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Streamlining Finances Can Help Physicians Achieve Future Goals


The first step is to create a balance sheet listing all assets. Doing so will provide physicians with an overall picture of their financial situation.

The old adage of keeping things simple applies to personal finance as much as it does to other avenues in life. Simplifying things by streamlining your finances can go a long way toward helping you both recognize and realize the goals you want to achieve. And it all starts with getting organized.

“You have to know where your goals and commitments are,” says Paul Sutherland, CFP, of the FIM Group, and author of the AMA Physician’s Guide to Financial Planning. “Then everything flows from there.”

Balancing act

Brian Knabe, MD, a physician turned financial advisor with Savant Capital Management, says that the first step in streamlining finances is to create a balance sheet listing all assets—from real estate and retirement accounts to the cash value of insurance policies—as well as outstanding loans. Doing so will provide physicians with an overall picture of their financial situation.

Tools like Quicken Books can help in assembling an inventory of assets and debts. There’s also a free website called where physicians can keep track of their assets so they know what their balance sheet looks like. “It also helps track expenses,” says Leslie Thompson, CFA, CDFA, CPA, partner of Spectrum Management Group. “It can help physicians categorize and gain a better understand of where their money is going. Many [physicians] have legitimate concerns about what their income is going to be in the future.”

The challenge, says Thompson, is that physicians typically have more “pieces of information” that they need to keep track of. Physicians’ estate planning needs and insurance needs are also more complex than most individuals, so having control of that information is invaluable. And, like most people, physicians spend more than they realize, in categories that are more discretionary.

No coordinated effortOnce a balance sheet is set up, physicians may find that they’ve fallen victim to what Sutherland calls the “d’jour effect”—purchasing an insurance product from one company and then three years later purchasing another from a different company. “Nobody looked to see if [the policies are] complementary,” he says.

The same thing happens with investments, Sutherland explains. A newspaper article suggests purchasing XYZ stock, or a broker phones with a hot tip on municipal bonds, and pretty soon the physician owns a wide assortment of investments. “They think they have a portfolio but they just have a bunch of investments. It’s a junk drawer of investments, insurance and finances that are not coordinated.”

Knabe agrees. He says that the end result of the d’jour effect is physicians have a lot of different pieces that do not work well together. The different elements could, in fact, be pulling in different directions, further restricting physicians from reaching their goals. “There’s a planning process, an investing process, and a tax management process that overlays the other two. If you look at just one of those pieces you can get certain benefits. But if you look at all the pieces together, the sum of the parts can be greater than the sum of each piece individually.”

Knabe adds that setting up a balance sheet will also enable physicians to assess risk, and to manage risk appropriately. Is the right insurance in place? Do you have an appropriate umbrella policy to help fill the gaps? And with investments, are you taking too little risk or too much risk? Having the majority of your retirement funds invested in CDs, Knabe says, is an example of too little risk. Speculation following the latest trend is an example of too much risk. The latter, he says, is like looking in the rear view mirror while driving. “It doesn’t necessarily help you, and it can lead to accidents.”

Work with a pro

Sutherland says he wrote the AMA guide because there are many physicians who want to handle their own finances. However, if you choose to work with a professional, he strongly suggests using a fee-only advisor who has at least ten years of experience. “When you go to an insurance agent or a stock broker, their only goal is to sell you something so that they can make some money. If they get commissions, that means it taints their advice, and they’re going to be less objective. It’s better to do it yourself.”

Knabe echoes those thoughts. He suggests hiring a fiduciary—an individual who can manage the physician’s assets. He likens it to the hippocratic oath of the investment world. “If you agree to take on the responsibility of the fiduciary, you agree that you will act only in the best interests of the client. And you’re only able to do that if you’re not receiving any fees of commissions from someone else.”

Ed Rabinowitz is a veteran healthcare writer and reporter. He welcomes comments at

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