A financial plan is a formal document, stating goals & objectives, current financial status, inflation assumptions, market rate of return assumptions, time value of money costs, among other items. This document basically creates a snapshot of your financial picture now, and oftentimes projects what will happen if you follow the plan. Once the plan is written and created, implementation of the plan is expected.
The truth is, even the best financial planners know a financial plan is nothing more than an educated guess. There are way too many variables to predict anyone’s future. Inflation rates and market returns are never linear. Human nature doesn’t usually allow us to create a one-time financial plan and stay on track. While financial plans can be useful tools, and I’m 100% into creating them, that’s not what young doctors need.
If you want to check “create a financial plan” off your to-do list, you should create one; however, a financial plan shouldn’t be a one-time action. Young doctors don’t need a financial plan; they need financial planning. They need consistent conversations and updates, not old reports and guesswork assumptions. Doctors will change courses so many times in the first few years of their careers that a stagnant, stated plan isn’t enough. They need a living, breathing financial resource to provide financial education; a labile habitat for advice as opportunities arise. In the first five years of practice, a physician will change courses eight or nine times, whether the focus is on paying off debt, building a practice, establishing a lifestyle, saving money, protecting their education and income, managing their family, and building and protecting an estate. A physician steps in front of so many opportunities throughout his or her lifetime, and the ability to get advice on these opportunities can create such a great advantage. This constant state of change constitutes a platform of open conversation and ideas. At the center of all it is an active listener and an educational heart.
Life, as it changes, dictates our next move financially. It’s impossible to predict the flow and pace of a doctor’s first decade of practice with charts and assumptions. What’s important is to strike a balance of being proactive and reactive to plan and save, so when opportunities present themselves, the financial aspects are ready to go.