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The Medical News of Arkansas posed a series of questions to financial adviser Chad Carlson of Delta Trust. What follows are the questions and his responses.



In terms of personal finances, what are some things a newly minted physician should be considering?

My best practical advice for new physicians and their families focuses on these three areas:

1) Don't buy a big house. Many young physicians, elated with their newfound income, rush right out and purchase an expensive home. And if it's not a new home, it's a new car. Before they know it, many young doctors are buried under monthly payments that exceed half of their income, or more.

2) Don't ignore your medical school loans. Although the interest on student loans may be lower than other credit lines, it's a mistake to delay paying them off. Of course, if you have high interest credit card debt, (paying that off is) priority one. After the consumer debt is erased, start repaying the loans. You can't build wealth until you've paid off what you owe.

3) Build a good financial team. This is a team of professionals that include a CPA, an attorney, a financial planner, a local banker, and an insurance professional. As the old saying goes, "two heads are better than one." Having a team of specialists working together to keep you focused and on-track is a key to success. Your team will also help you avoid problems with the first two areas.



How soon should a physician start thinking about these things, while still in school, as a resident, or as they wrap up a fellowship?

In a perfect world, one of the courses offered in medical school would be "Personal Finance 101." Some programs do offer electives about money management or retirement planning, which is great. As mentioned earlier, I recommend forming a team of trusted advisors. Theses are relationships that young doctors or medical school students need to begin cultivating as early as possible. It's like having a family physician. You need a financial doctor to help you with your financial health who works with specialists for high priority issues.



The debt load for a new doctor can be staggering when all the medical school loans are totaled. What are some financial things a physician can do to help ease that burden?

It's important for young physicians to avoid making "lifestyle" mistakes. Big houses and country club memberships are luxuries. First and foremost, focus on building your practice and paying off your debts. As your practice grows, so will your income — allowing you to add to these extra "perks".



And for doctors who are working in an established practice, what are some of the things they should be thinking of as they look toward retirement?

While looking toward retirement, watch for the usual roadblocks and detours. Frequently, I meet physicians who have inadequate liability insurance and disability coverage. A review of your insurance portfolio is critical. I also encourage clients to conduct a comprehensive estate plan review with an emphasis on asset protection strategies. And of course, remember the old rule that says: if it sounds too good to be true, it probably is. A lot of smart people, doctors included, have lost money on can't-lose deals and get-rich-quick investments. Keep your portfolio well diversified, remember to keep adequate, emergency cash reserves and keep a close watch on your risk exposures. And finally, don't work at this alone. Find advisors whose wisdom and counsel you trust and establish a plan.



January 2007

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