Doctor’s Money Mistakes….I

Having spoken to about 4000 doctors I have a view (not fair, just views which could be wrong) about the kind of mistakes doctors make. Here I am listing a few:

1. Listening to the Relationship Manager’s words like a Gospel: Most doctors have a lot of respect for the banker who comes  to them for whatever work. So the RM is able to sell them anything that they want to sell.

2. Poor debt management: Doctors are perhaps the only set of professionals who will keep a fixed deposit in a bank AND borrow against that. This is so funny but the docs are happy that they are paying ‘only 1 % interest’ – ON THEIR OWN MONEY. Also their borrowing – it begins early for  medical students as they get into the habit of living beyond their means – after all everybody is doing it.  Student loans, car loans, personal loans, credit card loans, and expensively structured mortgages.  It isn’t just that the doc lives beyond her means – she is also paying too interest causing a pull down on her finances.

3. Poor savings rate: It is easy to sell to doctors by just saying ‘Oh you are a doctor’. So doctors THINK that they should have a high level of expenses – no doc for example will buy a Nano car. Even if he goes to a car showroom to buy a Nano, the car salesman will sell him a higher end car very easily.  To be a truly successful professional, you need to live sufficiently far below your means. Only then will you be able to find money to invest, pay off all the debt, and build a good net worth.  Saving 10% is not a good rule for doctors who start earning and investing LATE.  Unlike others doctors only get 30 years to save and invest! So doctors SHOULD be saving 15% if they plan to retire at 65.  That’s JUST retirement.  A 5% savings rate just isn’t going to cut it.  What keeps doctors from saving more and even better INVESTING MORE?  Most important is the educational loan. In short, doctors spend too much.  Quit it.  Like quitting smoking, it’s simple, but not easy.

4. Wrong Insurance: Every doctor has life insurance – but it is not term insurance that most of us recommend, but the expensive Endowment insurance. This takes various names like classic endowment, moneyback, unit linked, whole life, …most doctors do not need this. What we all need is a simple Term life insurance. Many doctors do not have enough medical insurance – surprisingly they underestimate hospitalisation expenses. Not enough surgeons have insurance against a client suing them for negligence, etc. So inappropriate and insufficient insurance is a given!

5. Buying a house before buying a clinic/ dispensary.

6. ‘Feeling Rich’ – exploited by family and friends who borrow from doctors – and the money just disappears.

7. Very lop sided assets – mostly Real estate and that too badly done deals.



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6 Responses to “Doctor’s Money Mistakes….I”

  1. Recently I took my child to a pedeatrician close to our home. The guy must be in his early 30’s, married and has a 20 month old kid.
    During most of the 20 min session, he kept asking about how my child got into a particular school, how much was the fees, Did they ask about the fathers income etc. He rents a clinic, charges 200, visits two hospitals and works 12 hours minimum excluding travelling. Oh boy I was under impression that being a doctor meant easy money.


  3. Subra Sir,

    Isn’t the 1% more interest rate on borrowing from FD a good deal? I’m asking this because I’m in the exact state of mind. If i want to make an RE investment, Instead of breaking my existing FD, i can borrow with 1% more interest and pay back from my future income/cash flow. my net worth stays intact (Mental calculation, I know). i will have the motivation to pay back that particular loan. If i go for normal loan from the bank, i have to pay more interest rate on that.

  4. What the doctors lose by not investing properly, they earn that by evading taxes and charging patients a lot. And don’t you understand why they invest in real estate more? That’s the easy way to hide black money.

  5. In every article about doctors, there will be one person who has to come in and say something mean and insulting about them. I wonder what happens to these people when a loved one is really sick. It must feel terrible to entrust the life of a loved one to a person they have such a low opinion about and even viscerally hate secretly.

  6. Well, what they do by saving a sick person they take it back by producing a bill that empties a decade long savings of the patient. Believe me, from my own experience i heard a doctor tell patient that if you have insurance and you go for cashless, then they charge 30% more. But if you pay and get it reimbursed, its 30% of your insurance saved. How is this ethical? Only because its a matter of life, people don’t have any option but to agree to whatever doctor says. The less we talk about govt doctors, the better it is.

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