Female physicians often feel less informed about financial and legal planning than their male counterparts. Here are common mistakes they make.
In a previous article we discussed the fact that many doctors feel they lack key financial planning information and provided links to a variety of articles on specific topics to help fight that problem. This week we take a look at common financial mistakes made by female physicians in particular as many of them feel even less informed about financial and legal planning than their male counterparts.
1. Not having a plan at all. Many of the very successful female doctors I work with are top-earning specialist practitioners but often start their financial and legal planning several years after their male counterparts. They are sometimes so focused on running their practice and cash flow that they neglect to spend an adequate amount of time on issues like asset protection, tax avoidance, and financial planning outside funding the most basic retirement vehicles. Alternately, many are so overwhelmed by the process of picking and vetting a financial advisor and the wide variety of choices available that they simply ignore the issue, often with disastrous results or to their detriment. A common example is sophisticated personal and business tax planning; would having “kept” an extra 10 percent a year for the last ten years (or the next ten) have been worth the effort?
Without a plan you are at the mercy of the markets, the economy, your partners, your patients… the list is endless. A plan is important and empowering. I consistently find that the most successful doctors I work with have a clear vision of what they must earn, save, and spend and for how long: This is also known as a budget. They have financial-production goals either personally or for their practice and an exit strategy or a minimum ending point for when they plan will have been achieved and what they’d like to do next. Working as hard as you can for as many (or worse, as few) hours a day as possible, paying your bills, and settling for what is left is not a plan.
2. Completely delegating (or abdicating) responsibility to someone else. I work with a variety of female doctors and often find that the relationship is initiated and controlled by their male spouses or some other close male like a father, sibling, or friend. While half or more of the income and assets at stake may be earned by the female partner in relationship, we find that they often do not take an active or at least not as active a role in the decisions that are made and this often leads to fear, stress, second guessing, and relationship issues that are compounded by financial stress, which is also a leading cause divorce. There is nothing wrong with getting advice and help from someone more experienced, but doing so with blind faith sets you up for a fall and delegating still means you are responsible for the choices made at the end of the day. A basic understanding of what you are doing and how each move fits into the overall financial plan (you do have a plan, right?) you are working toward is the most basic starting point even if you need to rely on experts to execute any particular measure.
3. Not having adequate cash reserves. Some female doctors are so focused on the needs of others including staff, children, and other family members that they forget to “pay themselves first,” a key lesson from one of the books about money we discussed in a past article. While I understand the pleasure of caring for those you love, doing so at the risk of your financial solvency is irresponsible to yourself and to them, as you will not be able to provide for them for long. Most financial resources suggest having six to nine months of essential living expenses saved in cash or in a form that can be made liquid with minimal risk, expense, or delay (like early exit fees common in an annuity or CD).
4. Emotion overriding math. A final caveat I’d provide from my personal practice experience is that some female physicians are simply too nice for their own good. Whether it's not requiring legal and financial formalities on business deals, partnerships, loans to friends and family, or something as basic as getting a prenuptial agreement, we see “trust” being a much higher exposure factor than for your male counterparts. My advice is to trust but also verify and handle business like business. It will make expectations clear, reduce conflict and expenses going forward, and help preserve the relationship you value and are relying on.