Money Meets Medicine Podcast
MMM 78: These 5 People Determine A Physician’s Financial Success
Do you have parents who expect you to take care of them financially? Or have you ever thought about paying for your kids’ college? Maybe you have a brother or sister who has asked you to help them out.
This all begs the same question, should physicians save for retirement or help their family?
Life Is Complicated
Sometimes it might seem like people think you don’t invest because you are living in the now, but we know that is not usually the case.
Instead, you are trying to make real-life, tough decisions like should you save for your kids’ college or your own retirement? What if you need to help out your aging parents? How do you still make the best financial decisions for now and your future?
Let’s talk through a few different scenarios that can come up and put you in the tough position of choosing between helping your family or saving for your future retirement.
Kids’ College vs. Saving For Retirement
The first question I want you to ask yourself is should I be saving for my kids’ college or my retirement? This is a very interesting conversation because some feel strongly that parents should pay and some feel strongly that children should learn how to make it work.
First, you can’t finance your retirement, but you can finance your kids’ college. That’s one key thought to strongly consider when looking at this trade off.
Second, if you asked your children the question, “Would you rather me pay for your college or would you rather pay for my healthcare and lodging in my elderly years?” They will undoubtedly say college.
Now, this is not to say that you can’t help your kids understand how they can pay for college and pay off any debt quickly. But really think about this trade off.
Side note, it is also important to think about if a 529 Plan is really the best way to save if you do choose to save for your kids’ college education.
Helping Parents Out Financially
This is a tricky discussion here because it is a very sensitive one. For some people there is a cultural expectation that children take care of their parents financially when they are older. And therefore the parents have generally not planned for retirement because the norm is they will be taken care of.
For example, I have talked to people before whose parents were making really good money, but saved absolutely nothing for retirement. Why? Because he knew that it was his child’s responsibility to take care of him in his older age. So, if this is a cultural decision in your family, we are not going to question that.
However, for others this cultural expectation does not exist or they do not plan to keep it. In this case it really comes down to how involved your parents want you to be in their finances. This is a discussion you need to have early so you both can have common goals and an understanding of what responsibility each person (parent and child) have. Will you have a shared bank account or not? Who is expected to cover what? These are questions that you want to answer early on.
Providing Financial Aid To Other Family Members
So what if there are other members of the family who need financial aid? Maybe your sister, brother, a close cousin or aunt and uncle. What then?
First I want to caveat this one, it has been my experience with my family that money can ruin really good relationships. I am not saying don’t help them out, but I do have some recommendations if it is at all possible for you to help someone out.
Here are my top two things:
(1) Give the money as a gift with no expectation of getting it back
(2) If you can not give it as a gift, then be VERY clear on how and when you expect the money back. Review what happens if they don’t pay (I’d write it down and make sure both people really understand it). This isn’t because of lack of trust, it is for clarity so that people’s feelings don’t get hurt when it doesn’t go the way that you plan. Because it rarely goes as planned.
Communication Is Key
These financial decisions are never cut and dry. However, it is really important to be thinking about and planning for these different scenarios that may come up in life. Communication and planning is key. If you haven’t talked to your parents or children about what retirement and paying for college will look like, have those conversations now. The earlier the better.
And be sure to include your spouse in every conversation and decision too. If your spouse doesn’t care about money then we have some tips in a previous podcast episode for you on that here, but still have the conversations.
Learning how to balance your responsibilities to your family financially, making decisions on what that looks like, and finding opportunities to help your family financially while meeting your goals all starts with talking about it. It is so important to have clarity on the situation with everyone involved when making decisions to support your family or not.
You might also be interested in…
Show Me the Money (In the Financial Industry)
The personal finance industry is meant to help you manage your assets, but particularly for doctors, many questions remain around what that kind of support actually means.
Does your financial advisor have your best interest at heart? Do you know how they get paid? Are they transparent in their disclosures about how their company actually works? Where are the conflicts of interest?
Because you can rest assured there are conflicts of interest. It’s just a matter of how they show up. And once you can say “Show me the money” and find them, that’s when you can make intentional, informed decisions regarding your personal finance.
In tackling this topic, we wanted to acknowledge the two main reasons you may be considering your options for charitable giving, especially as a high-earning physician.
One is that you may have religious convictions that make you feel more inclined to give. Even if you don’t hold to the same belief system that we do – specifically around tithing and the historical background of that concept – giving to your community is very valuable. Not just for the recipient, but for you, the giver.
This leads us into reason two, which is that giving money (or other valuable resources) and helping others has been shown to increase long-term satisfaction and fulfillment in your life.
There’s also a practical side of financial charitable giving to consider, which are the tax advantages you can use to create the most bang for your buck – literally.
Charitable Giving for Physicians
Does tithing or charitable giving play a part in your personal finances? Should it? As usual, we’re not shying away from taking a deep dive into a very personal topic. Personal finance is personal, maybe never more so than when it comes to deciding how you want to give back.
In tackling this topic, we wanted to acknowledge the two main reasons you may be considering your options for charitable giving, especially as a high-earning physician.
One is that you may have religious convictions that make you feel more inclined to give. Even if you don’t hold to the same belief system that we do – specifically around tithing and the historical background of that concept – giving to your community is very valuable. Not just for the recipient, but for you, the giver.
This leads us into reason two, which is that giving money (or other valuable resources) and helping others has been shown to increase long-term satisfaction and fulfillment in your life.
There’s also a practical side of financial charitable giving to consider, which are the tax advantages you can use to create the most bang for your buck – literally.
Making the Most of Your Paycheck
You’ve done it – your training is complete and now you’re finally getting a paycheck fit for an attending physician. You think, “I’ve arrived! I’m going to start making so much more money.”
Famous last words. If you’re not prepared, that is.
Seemingly unassuming, everyday expenses still have the potential to wreck your new paycheck and your budget. I’ve seen it many times over the years: you try to be careful, but you (understandably) want to enjoy your hard-earned money. Costs creep up on you, things snowball. Suddenly, your post-tax paycheck is no different than it was in residency.
You thought you knew how to spend money wisely, but now you wonder, “What was the point of all my hard work to get here?”
Don’t worry. You can still enjoy the money you make while being aware of five main money traps that a high-income earner like you could be susceptible to if you’re not paying attention.
Are you ready to live a life you love?
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