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cash flow modelling doctors

Budget and Cash Flow Modelling for Doctors


Nov 5, 2019


Doctors earning a high income face the temptation to spend in line with their pay packet. But without a good budget and an understanding of your cash flow, problems can arise quickly.

In addition to paying for some luxuries, you also have to make large payments in other areas such as funding your mortgage, kids’ education, career development, paying tax, investing and saving toward retirement.

Life can be more expensive than you may think. Take your children’s school fees, for example.

Let’s say you have plans to send your child to a private school that costs $20,000 per annum. That may seem manageable, at first. But you can double that expense if you live in a rural area and require boarding school. Now let’s say that that you intend to keep your child in private school from R-12. Ultimately, you’ll have spent around half a million dollars on your child’s education!

How can you efficiently manage your income to meet all of your financial demands without feeling stressed to the limit?

It all comes down to managing your cash flow and budgeting.

First, understand what cash flow modelling is.

Let’s not over complicate it. What we’re really talking about is getting a good understanding of what’s coming in, and what’s going out. It is having a plan and a system to forecast the sources and use of your hard earned money.

That plan starts with a budget.

Yes, doctors need budgets.

A budget is just as beneficial for doctors like you as it is for anyone else. It’s a useful tool that will give you more control over your finances.

There’s no specific way you should structure your budget. Your budget should reflect your individual situation and personal priorities. No matter how much money you earn, the important thing is to keep track of every dollar so that your money works for you instead of slipping out of your control.

A budget will give you the financial independence you need to reach your wealth creation goals.

Don’t like the idea of budgeting? Consider your priorities.

If ‘budget’ is a dirty word to you, then you can take a slightly different approach to managing your finances while achieving the same result.

Simply budget out the cost of your biggest and most important expenses and pay those first. Then use the rest of your money as you choose.

With this method, you essentially ‘pay yourself first.’ You get those major expenses out of the way so that you have peace of mind and can spend your money guilt-free. It’s a significant first step towards successfully managing your cash flow.

Some of your large expenses might include:

– Contributions to your super or retirement

– Education expenses

– Mortgage

– Car loan payments

Bear in mind, too, that your biggest and most urgent fixed expenses are most often debts. Spending most of your income on debt such as your mortgage, loans and credit cards isn’t a good way to build wealth. Keep your debts to a minimum and you’ll have more cash to spend in flexible ways on other areas including the weekly essentials, entertainment and holidays as well as investments.

Successful cash flow management for doctors.

Managing your cash flow successfully will empower you to reach your financial goals, expand your business and grow your wealth.

To get started, track your current spending habits for a couple of months. This will give you some baseline data and help you identify which areas you may be spending too much in.

Run your own medical practice? Cash flow modelling is even more important, as you have wages to pay and many more expenses. As they say, cash is king in business and a great plan will set you up for success.

Get advice

For help in designing a budget or just learning how to manage cash flow, you need to contact a professional financial adviser who understands the unique financial challenges that doctors face.

Contact Nitschke Nancarrow, specialists in accounting, financial planning, loans and finance, investment and business for medical professionals. 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.

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