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A recent listing of the highest paid professions in the United States indicted that nine of the top ten spots were occupied by physicians.

There is certainly a wide-spread feeling that all doctors are, to use a common expression, “filthy rich” and, therefore, immune from the normal financial pressures faced by most people.

Those who hold that feeling have little appreciation for both the difficulty and enormous expense of becoming a physician and the reality that today’s health care environment has resulted in the income increase of most physicians’ salaries not keeping pace with inflation.

A 2006 study of physicians’ pay and production, done by the Medical Group Management Association, showed that primary care physicians increased their production by 3.7 percent, but their pay (avg. $171,519) increased only two percent, while inflation was 3.2 percent. For specialists (avg. $322,259), the production increase was 2.3 percent while the pay increase was only 1.7 percent.

Keep in mind that those average pays are far more than doctors earn as interns and in their early years of practice, when most of them are paying off the huge costs of their education. For many, it takes at least five years to do that. (The average cost of medical school at a public institution is $140,000; for a private school, it is $225,000).

Remember, also, that managed care and government-led initiatives to control health care costs have decreased physician compensation.

These factors have much to do with the declining number of people who aspire to be doctors. There are only two applicants for every place in United States medical schools. Sixty percent of all medical students come from the wealthiest 20 percent of all U.S. families. There is an alarming decline in the number of primary care physicians.

Truth is, money is not the motivating factor in becoming a physician. It is a rewarding, satisfying and interesting profession with unmatched opportunity to “do good.”

It is also the truth that, in the arena of financial planning, we are more alike than different. Just like the rest of us, doctors must devote serious time to financial planning at every stage of their career. Early on, the most pressing matter is trying to eliminate that huge debt load. Then, like the rest of us, doctors have to raise their children

and pay for their education. Finally, again like the rest of us, doctors worry about how to retire in reasonable comfort.

Your author is not qualified to be either a physician’s or anyone else’s financial planner, but I will attempt to give a little direction on this important area of a physician’s career.

First, it’s important to know that this is not something in which a “heal thyself” attitude is wise. Second, it is an area where caution is important, because there are many folks who say they can help when they can’t.

Here’s what financial planning is about: saving, investing, insurance, taxes, retirement and estate planning.

There are dozens of professional designations for people who call themselves financial planners. Some charge a fee for their time; others are paid by commission earned on products they sell. The conventional wisdom advises one to use advisors who get paid for their time, rather than those who get paid on the basis of what they sell.

The core of your financial advisory team should be your banker, your accountant and your insurance agent. It is likely that you’ll need an attorney at all stages of your career for drafting documents, such as wills, trusts, estate plans and for advice on elder care issues. In all instances, insist that all your advisors recognize that their relationship imposes a “fiduciary duty” upon them; that is, your well-being, not their profit, is paramount.

A publication titled GREENBOOK Financial Services suggest five good questions for physicians to use in diagnosing their financial well-being:

1. Are you taking advantage of recent tax legislation to contribute up to $200,000 or more per year in IRS approved retirement plans with tax-deductible dollars?

2. What risk management practices (health, life, disability, long-term care insurance) do you employ to protect your financial future?

3. Are you basing your investment decisions on instinct and hunches?

4. Do you rely on a loose network of specialty advisors to manage your finances?

5. When will you reach financial independence?

If your answers are no to number one, none to number two, yes to numbers three and four, and if you have no clue about number five, you definitely have a financial illness that needs immediate treatment.



Charles Farmer
Spragins, Barnett & Cobb, PLC
731-424-0461
cfarmer@spraginslaw.com



April 2008


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