Last week in my quest to gather information of how doctors live I met a doctor and had a look at his annual cash flow. It almost scared me. Here was a doctor (for our story let us call him Dr. Pradeep married to Bhargavi a house wife). Here is his annual cash flow statement:

A doctor’s expense sheet

Gross Income                                                 1,700,000

Pensions contribution                                                           100,000
Tax                                                                                                  250,000

Cash Inflow per annum 1,350,000

School fees                                             100,000
Electricity                                                  60,000
Petrol                                                           72,000
Driver                                                          72,000
Entertainment                                          55,000
Food                                                            144,000
Household exp                                          50,000
Telephone                                                    36,000
House EMI                                                400,000
Vacation                                                     100,000
Clothes etc.                                                  70,000
Maintenance charges                               16,000
Miscellaneous                                             60,000

Total Rs.                                                                             1,235,000

Surplus                                    115,000

I was quite zapped when he told me that on an income of about Rs. 17 lakhs he has almost no surplus to invest for his retirement. He is not very old by doctor standards – he is just 43 years old. But wait a minute, when he came to me, he and his wife were about to upgrade to a car costing Rs. 15 lakhs (EMI Rs. 28000 per month) and a house costing Rs. 100 lakhs  (differential EMI Rs. 25000 per month).

They were quite stunned when they tabulated their expenses and realized that one extra expense like a car or a house repair could create a serious cash flow crisis! Dr. Pradeep’s father (who retired as a clerk in BEST – Mumbai’s transport company) was living on his pension with his wife in another suburb of Mumbai. He had started a Public Provident fund account for Dr. Pradeep and made sure Dr. Pradeep contributed Rs. 70,000 to it annually. That was Dr. Pradeep’s only saving. He had no investments AT ALL. His life insurance (I estimated he needs Rs. 3 crores as a term cover – and that would cost Rs. 65,000 per annum) was also NIL. His medical insurance was NIL. His parents had a cover from New India for Rs. 300,000 for which his father was paying the premium.

Normally my alarm levels would have been lower – doctors earn for a very long period of time. However, Dr. Pradeep was a General Practitioner in a lower middle class area – and his clients ability to pay more fees was not certain. He had been in practice for about 12 years and his income had reached a plateau.

What can now be done? Want inputs from readers….!

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  1. its not how much you earn but how much you save and how wisely you invest that saved amount that defines the financial health of an individual,
    a nice informative article subra jee,

  2. Since his income from practice has reached a plateau..

    My guess is, Doctor needs to control his expenses, and start saving part of this in a long term ( atleast 10 to 15 years ) portfolio, at this rate he will have still be short of a good retirement pool to take care of his post retirement expenses. but better late and short than broke.

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