Are you a doctor who’s drowning in debt? Medical accountant Kym Nitschke shares some tips that will help you stay on top of your finances.
Being a high-earning doctor doesn’t make you immune to debt. Medical professionals can find themselves saddled with all kinds of debt: credit card debt, home mortgage, investments, loans for medical equipment and business loans for starting up their practice.
You may be dealing with different kinds of debt depending on where you are at in your career and personal life.
No matter which kind of debt you have, there are several debt-crushing tips that will help you clear it out fast.
Prioritise your debt
You don’t pay off debts or make repayments on your loan using funds that happen to be left over at the end of the month. Rather, you should make paying off your debts a priority. If you don’t, you’ll always have that cloud looming over your head and ruining your plans for the future.
Next, you must arrange your current debts in order of most important to least. Decide whether you want to pay off one large one first or multiple smaller debts. You might organise your list by prioritising the debts you can pay off the fastest. Or you may opt to pay off first the debt or loan that has the heaviest fees or interest rates attached so that you can stop wasting money on it.
Lastly, make an effort to avoid taking on any more unnecessary debt while you focus on paying off your current ones.
Create a budget
Yes, even wealthy doctors and successful medical practice owners need to work with a budget! A budget isn’t about limiting your spending freedom or denying yourself some luxuries; it’s simply about knowing where every cent of your hard-earned salary or revenue is going.
Budgeting helps you figure out where you need to spend your funds so that you can determine exactly how much is left to work with. Once you’ve allocated money to the essential areas such as utility bills, rent and employee payroll, you’ll know how much you should budget out to pay toward your debts each month.
Budgeting gives you more control over your finances so that you can pay off your debt as soon as possible.
Resist lifestyle inflation
“Lifestyle inflation” refers to the tendency to spend in proportion with what you earn. Doctors do have the reputation of being wealthy. You may be tempted or pressured to spend more money as you earn more by buying a big house, driving an expensive vehicle and making other big purchases that communicate wealth and status.
However, it’s not always necessary to live like you are earning hundreds of thousands of dollars a year. You might be better off sticking to the same modest budget even if you do gradually start earning more money. The extra can go straight to clearing away your debts.
Consider debt consolidation
Debt consolidation is when you pay off multiple debts at once by taking out a loan that covers them all. You then make repayments on this single loan which may offer a more favourable interest rate than you had before.
This method can be helpful if you find you’re overwhelmed by having many repayment bills due each month. Consolidating your debts can give you a more realistic picture of how much you owe and then enable you to budget out regular debt repayments.
A word of caution is in order, however. Debt consolidation isn’t right for everyone. Sometimes, there are hidden fees and interest rate regulations that can work out to be even more expensive than your previous arrangements.
Additionally, consolidation isn’t an instant cure that will make all of your debt go away. You’ll still need to budget carefully and track and change your spending habits in order to keep paying of the debt.
Consult an experienced medical accountant
When your patients are sick, you expect them to visit the right medical professional for real help. Likewise, you need an expert to diagnose your financial condition. So get the right advice. Otherwise, you could make costly mistakes.
Ready to get rid of debt? Talk to medical practice accounting experts now.
Contact Nitschke Nancarrow, experts in all aspects of medical accounting, financial planning and business. We operate in Adelaide, Sydney, Melbourne and throughout Australia. Managing partner Kym Nitschke is available for a free initial discussion about your situation. Call us on (08) 8379 9950 or send me an email.
– Kym Nitschke
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.Tags: debt, debt consolidation, doctor, medical professional