Most people assume that if you earn a great income and appear to be wealthy, well then you must be good with money. But this isn’t always the case, and this is especially relevant for doctors.
More money brings more complexities. There’s more to manage, more risk and more to lose. For doctors, add the time component – most doctors barely have time to scratch themselves, let alone manage their finances closely (that’s why working with an experienced medical accountant and financial planning specialist is key).
In this blog, we highlight the common mistakes made by big earning doctors, so you can avoid them.
Spending too much
Having a lavish lifestyle is fun, until it isn’t. Buying the expensive house, cars and living the high life day to day can seem like you’re enjoying your money while you can, but it’s the fast track to failure especially if you hope to maintain a great lifestyle through retirement.
Taking a look at how you live is important, because with a higher income it can be tempting to buy the bigger house, nicer car and take luxury holidays. And surprisingly even the top earners find themselves in debt, living beyond their means. Then when retirement hits that income is no longer being generated, so the high life quickly becomes unsustainable, leaving you in a precarious position.
Not being future focused
As we said, spending your earnings today feels good – reward for your hard work, right? Of course you deserve to enjoy the fruits of your labour, but we often see people thinking about what they need and want today at the expense of tomorrow.
Are private school fees coming up? What type of retirement do you wish to have? What about unforeseen sickness? While these questions might feel far off and not relevant, before you know it the bills come crashing in and you’re not prepared.
Listening to the wrong people
Doctors are magnets for dodgy investment schemes. There are many ‘opportunities’ and wannabe ‘experts’ who see doctors and see the dollar signs. Because doctors are busy they often don’t do the due diligence, leading to seriously costly money mistakes.
Unfortunately, family can also be a problem. When someone in the family like a parent is making large sums of money, family members can start to expect the hand outs. It’s important to set boundaries and for all family members, including heirs, to understand the plan and how money will be allocated and invested.
Having an open channel of communication reduces the potential for family feuds and harmful decisions where money is involved, and everyone is taken care of.
Investing for tax benefits only
With a high wage, income tax can chew through your take home money. We love pulling together strategies to help doctors pay less tax, but making investment decisions purely for an apparent tax benefit is the wrong mindset. Investing purely for tax upside instead of considering the future value of the investment itself is a common error that leads to greater losses down the track.
Not to mention, tax rules change all the time, which means having your money in bad investments can lead to not having any benefits at all. The better thing to do is look at the tax benefit as an added bonus and talk to a medical wealth expert about what opportunities are best for you and your circumstances.
Not working with medical wealth experts
Accountants and financial planners are not made equal. A specialist in accounting, investing and wealth strategy for medical professionals knows your needs and also the industry-specific opportunities.
Get the right strategy and avoid the common mistakes made by wealthy doctors.
Get in touch with Kym Nitschke and the team of experts at Nitschke Nancarrow now.
The information contained on this article 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.