The Doctor's 4 Lessons for Financial Happiness

Physicians are the experts when it comes to physical health, but when it comes to financial health, surveys suggest many doctors have a lot to learn. Here are 4 tips to get started.

My father had a long career as a physician—nearly 50 years of good doctoring. He had success because it was an optimal time to practice medicine. The 1950s to the 1990s were what you might call “glory years” for the profession—when doctors held near-God status.

Economic success also came because he did little things well. He didn’t hit a lot of financial homeruns, but he smacked quite a few singles and doubles and that was enough.

The American Medical Association (AMA), the nation’s most famous doctor group, conducted a survey a while back on the financial preparedness of physicians. The numbers weren’t pretty.

Just 5% of surveyed physicians said they are “ahead of schedule” in their readiness for retirement. That’s a lot of making up to do. And it’s the nation’s primary care doctors who feel they are most behind in their goal to have a happy post-medicine life. However, most doctors (80%) expressed general confidence that they have the smarts to make correct personal finance decisions.

The survey reached the conclusion financially happy doctors do the following 4 things:

• Make time for money matters. The AMA survey found that while nearly 80% of doctors claim they review their personal financial situation at least once a year, about half said that it still wasn’t enough time.

When it comes to major money concerns for doctors, at the top of the list were: funding a proper retirement plan, paying for their children’s college, and having enough life/disability insurance.

My father was good here too. He regularly funded his retirement plan, he didn’t live extravagantly, he ate his meals at home, vacations were on a budget, he invested in good companies, and he rode out stock market storms.

Developing a personally suitable financial strategy is a must for today’s doctor. You’ll never reach your destination if you don’t know where you’re going.

And no one knows your fiscal wants and needs better than yourself. Discuss personal finance issues with your spouse at least once per month. Sometimes just getting started is the hardest part. Remember, you each bring strengths and weaknesses to the process. You sink or swim together, though.

• Develop an estate plan. More than 1 in 3 doctors said they didn’t have an estate plan and just over half (57%) said they had an updated will. This is bad but it seems there’s been some improvement.

When PMD surveyed doctors about 10 years ago, 2 out of 3 didn’t even have the protection of a basic will. For those who did, most were outdated.

The AMA survey found that male physicians were way ahead of their female colleagues in the estate planning department.

When it comes to your family and finances, never let anyone else have the final word. Act now—there might not be a tomorrow.

• Be prepared for a disability. Perhaps it’s because they see it every day, but in this category doctors seem mostly prepared. Nearly 80% of physicians believe that disability coverage is “essential” and 75% say they have it. Most doctors (86%) also bought the insurance early in their careers. Aiding good preparation was the fact that 2 in 3 doctors said they knew a colleague who had become disabled.

Still, all is not ideal in this department—more than 40% said they have not reviewed their policy in at least 5 years. And even with the coverage in place, many doctors don’t think the protection levels are enough. Just 25% said they would get at least $10,000 in monthly disability payments. Far less than what many earn in practice. They average primary care doctor earns about $18,500 per month; it’s $33,000 monthly for the average specialist.

My dad was stricken with an awful disability before his 40th birthday. He was paralyzed from the waist down for many months. I don’t think he had disability coverage then or if it even existed. He just worked through it. That’s not the way to go.

• Find a good money manager. This may have been my dad’s best money move. He found a good and trusty money guy. It was his brother-in-law.

Around the time of his 50th birthday dad realized that he had virtually zero retirement savings. With a wife and 8 children, and not wanting to “work forever,” he took drastic action. He cashed in a life insurance policy, took the $25,000 he got and handed it to my uncle.

Investing mostly in blue chip stocks and mutual funds, anchored by a buy-and-hold philosophy, the initial stake grew to nearly $1.2 million at its peak. Indeed, dad took a big hit during the late 1990s dot-com bubble and bust. My uncle had told dad he was too heavy in tech stocks, had already done well, and should get out. It was one of few times my father didn’t listen and he paid the price for it.

Looks like more than a few docs will need help with money advice. Among those in their professional prime (age 40 to 60), only about 35% said they had at least $1 million in their retirement accounts.