "Given the fact they enter into the workforce later when compared to others, there are many special expectations by them in terms of lifestyle and wealth as associated with the medical profession conventionally, which puts many physicians to live up to those social expectations."
Issues which are significant for physicians during a buy-out:
Physicians, in general, spend many years trying to become the best in their respective fields. They do not have either the time or the inclination to become financial experts. In fact, many physicians wish that their formal medical education had also included some financial management training in their course works - increased earning capacities, issues of debt management, challenges of liabilities, results in chances of neglect or mistakes in the physician’s finances and in his handling his financial matters. These errors can go on to have considerable effects in a physician's net worth over time. A good financial plan will take into account all the aspects of the financial life of a physician, including their cash flow, their debt management, strategies for taxations, protecting their assets, preparing their children for their financial responsibilities and their estate planning.
Critical strategies for financial planning of physicians:
Strategy #1
Document all your current financial conditions and your overall objectives. Hire professionals who can help you to identify and also document all of your short-term goals while not ignoring your long-term goals. Statements showing your cash flows and your net worth and values need to be drawn up.
Strategy #2
Remain careful about investments which appear to be unbelievable and "too good to be true"
Physicians can often get viewed as prime targets for various private investment opportunities from their friends and families. These opportunities can lead to disappointment many times. Hence it is essential that you must always take second opinions before finalizing on any investment opportunity. Do not make any investment without proper guidance on your own.
Strategy #3
Be patient. You must not jump to make any new opportunities. You need to invest time, research and also take professional consultations before you make a strategy for your investments. These formulations take time, and you must remain patient.
Strategy #4
Prepare yourself for tax liabilities. Buy out agreements can ignore tax liabilities sometimes. So you must see to it that tax liabilities are not ignored when you are undergoing a buyout. You must give attention to the alternative minimum tax which you might have to pay.
Strategy #5
Understand the benefits of your new package. Many times, buyouts result in completely new benefit packages, these packages can include shifts in health insurance options, your long-term disability insurances and caps and terms, additional life insurance rates and options and new plan offerings for your retirements. Each of these plans requires detailed planning and studied research, so you must seek all the help that you can get before you finalize on anything. You can incur substantial losses if you fail to take these benefits and their respective terms and conditions into your cognizance.
Strategy #6
Update the estate strategy. Medical buyouts allow you to get an accurate and complete assessment of your total net worth, Federal and your state's tax-transfer laws will be changing after few years. Thus you must be prepared for them. If you fail to update your estate documents, then they can lead to meaningless and needless losses of your net worth and hinder your value. Estate plans are required because they can impact your family, your children and can help you to create a good legacy that lasts and help you to retain assets.
Strategy #7
It is never too late to start. It is never too late to start planning; you still have a lot of years of practice left ahead of you. New plans are continually coming out, new strategies getting devised. It would be wise for you to start a plan as quickly as you can to secure your future.
Conclusion
Financial planning for physicians is an important thing which needs to be assessed and carefully planned out. Hopefully, the tips mentioned in this article will help you.
