Cash flow pressures
for doctors and dentists
Most doctors and dentists enjoy long careers and
above-average incomes compared to the general population.
Yet many medical professionals do not retire with the financial assets
they should, or could have accumulated.
The number one reason why medical professionals seek our advice. Cash flow-related stress or pressure is the number one issue why medical professionals seek our advice. High income taxes, living expenses, mortgage repayments and school fees put a significant amount of stress on your cash flow, to the point where you feel you are always running short of money.
Cash flow pressures
Even if your income is $500,000 or higher, you may still find yourself unable to make significant financial progress. Surely there has to be a better way. The reality is that if you are unable to generate and capture surplus cash flow, you will not be able to build wealth and repay debt in a meaningful way.
How to manage your cash flow more effectively
Most people find it hard to stick to a budget, which is why we believe a more effective way of managing your cash flow is to ‘pay yourself first’. Paying yourself first means that you direct funds to your most important goals before you get a chance to spend the money.
The principle is that what you don’t have, you won’t miss (and won’t be able to spend). It is simple, but can be very effective. The key to the success of this strategy lies in the fact that you need to list your goals in order of priority. The idea is that the thought of achieving your main goals will help you to be disciplined, as opposed to traditional budgeting, where it is all about ‘counting the pennies’.
For example, you may want to fund your children’s school fees, repay your mortgage quicker and also save for retirement. Once you have decided or worked out how much funding each of these goals requires on a regular basis, you need to implement it by setting up automated payments or direct debits. Ideally, the frequency of the payment is linked to when you receive your employment income.
As an example, you may direct:
$6,000 p.m. to mortgage repayments
$1,500 p.m. to school fee savings
$500 p.m. to superannuation
We have found this to be a very effective way to maintain a disciplined savings habit, and notice that our clients naturally reduce their expenditure level over time. They become more aware of what they spend their money on and make more conscious spending decisions.
How we help doctors and dentists manage their cash flow
A significant part of our advice process is focused on helping our clients take more control of their cash flow.
We achieve this in the following way:
– a detailed analysis of your current income and expenses and establishing the amount of disposable after-tax income;
– a review of any outstanding tax liabilities, which is particularly relevant for medical professionals in private practice, as your quarterly tax instalments may not be in line with the actual tax payable;
– discovery of your family’s financial goals and associated funding requirements;
– financial modelling to establish the current and future estimated annual cash flows, incorporating all of the above;
– this allows us to stress-test various scenarios and assists in establishing where goal trade-offs may be required (e.g. spending less on holidays, working longer, etc.);
– assistance with implementation of various cash flow strategies;
– review and discussion of progress
If you would like to take more control of your cash flow, we would be happy to offer you a complimentary meeting.
Get Your FREE eBook today
“Very informative, a financial ‘nuts-and-bolts’ that every doctor should read.”
~ Dr Green
Send us an email
We always love to hear from our customers. Feel free to drop in or contact us during our business hours.