Financial planning can be a difficult topic. When you are trying to balance life, education debt, and an independent practice, all while planning for retirement and whatever else life may have in store, planning for a successful financial future is not a task you want just anyone to handle. Whether you are looking to take on this enormous duty yourself or you want to find someone to help, it is important to keep some key things in mind.
When looking for a financial advisor, try to find someone who has dealt with other clients similar to you. For example, you wouldn’t want to get your haircut by a dog groomer, just as you wouldn’t want to trust your money and your medical practice’s money with someone who has only dealt with individual and private accounts. You want someone who understands the importance of practice strategies such as healthcare revenue cycle management, for example.
It’s also important to make sure the advisor is certified. Chris Roe, a CPA, PFS, and founder and CEO of Rx Wealth Advisors recommends using a financial planner who has the certified financial analyst/professional designation (CFA or CFP) or certified professional accountant (CPA) designation. “These certifications mean that they really made a commitment to the profession and they’ve done the extra work and education.”
Learn more about Elation’s healthcare revenue cycle management solution. We can help you maximize your revenue while you focus on providing the highest quality care to your patients.
Some financial planning tips for independent physicians include:
- Make sure that the person you choose to help you with financial planning understands that your life and career will go through phases and inconsistencies.
- Find an advisor who keeps your end goals in mind.
- There should be a level of trust involved. The financial planner should be doing what’s best for your money and not theirs. When choosing a planner, consider how they might get paid. For instance, if a planner is based on commission, they may only be interested in what ventures they can convince you to invest in. Commission based planners may only be necessary for short term planning.
- If you are looking for a long term planner (as most independent physicians should), you should focus on planners who are fee-based. These are typically paid based on an hourly rate or a flat fee regardless of what you may or may not what to invest in.
- Research and establish a relationship with a financial advisor before you accumulate assets so they can help you manage as you grow. Finding someone to help manage all of your accounts before you reach all of your goals is key. This certified financial planner can help you divide your money as you earn it so that it continues to grow with you. As you build your practice, you planner will build with you, understanding that your goals may change over time.
If you are planning on acting as your own financial advisor, it can seem a bit overwhelming, but there are options for you as well.
- Always include an emergency fund. You can start off small and slowly add to this fund over time. How much you may need will depend on your situation:
- 3 Months of Gross Income: Single with strong and reliable income or married with a dual reliable income.
- 4-5 Months of Gross Income: Married with one income, or single with kids.
- 6+ Months of Gross Income: Married with kids or single with variable income (i.e., practice owner or performance-based (RVUs))
- Understand the difference between “good debt” and “bad debt” and handle your expenses accordingly. Good debt includes student loans, a mortgage, and a small business loan. Bad debt includes credit cards, car loans, and any loans with high interest rates.
- Most importantly, set a budget. This budget should allow for anything you may have to pay and then some. It should include:
- 50% of your income on living expenses (rent/mortgage, groceries, bills, etc.).
- 30% of your income on lifestyle choices like eating out and other discretionary spending.
- 20% of your income toward debt payments and savings.