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How Should a Physician’s Financial Plan Adapt to the World Today?

August 02, 2020
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Without question, 2020 has been tumultuous to say the least. There is still unknown fallout from the covid-19 pandemic, and there’s a great movement demanding social justice. The stock market has seen unprecedented volatility, unemployment went from a record low to a record high within a month, and there’s no telling what’s next. Hospital systems nearly went broke while delaying non-necessary treatments for months and furloughed many of its healthcare workers. With so much uncertainty, how should a physician’s financial plan adapt to the economic turmoil? 

First of all, don’t listen to any blanket statements about your finances (and there’s a lot of these statements right now). If someone says, “Buy into the market!” or “Sell your shares now!” or provides a piece of advice that’s supposed to apply to everyone, listen to with caution. Now is the time to truly customize your own “economic treatment plan.” The economy has been hurt, but it appears to be getting back up. This presents many opportunities, but not all opportunities are one-size-fits-all. This is a perfect time to reflect and decide how you’d like proceed.

Job security for physicians has been shook. Adapting to the cracks in the healthcare system has been quite an enigma. As a response, I think there will be a surge of entrepreneurial trails taken by furloughed physicians. If you’ve been furloughed, now’s a great time to contemplate a possible side hustle. Entrepreneurial ventures usually require some amount of liquidity. With websites, blogs, and information being a source of entrepreneurial ventures, cash on hand might not be necessarily used for investment in infrastructure as much as living expenses while creating your platform. If your hospital system is – or seems – to be in jeopardy, it also makes sense to have a little bit of living expenses stored away in an accessible account. Whether it be a savings account or an investment account, it’s typically best to have these in nonqualified (non-retirement) accounts; however, it’s important to remember that 457 plans don’t have a 10% early withdrawal penalty – as long as they haven’t been rolled into an IRA. Taxes will still have to be paid on withdrawal of a 457 plan, and these accounts are often popular within hospital systems.

Lastly, this is good time to check on your protection portfolio. Big economic changes are a great time to review the foundation of your financial plan. Read your will and trusts if you have them. If you don’t have them, it’s probably time to get them established. Go over your insurance policies. Do you have enough life insurance and disability insurance? Have you purchased an umbrella insurance policy? In the short scope of this pandemic, life insurance, disability insurance, and cash reserves are some of the most important pieces of a plan. These components will allow for maximum security in uncertainty.

Physicians trying to adapt to the world today should be considering what’s around the corner but not yet revealed. The economy is really trying to overcome the impact of the coronavirus, yet markets are still suppressed; I think there’s some real opportunity here, but all efforts in creating a financial plan need to be balanced appropriately. In this economy, if someone goes “all in” on one concept, whether it is buying in to the market or staying put in cash, they might find themselves in a difficult situation of powerlessness or missed opportunity. All in all, a perfectly detailed plan might really mean finding a liquidity budget as well as a risk/opportunity budget. Hedging the two, cash and investments, together might be the best way to navigate the seemingly low prices of the market and the uncertainty of the economy.