Even the best of doctors may face unique financial challenges. However, doctors are cutting costs to enjoy financial stability. Careful financial planning for doctors can get them to a better place later in life. Doctors can enjoy financial stability if they learn how to save and invest money, so it earns a return. This is how these funds grow faster. But the earlier they start saving and cutting down costs, the greater the effect. Let’s take a look at 10 ways doctors are saving money these days and how you can cut down costs in your practice or lifestyle to create more financial stability. Good financial planning for doctors is key if you want your personal and business life to succeed. A CPA in Miami can lead the way into financial freedom.
1. Refinance Your Student Debt
Based on a 2018 report by the Association of American Medical Colleges, approximately three-fourths of medical students carry college debt upward of $200K. Whether you should consider refinancing your student debt is based on the type of loan you have. If your loans have high-interest rates and they don’t qualify for forgiveness, you should shop around for lower rates. However, federal loans may already have low-interest rates, so refinancing may not be a good idea.
2. Buying Life And Disability Insurance
If you get hurt at work or can’t work for a few months, disability insurance can protect the physician’s finances. This type of insurance for doctors is a must if you are doing manual labor such as for surgeons. Disability insurance can replace income if you are severely injured and can’t work as a result. It’s also good for those who may be able to work but perhaps not in the same capacity. Disability insurance can complete Social Security Disability insurance, which you already have as a taxpayer. However, qualifying to receive Social Security benefits is not easy, and when you do, most likely it won’t be enough. Let’s put it this way, combining both types of insurance will get you 60% above your regular income.
In like manner, life insurance is one of the key foundations of good physician financial planning, particularly if you have someone depending on your income. Many employers already offer life insurance as a benefit, but it might not be enough for doctors since they have higher spending and higher incomes to protect. Also, they lose life insurance coverage if they quit their job. In other words, doctors should consider purchasing life insurance separate from their employer.
3. Beyond 401K Or 403b
Once physicians have boosted their contributions to 401K or 403b, they can explore other saving opportunities with tax advantages. Practice owners may consider cash-balance plans. These plans allow them to save more pre-tax than contributions made to 401k plans. For locum tenens physicians, a simpler employee pension IRA or 401k may work best as it provides more tax benefits for extra savings on their independent income. Since physicians have high incomes, for the most part, there is no need to invest in startups or private deals. The goal is not to get the highest annual return but rather to make sure your investment is aligned with your financial goals.
4. Plan For Retirement
Becoming financially independent rather than focusing solely on retirement should be every doctor’s goal. One of the key factors is seeing where your money goes rather than how much you can save. Financial independence means you work as an option and not a requirement. A rule of thumb is to withdraw 4% from your portfolio every year. Based on your specific financial circumstances, a tax accountant in Miami with physician retirement planning experience can tell you about the options available.
5. Find Ways To Save On Taxes
While physicians make a decent amount of money, they got large amounts of student debt and other expenses that may not allow them to save on taxes. Thus, saving money on taxes makes complete sense if you want to put it towards your financial standing. Here are some ways to help you reach your goal:
- Go beyond the usual company-sponsored 401(k) or 403(b) and contribute to several tax advantage accounts. It will allow you to save more pre-tax.
- Consider a 529 plan account if you want to save for your children and college funds. These accounts grow tax-free if they are used for qualified medical expenses.
- If you own your practice, you can deduct business expenses. The goal is to deduct as much as you can on Schedule C or personal tax return.
- When it comes to investment think in terms of long versus short-term gains. That’s because long-term capital gains are taxed much lower. Short-term gains are taxed at your regular income rate.
- Consider donating investments, that way you get a double tax benefit, a tax deduction for the gift plus, and avoiding the sale’s capital gain.
6. Don’t Ignore Your Credit Score And Consider A 0% Balance Transfer For Your Credit Cards
If you are stuck paying expensive credit card bills, consider another credit card company to pay off your current debt and high interest. New credit cards give you interest-free for a promotional period. Your credit score is also important to your financial health. Checking your credit score is a good way to see where you stand and possibly have better borrowing opportunities in the future. Your credit score informs lenders and other interest parties of your credit risk. Different factors can determine your credit scores such as payment history, amount of debt, and credit inquiries. Also, a low credit score may lead to major financial consequences.
7. Don’t Overindulge In The Advertised Doctor Lifestyle
Overspending is one of the major obstacles to anyone trying to save some, especially for doctors who have the funds available to indulge in the not-so-affordable lifestyle. Learn your limits and be willing to accept them. Yes, it’s true, the life of a doctor can be stressful. After dealing with patients that may not want to adhere to their treatment plan, continuing your education, juggling a full-time job, and family life, you may need to escape the demands of your profession.
But beware of what’s labeled as fun, it can cost you. Many physicians indulge in high-dollar items or events on impulse that will cause them unnecessary financial burdens. Try instead of community-friendly activities, spend more time with family and friends, and exercise regularly. It can be quite rewarding and at the same time inexpensive. Also, budget for vacations, meals out, and any extravagant hobby. In other words, buy and have fun but stick to your budget. Overall, don’t buy into the advertised doctor lifestyle.
8. Understand Your Options When Buying A Home
First, make sure you find a location perfect for your needs. Location matters, especially for a doctor. Some real estate options can assist you with relocation if necessary. With the right real estate agent, you can make a smooth transition. Also, take your time to find the perfect home. Remember, purchasing a home is a commitment and a very important decision.
9. Be Strategic About Buying A Medical Practice – Save Your Practice Some Cash
While buying a medical practice is a financial investment in your future, it is also a financial commitment. It’s crucial you are informed about the particulars of your buy-in loan. Make sure you can easily cover your monthly loan payments. Seek expert advice from a CPA in Pembroke Pines to ensure that you are not only securing a good buy-in loan but also your associated debt is in fact helping rather than hurting your finances.
Most physician practices, just like any other business, are always looking for ways to save their practice some money. Here are some useful cost-saving ideas for your medical practice:
Create a patient portal for your patients to schedule appointments on their own.
A portal allows your patients to also view other things such as lab results and billing history. Patient portals can be easily integrated with electronic health records (EHR). You can avoid the cost of hiring extra staff to schedule appointments. Make sure you educate your staff first and then your patients on the importance of its use.
Avoid incorrect billing and coding with a practice management system.
This is one of the biggest problems that medical practices face. Automated billing helps you eliminate unnecessary medical practice expenses.
Upgrade your EMR/EHR technology.
Electronic medical records (EMR) and electronic health record (EHR) systems are a great way to reduce operating costs, become more profitable, and improve patient outcomes. This software can deal with the day-to-day operations of a medical office. It tracks appointments, financial information, notes, and results that meet compliance and regulatory requirements all in one place. The EMR software is generally intended for the practice’s internal use while the EHR software can be shared throughout multiple branches. This information can be shared externally with your patients and other health care providers and insurers.
Rent out an area in your practice and negotiate your rent costs.
Young medical professionals can benefit from renting your extra space and you can benefit from the extra bucks to finish paying your property faster. Also, you may be able to renegotiate your rent or lease agreement based on local land prices and the fluctuations of market conditions.
10. Last But Not Least – Hire A CPA
Doctors may face some financial issues at times, which for a better outcome, they should discuss with a trusted financial advisor or tax accountant in Pembroke Pines. This is particularly true for those that have their own clinic or practice. They are also bound by state requirements such as taxation – a financial matter that requires the right kind of management.
The truth is that if you are a doctor you don’t have a lot of time to manage your finances properly, and accountants made a whole career out of keeping busy people like you financially healthy so that you can focus more on things that matter the most to you.
CPAs help you avoid a lot of financial discrepancies, especially if you are handling many accounts and transactions. Due to their experience at detecting these errors quickly, accountants can help you avoid legal fees, fines, and even criminal charges. You will save a lot of time and money in the long run.
Do not allow your demanding career to take a toll on your finances. Contact a CPA in Pembroke Pines today to schedule a virtual or in-house consultation.
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