The ‘3’ Mantras of Financial Freedom for Doctors & Healthcare Professionals. Part 1 / 3

Water, Water Everywhere; and not a Drop to Drink. 

Dr.irineu antao pereira

MBBS, DNB(Gen.Surg), MCh(CVTS-JIPMER), DNB(CVTS), MBA(Healthcare Management)

Financial Management advice is everywhere, and sometimes even your friends, family and colleagues are eager to share their opinions with you – for free. It’s everywhere that you may find the so-called ‘pearls of wisdom’  about how you should manage your money and achieve financial ‘nirvana’. 

The Truth lies in reading between the lines.

Truth be told, during my early days as a healthcare professional, I – myself, searched and found many of these ‘mantras’. Unfortunately, some managed to leave wide holes in my pockets until after half a dozen years of struggle, I put my ‘trial and error’ learnings to the test. And achieved my success.

Unfortunately, that’s the story of most of the financial management advice available today. And it tends to be so overwhelming, that even the so-called ‘Crème-de-la-Crème’ of our society – the Medical Fraternity, tends to be left confounded. 

So, it’s time I share my simplified understanding of money management for doctors. These learnings have formulated my personal, professional and financial life. I presume these thoughts will help you in framing your perspectives to your own financial freedom. The truth lies in the following three golden rules which will never change.

Golden Rule #1: Ensure that the ‘Denominator’ is always less than the ‘Numerator”

Never Spend’ more than you 'Earn'. I consider this the ‘anchor’ of the money management mantra. The ‘Outflow’ can never exceed the ‘Inflow’. 

Let me highlight three areas of spends : A House, A Car and The Credit Cards.

  • A Mercedes, an Audi or a BMW definitely appears better than a Suzuki, a Honda or a Toyota. 
  • It’s great to own an up-market villa or a penthouse, than an apartment. 
  • And a Credit Card is a sure shot way to ‘spend’ much more than you ‘earn’.
And that is where lies a problem :

There is a problem - if you are buying for status and not as an investment or an asset. There lies a problem if the purchase ‘piles’ up your debt and adds to your EMI baggage. 

A Smarter Option :

  • A smart move involves buying a home or a car that meets your needs but doesn’t stretch your budget. 
  • Then stay in your home or use that car as long as you can, to maximize your investment.

It’s usual for car marketeers et cetera to advertise the ‘Depreciation Benefits’ at financial year endings. But there is a huge difference between buying for “Depreciation” and buying for “Appreciation”. 

The best example is the difference between buying a Home and buying a Car. 

One ‘appreciates’, the other ‘depreciates’ in value – even up to 25 percent, the moment you drive it out of the showroom. In fact, the average new car loses about 50 percent of its value in the first five years — but still has at least 50 percent of life still left. When you buy a car, it helps to also keep in mind that the more the luxurious and swanky the car, the higher the recurring costs.

 It’s often smart to buy a car that fits your needs and not the desire to impress your colleagues, friends and maybe your patients. This principle holds true for most other luxuries as well. 

Coming back to the car, make sure it has enough safety features. And then keep your car as long as you can to get more mileage – not only in terms of the fuel, but also out of your investment. 

Similarly, another area of importance is your use of a credit card for convenience and emergencies. Make sure to pay it off every month. Or the interest tends to get into your investment quota of funds. 

It’s often smart to save, spend and invest your money for your needs and financial security - short, intermediate and long term. Your finances should not be used to satisfy your desire to impress your colleagues, friends and family.

Mantra Number : ONE

Ensure that the ‘Denominator’ is always less than the ‘Numerator”, and you will always be in positive balance. It’s not only the amount money you earn that’s important but the way you spend it or invest it, is far more important. It’s really that simple.

Follow for Mantra Number Two (October 22,2021) and Three (October 23,2021)

Originally published October 21, 2021