Financial Strategies For Doctors: Building An Emergency Fund And Beyond

Doctors have a deeper grasp of the concept of "emergency" compared to others. These situations can range from pressing but manageable issues to devastating, costly, and life-changing events. Despite this understanding, many fail to set aside emergency funds to soften the impact when personally faced with such unplanned circumstances.

As someone accustomed to managing crises routinely, it's clear that avoiding financial crises is a top priority. With a stable income that reflects your expertise, now is the moment to establish a strategic financial blueprint.

In this article, we provide you with financial strategies that will protect you and your family from the potential devastation of emergencies, and ensure a financially secure future, too.

No. 1

Protect Your Assets

The 2020 pandemic showed us that no one is immune to emergencies. As the world experienced a global shutdown, the financial health of most households took a hit. Even medical facilities were forced to comply with a temporary closure, causing many offices to close permanently due to a lack of funds.

However, the consequences of COVID-19 also taught a valuable lesson on the importance of insurance for asset protection. Having a business interruption policy that covers the operating expense essentials, such as payroll and rent, can protect you from everything from fires and floods to rampant viruses. A savings account may do the same thing, but insurance means you don’t need to dig into your funds.

Health insurance is another crucial method of asset protection. Heart attacks, cancer, and other unexpected massive health conditions can leave you with tens of thousands of dollars in medical bills. Insurance minimizes how much of these expenses are your responsibility and caps you at a maximum out-of-pocket responsibility each year.

Of course, there are other types of insurance coverage that physicians should consider, such as life and disability policies. For an in-depth discussion of the best asset protection choices for you, talk to a financial advisor like OJM Group, which specializes in helping medical professionals.

No. 2

Build Your Emergency Fund

Once your assets are thoroughly protected, the next step is to build your emergency fund. This term refers to funds set aside in savings or another easily accessible place that can be used if unexpected expenses arise.

Having an emergency fund minimizes your need to take on debt for things like mechanical failure, health issues, or other expensive life events. Yes, it’s never fun to dig into the savings you’ve worked hard to create, but it’s easier to replenish that safety net than to pay off high-interest loans.

Although physicians generally have higher incomes than the average worker, they also tend to accrue larger household expenses. Losing one or two weeks of work due to an emergency can have a domino effect that takes years to correct.

The general financial expert consensus is that an emergency fund should cover 3-6 months of living expenses. If you own a medical office, having a separate fund with 3-6 months of operating expenses is wise. These funds can be held in a high-yield savings account, a CD (Certificate of Deposit), or a traditional checking account. Some people prefer to keep their safety net on hand in cash.

Don’t worry if you can’t come up with that figure right away. Start small, and keep adding to your savings with regular investments as you can.

No. 3

Fund Your Emergency Net By Paying Off Debt

Concerned about where you’ll come up with the money to fund your emergency account with all the other expenses you have? One fiscally efficient way to do this is to start by knocking out your high-interest credit card and loan debt.

Once you’ve snowballed any extra money you have into those minimum monthly payments and eliminated those bills, don’t go on a shopping spree to celebrate. Instead, start taking what you once paid in debt payments and putting that money into your emergency fund.

If you need to make a large purchase that you can’t afford outright, such as paying for expensive car repairs or getting your child’s braces, consider using your emergency funds before taking on more debt. Then, replenish that account as quickly as possible.

The goal should always be to avoid touching funds in a savings account or CD so they can accrue interest for you. But if it’s a toss-up between using a credit card or taking out a loan and emptying your nest egg, go with the savings funds. It will be easier to rebuild that safety net than to pay off a high-interest debt.

Takeaways: Safeguard Your Finances with an Emergency Fund and Insurance Coverage

Establishing an emergency fund is a wise financial tactic that can prove invaluable in preventing accruing additional debt. However, the initial measure in safeguarding your assets is guaranteeing they are adequately protected by the appropriate insurance policies.

With an emergency safety net and protective coverage in place, you can navigate your day with peace of mind, knowing that any unforeseen events are financially managed.