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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