Medical practitioners only start earning when they are almost 30 because of a long training period. The initial earning phase involves paying off educational loans, starting a family and setting up a practice. “Starting out late and long erratic working hours do influence a doctor’s financial life. They don’t have much time to plan their finances,” says Hemant Beniwal, Director, Ark Primary Advisors. Here is what they need to do.
As soon as a doctor embarks on a practice, an indemnity cover becomes a must. The risk of a financial liability is real as the amount they can be sued for can be exorbitant. “Doctors require special insurance to protect themselves if they are sued for negligence, malpractice or mistakes,” says Beniwal. This special cover is a professional indemnity policy or medical indemnity insurance. Insurers such as New India Assurance and ICICI Lombard have this on offer. A general physician can buy a `10 lakh policy for as little as `1,140 per annum.
The expenses don’t end there. Equipment needs to be added and upgraded every 2 to 4 years. Says Beniwal, “Doctors should ensure that their debts are not beyond their means. They must have a financial plan with defined goals.” Banks offer special interest rates (10.3 to 12.3%) to doctors on loans to buy equipment and set up a clinic. One should take advantage of the lower rates instead of opting for expensive personal loans.
Other than setting up their own practices, doctors have multiple professional goals that need careful investments to meet. The most important is the need for continuous education to upgrade skills. Doctors are easy targets of bank relationship managers and distributors of investment products. They can also fall victim to unnecessary churning of theirfund portfolios to help the managers meet their targets.
Meena Shriram, Head, Doctor’s Practice at My Financial Advisor explains, “Doctors are never taught about finance and they also avoid discussing money and investments with people in the fraternity.” Hence, they tend to lack expertise in financial matters and fall for jargons used by investment advisers and product distributors.
“Doctor’s need to give time to gain knowledge of assets available by reading blogs or undergo basic training on financial literacy,” advises Beniwal. Instead of relationship managers, they would do well to consult Sebi-registered investment advisers. As doctors tend to keep on working as long as they are physically able to, there is no such thing as retirement age. Hence, most doctors don’t need a huge retirement corpus. What they need is an investment strategy to preserve wealth after crossing the age of 60 instead of taking aggressive investment decisions. They should have a contingency fund equivalent to an year’s household expenses with adequate health covers for themselves and their spouses.