A. Lack of time given to Personal Financial Management:-
Many times Doctor doesn’t give sufficient for their Personal Financial management.
There can be the following reasons for this to happen:
- They are not aware of the importance of Personal Financial Planning
- They think that they know about it & they are on the right track
- Some Doctors realize the need for looking seriously into their PFM but they may not find the right advisor.
Most of the advisors they come across are only interested to sell them products & make a quick bug so they lose the interest altogether. Then they keep their Financial Matter as it is.
B. Investment is done in an ad hoc manner:-
Many times I observe that the investment done by the doctor is very scattered & done in an ad hoc manner.
This mainly because the investment is done as & when they have extra money or some product seller pushes a product or their banker makes them compulsory to buy because they have given them a loan. Seldom I see a doctor having a structured & planned investment portfolio.
C. Inadequate cover against the risk of Death, Disability, and Critical Illness:-
Who knows the importance of Life’s uncertainty than doctors? But when it comes to their own protection plan against the risk of Death, Disability, & Critical Illness they are highly underinsured.
Doctors pay a huge premium for their Life insurance policies but their Risk cover in most cases is below their actual
requirement. This is mainly because Policies are bough in a rudimentary fashion as and when an agent makes a sales pitch or patient approaches doctor to sell.
D. Thinking that CA as their Financial Planner:-
In India, financial planning is comparatively a new concept. Most doctors think that their CA can do their financial planning. We need to understand that Financial planning is a structured science & unless a person is not trained (CFP) he is not equipped to provide advice.
It’s like asking an orthopedic surgeon to do Oncosurgery.
E. Not differentiating their personal finance from their practice:-
When a doctor’s practice starts growing it is essential that they create a clear cut distinction between their practice income and their personal income. This will help them to achieve their financial goals peacefully and also to organize their financial matters properly.
There are many strategies to do this for more information contact nirajnanal@hotmail.com
F. Not keeping proper accounts:-
Even though doctors work as a professional it is very important for them to manage their Finance like a businessman. In the early stages of a doctor’s practice, it is ok to do all the accounting at the end of the year. But if they continue the same process as their practice starts growing they may end up in a lot of mismanagement. Doing accounting on a regular basis is a must for doctors.
G. Buying too much Real estate:-
Many times doctors think that Real Estate is the best investment. Also, they create a lot of cash so that is another reason they think that Real Estate is the best place to park money. They have a lot investment in Flats, Practice properties, land, etc. But they may forget the biggest disadvantage of real estate and that’ is illiquidity. Therefore they may face cash flow crunch when the money is required. Also, their overall asset allocation goes for a toss as the majority of their investments are only in Real estate.
H. Financial planning is not Investment Planning or Tax Planning:-
Many times doctors mistake financial planning for Investment planning or tax planning. They think that if they are able to save tax they are done with their financial planning. Financial Planning is a holistic science of managing your overall personal finance which includes Retirement planning, Cash Flow Planning, Goal Getting, Estate Planning, Risk Management, etc.
So taking a holistic view about their PFM may help them immensely.
