Not sure whether to call this commandments, fatwas, or rules..but some advice for doctors. This is based on my interaction with doctors and investing coaching that I do for people in general:
- Personal Financial Management is more than choosing which share to buy or which mutual fund to invest in. Share trading / investing is a very small portion of financial management.
- Doctors do not have a second job, none of them have a pension, and India has no social security. If your money does not work for you, you will work till the age of 91 if you have to live till 93.
- Continuing Medical Education is fine, you desperately need Continuing Financial Education, start today.
- Please kill your ego. BFSI has an amazing ability to separate you from your wealth. As of today banks are winning hands down.
- Thou shalt save 20% of your income once you hit 30 years of age. Ok, ok, one year after you start practice you will do this! For the general population this is about 10% of one’s income. However doctors start late, spend more on lifestyle, need to invest in their profession hence this 20% figure for docs.
- Repeat point no. 3. Once you know what is finance and how it works, you will not buy a life insurance product which has an element of investment too. This is simply because the way the product is structured and the huge costs built in. So stay away from Endowment, ULIP, Classic Insurance, Annuity, Pension…Just say NO.
- Thou shalt increase your investments in mutual funds, direct equities, etc. as your income increases. Auto increase too is possible, opt for that.
- Insure against all kind of risks that we understand NOW – life insurance, medical insurance, malpractice insurance, disability insurance, etc. Also remember that this is a dynamic concept – so keep reviewing your insurance regularly at least once in 3 years if not on a yearly basis.
- You will not invest in direct equities (unless your parent, kid, sibling or spouse is a qualified professional in that field and doing it for you), you will stay away from Ulips, Reits, PMS, real estate pms, car financing schemes, peer to peer lending…etc. Thou shalt only invest in mutual funds – and if you do not have a competent adviser – stick to a big index fund , do a SIP, and have a 10+ year view while putting in money into the fund.
- Thou shalt hire ONLY competent financial advisors for your Income tax, business advisory, and investment advisory. Go to a person your age, reasonably successful, and a guy who will stand up to you and say “hey Doc what you just said is WRONG’. Young CAs may get intimidated by you and he/she may not be calm enough to give you sane advice.
- Though shalt minimize expenses and defer taxes as much as possible. Deferring taxes is not something even good CAs do – so learn about it and tell them to transfer current income to a future capital gain.
- Thou shalt know the difference between Debt for Growth and debt for Expenses. Debt for Expenses should be nil always! However if you have borrowed try repaying ASAP.
- Protect your assets, insure against catastrophe, write your will, and document your assets properly and do it NOW.
MORE a little later perhaps….after docs give some feedback…
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