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Financial Planning

11 Recommendations to Position Your Business or Practice for a Successful Sale

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By Chris J. Roe, CPA, PFS

Many private businesses and physician-owned practices face challenges when the owner decides it is time to make a transition. Whether an external sale or an internal succession, the process can be difficult and time-consuming. Many businesses fail to have a succession plan in place, whether it’s because they weren’t sure how to start creating one or just didn’t have a defined internal successor. This leads the business owner to seek an external sale. 

As a third-party sale is sought, the business owner, more often than not, realizes his mental business value is far different than the actual value third-party buyers are willing to pay. Given the goal is to maximize the value received, how do owners best position their business for sale? Here are several recommendations to consider:

Get Your Accounting Records in Order

Make sure your bookkeeping and financial statements are up-to-date and professional. If you are planning to head to market with the business, you will want to get at least the last two year’s financial statements reviewed by an external CPA Firm. This will give some assurance to the buyer that your books are in order.

Have Your Business or Practice Appraised

Hire a third-party appraiser to perform an outside business valuation. This will give you a good benchmark of what a third-party buyer may offer you.

Increase Your EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

Many buyers will value your business based on a trailing 12 months of earnings. You want your profit margins to be at or slightly above the industry average, so as you move forward, it is appropriate to review your earnings, profit margins, and expenses to ensure you are pricing your product or services appropriately, given the market, and have eliminated any unnecessary expenses. 

Ensure Consist Earnings and Cash Flow 

Buyers like to see strong cash flow and consistency of earnings. Wide fluctuations in cash flow and earnings tend to scare buyers and lower business values. 

Develop Your Add-Backs List

As business owners, we tend to live our lives through our business. When you are negotiating a sale, there will be expenses you are incurring, such as company-provided automobile, discretionary travel, meals and entertainment, and professional fees, that will not be considered as part of the sale and will increase the sale price when added back. The new owners will not incur these expenses. You should evaluate your expenses and develop a list of these add-backs.

Be Prepared to Either Be a Minority Owner or Carry a Promissory Note

Depending on the buyer, you may be required to roll over some of your sale price into the equity of the new company. Also, depending on your business size and buyer, you may be required to carry a promissory note to help the buyer purchase your business. Either way, you need to understand you are no longer in control of the business you sell.

Helping with the Transition

Be prepared to continue to work in the business to help transition it or to help grow it. This will serve to ensure your carried ownership in the new business will be maximized upon a future transaction. Also, develop your ongoing salary expectations for your continued work in the business. Keep in mind that if your salary expectations are much greater than you are currently making, it will reduce the purchase price of your business. 

Evaluating Your Staff & Staffing 

Evaluate the strength of your staff and whether or not you are understaffed. Keep in mind that if a buyer has to add staff to operate the business, they will lower your purchase price. Make sure your staff is adequate to run the business in its current state.

Do Pre-Transaction Tax Planning 

The value of your business is not what you get for it but what you keep after taxes. Take the time to sit down with the proper professionals to do tax planning that will increase the amount you get to keep from the sale. Bear in mind these things take time, and the more in advance you decide you want to sell, the better the planning opportunities will be.

Assemble Your Team 

You will need a team of people to help you sell your business and to manage the family’s wealth post-sale. We normally serve as a team lead and help business owners assemble and coordinate amongst all team members. It will be difficult for you to be the coordinator, given the stress and emotions you will be going through when the sale process begins. You will need a team of attorneys, your CPA, an investment banker, and other professionals. 

Mental State 

Begin to prepare yourself mentally for the emotional roller coaster you will go through when selling your business. Additionally, prepare yourself for the post-closing regret that so many business owners experience.

While succession in a private business, family-owned enterprise, or physician-owned practice can be problematic and time-consuming, a sale can be a wonderful thing. If you take the time to prepare for the exit, your sale will turn out to be a wonderful event in your life.

Rx Wealth Advisors is a physician-focused financial advisory firm. Their primary focus is to help medical doctors maximize their earnings, keep more money in their pocket, and cultivate wealth so they can live the life they’ve earned and deserve. Rx Wealth can be reached at 412-227-9007, via email at croe@rxwealthadvisors.com, or on the web at rxwealthadvisors.com.

Growing Your Wealth: 11 Survival Tips for New Physicians

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Over the years, Rx Wealth has advised many professionals and business owners who have built a life of wealth, and a major contributor was their ability to earn and invest their money over a long time period. 

As a newly practicing physician, you will earn significant money affording you a comfortable lifestyle. But remember, you’re starting later in the game than other professions. Thus, it is imperative that you focus more intently on building wealth. Before you know it, you will be approaching retirement. 

Here are 11 recommendations to help you stay the course.

Tip #1: Take Care of Your Health

Your health is your key to a successful, rewarding career and life. Take care of yourself first.

Tip #2: Save Money for Retirement Stat

You will need to live below your income level, invest for the long term, and control underlying investment costs while setting realistic expectations and following through on execution. Retirement sneaks up on you quicker than you think.  In our experience, it is the follow-through on execution that busy professionals fail to do.

Tip #3: Access Coverage for Risks

This means having enough term life insurance to provide for your family in the event of your premature death. Also, ensure you have adequate amounts of disability, malpractice, and property and casualty insurance to protect you and your family from natural disasters, accidents, and litigation.

Tip #4: Protect Yourself From Creditors 

Own your assets in a way that will protect them from future creditors. Also, if you own your own practice, make sure you are protecting the assets of the practice, such as equipment and receivables, from potential creditors.

Tip #5: Update Your Estate Plan

Maintain up-to-date wills, powers of attorney, and other important estate documents so that your affairs are handled appropriately if you become incapacitated or pass away.

Tip #6: Factor in Future Inheritances

If you are expecting a future inheritance, you should be having conversations with your parents about the proper way for them to leave you an inheritance so that it is outside the reach of divorcing spouses or creditors.

Tip #7: Consider a Pre-nuptial Agreement

One of the most traumatic and wealth-destroying events in a physician’s life is divorce. Over the years, I have seen many aging physicians continue to work solely to try and recover from a devastating divorce. To avoid the pain, simply get a pre-nuptial agreement before getting married.

Tip #8: Establish a Professional Team

You do not know everything; thus, you should hire a good financial advisor who works and coordinates your financial needs with a qualified CPA, lawyer, and property and casualty insurance broker. Remember, not all professionals act in your best interests, so be careful and diligent with your selection.

Tip #9: Take Colleague Advice With a Grain of Salt

Colleagues are a good source of guidance but beware not to follow the advice of your colleagues blindly. Use them as a source of information, but do your own investigation as your situation is unlike any other.

Tip #10: Monitor Your Finances

While undoubtedly you will be very busy with your career and life’s other demands, you need to take some time to meet regularly with your professional team and focus on your family’s finances.

Tip #11: Build a Support System

Achieving success and happiness is very dependent on the support system you build around you. Make sure you get along with your spouse, children, friends, and work colleagues. These people are the most important in your life and provide you with the needed structure and support to achieve success. 

These recommendations will be a solid basis to allow you to enjoy your life and career while you build wealth. Whether you are beginning your journey as a physician or are already on it, Rx Wealth is here to help you reach your destination.

Rx Wealth Advisors is a physician-focused financial advisory firm. Their primary focus is to help medical doctors maximize their earnings, keep more money in their pockets, and cultivate wealth so they can live the life they’ve earned and deserve. Rx Wealth can be reached at 412-227-9007, via email at croe@rxwealthadvisors.com, or on the web at rxwealthadvisors.com.

The situations or opinions mentioned in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.

9 Myths Doctors Buy Into When Becoming Independent Contract Physicians

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We’ve had numerous inquiries from physicians about their desire not to be employed but to contract as independent physicians.

Forty to fifty years ago, physicians ran their own practices, doing the hiring, billing, and marketing all themselves. As time moved on and dramatic changes occurred in the healthcare industry, an increased number of physicians became employees instead of independent business owners. Health care systems, insurance companies, and the like either bought up practices or forced physicians to join them out of fear these systems would adversely affect their livelihoods. But now, the landscape is changing again. 

The wave of the future may be what we’ve dubbed the “hybrid physician model.” The hybrid physician model allows doctors to move from being employees to owning their own practice again. They won’t have to experience the hassles of hiring people, billing for services, marketing, and other administrative duties that come along with owning a business—all while earning a much higher annual income and receiving the enhanced income tax benefits of being a business owner.

In exploring the hybrid model, we’ve listed nine common myths physicians have and addressed each of them below.

Myth #1: Medical Malpractice Is Expensive

Physicians believe obtaining medical malpractice on their own will be cost-prohibitive, but this is not the case. Recently, we collaborated with a physician contracting directly with a medical facility. She realized she will receive an additional $80,000 per year in compensation, but was going to turn down the ability to go independent. Her initial mindset was medical malpractice insurance will be unreasonably priced and the cost will either exceed additional compensation or make the little benefit not worth the effort. However, after our conversation, she realized she can obtain medical malpractice insurance for $11,000 per year and we can assist in getting all other benefits in place. Our conversation changed her mindset regarding independence. We’ve built-in resources and relationships to help physicians nationally obtain medical malpractice for themselves or their group.

Myth #2: Health Insurance Is Hard to Obtain

While we find independent physicians struggling through the maze of health insurance, we recently uncovered a national resource that can place independent health insurance for physicians quickly. The cost ranges from $1,000 to $2,000 plus per month, and the premiums are tax-deductible if you’re self-employed. So, while the cost is high, your additional compensation and other benefits as an independent physician should far outweigh this cost.

Myth #3: Forming an LLC or Corporation Will Protect My Assets

While you may get limited asset protection by operating in a business entity, you’re on the hook if it’s you providing the medical services. However, if you employ other physicians or healthcare professionals to provide services, then you have a layer of protection from their malpractice. However, you must follow the business formalities each year, such as updating corporate records, holding meetings, and documenting business decisions.

Myth #4: An S-Corp Will Save Me a Bunch of Taxes

Generally, being an S-Corp versus a sole proprietor may save social security tax depending on your salary and will save you Medicare tax. Any profit distribution taken over your wage is not subject to payroll taxes. However, the IRS is keenly aware of this, so you cannot set your salary too low. Additionally, setting your salary low will affect the amount your business can contribute to your retirement plan. Finally, depending on income level, your Section 199A business deduction may be greater as a sole proprietor versus an S Corporation. We recommend a detailed tax analysis before selecting which tax structure is best for you. 

Myth #5: S Corporations Are Simple to Run

When running an S-Corp, you’ll need to set up payroll to pay your wages. This requires an accountant or payroll service to process checks and applicable withholding along with filing the necessary payroll tax returns to the Federal and state governments. Additionally, you may be required to obtain workers’ compensation and unemployment insurance.

Myth #6: I Can Wait Till End of Year to Do My Accounting and Taxes

An S-Corp requires a separate Federal and state income tax return. These returns require more information about the business than a typical Schedule C (Form 1040) on your personal return. Since you’re self-employed, you’ll file quarterly income tax estimates for Federal and state income taxes. This needs to be calculated quarterly by an accountant. Having good electronic accounting records can make this less costly. We recommend you hire an accountant to do the monthly accounting so that quarterly and annual tax filings are seamless.

Myth #7: Using My Checking and Credit Cards for Business Makes Things Simple

While not having an additional checking account and credit card for the business seems like simplification, it makes the business accounting more complex and may cause legal issues with your business structure. Moreover, in our experience, it makes accounting and taxes very costly.

First, it takes your accounting professional more time to sort through the business transactions, but more importantly, we often see missed business deductions on the tax returns. Thus, you’re paying more taxes than required. We recommend you set up a bank account and credit card in the business’s name and use it exclusively for business income and expenses. As a result, your monthly accounting will be accurate, allowing you to pay the minimum amount of taxes you owe and to understand your business performance.

Myth #8: Forming an Entity and Doing the Taxes and Accounting Myself Will Save Me Money

If you’ve this thought, you’re not 100% wrong. We can all do things ourselves, but there’s always a cost or trade-off. So, while you may save money, is it worth your time and effort to do this yourself? What happens if you make a mistake? You normally find out at the wrong time, costing you thousands. As a professional, we recommend you stick to doing what you do best and leave the rest to experts.

While it may cost more money upfront, your peace of mind and time savings is worth it. One of our key tenants at Rx Wealth for managing a physician’s financial structure is to transfer all risk from the physicians to other parties when the cost of doing so is small. Your cost for having professionals set up the business, do accounting and tax work each year, and oversee the operations are small in comparison to the lifetime value of your earnings. Do not be penny-wise, pound foolish. 

Myth #9: I Can Negotiate My Own Reimbursement Contract

While you may be the best person to understand the economics of your contract, we recommend you hire an attorney who has done this before. There will be plenty of legal stuff, such as termination language, restrictive covenants, and patient ownership to cover, and who knows, the attorney may even negotiate a higher compensation rate than you. While it’ll cost some money upfront, it’s money well spent to make sure you are legally protected.

 

Rx Wealth Advisors is a physician-focused financial advisory firm. Their primary focus is to help medical doctors maximize their earnings, keep more money in their pocket, and cultivate wealth so they can live the life they’ve earned and deserve. Rx Wealth can be reached at 412-227-9007, via email at croe@rxwealthadvisors.com, or on the web at rxwealthadvisors.com.

The situations or opinions mentioned in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.

A Physician’s Dilemma: Do I Need a Prenuptial?

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Ah!! The dreaded prenuptial agreement. Nothing ruins the excitement of wedding planning faster than bringing up this topic. The word, when broached before marriage, reeks of distrust, betrayal, and lack of confidence the marriage will succeed. 

In helping doctors with prenuptials, I always advise that they not think of it as a belief the marriage will end, although statistics show marriages have a 50/50 shot these days. Instead, think of it as a document that spells out the personal financial choices you and your fiancée plan to make. Most marriages break down over lack of communication, often about finances. Well, a prenuptial starts the marriage off on the right foot with full disclosure and discussion around finances. 

If you cannot negotiate this while you are in love and on cloud nine about the pending marriage, what do you think a divorce settlement negotiation will be like? Think about it: when you are going through the emotional turmoil of a divorce, you are likely to feel betrayed, hurt, like a failure, or [insert unpleasant emotion here]. Fighting about how assets will be split or how much alimony you are on the hook for through a lengthy court battle with five to six-figure legal fees is not exactly an ideal way to settle things. Do you think going to court and you paying enormous legal fees will help your emotional toll? A prenuptial speeds up the divorce process, saving time, money, and emotional stress, not to mention your wealth.

While we strongly recommend getting a prenuptial agreement in most situations, before running and telling the fiancée you need a prenup, understand what it is and what it is not.

A prenuptial agreement is a legal agreement negotiated between the couple before marriage that determines a couple’s finances in the event of divorce or death. Generally, the agreement should address how the couple will split their money and other assets upon a divorce, what is considered separate property and not subject to marital distribution, how assets acquired during the marriage, including a home, should be split, and even debt. An important point to note is each person needs to be represented separately by an attorney to protect their best interest.

In understanding a prenuptial agreement, the following should be considered:

Marriage, like other agreements, is a contract entered into freely by two parties. The terms of the contract, while not formally written by the parties, are provided by the laws of the state in which a couple resides. Through a prenuptial agreement, couples have the opportunity to negotiate the marital contract versus relying on the one-size-fits-all laws of their state.

While you do not need to be wealthy to have a prenuptial, if you own assets, are going to inherit assets, or want to protect future assets (like your growing practice), you should consider a prenuptial.

When negotiating a prenuptial agreement, there is broad leeway for the couple. However, the agreement needs to be fair and equitable in the event of a divorce. It is still subject to a judge’s review and acceptance as part of a divorce proceeding. Moreover, a prenuptial requires transparency by both parties. Each will need to fully disclose all the assets, debts, and trusts for which they may be current or contingent beneficiaries and any potential inheritance.

As a highly compensated physician, you more than likely will be required to pay alimony to your ex-spouse. A prenuptial agreement can have your spouse waive alimony (in certain states) or set the amount and terms of any future alimony. For example, the alimony may be based on an amount to achieve a certain level of monthly income and no more, or a particular dollar amount each month adjusted over time for inflation. I have also seen a single payment based on a specific amount for each year of marriage.

Moreover, a prenuptial addresses premarital and marital debt. Should one spouse have significant debt, as most doctors do, the other spouse may not want to take it on in the event of divorce.

Furthermore, if you or your spouse have been previously married or have children, you want to make sure previous financial affairs and obligations are not mixed with your new marriage’s finances. Additionally, you can specifically address which of your assets goes to your children. However, a prenuptial agreement is not a replacement for a will.

Prenuptials do not and cannot address any future child support issues or custody. This will need to be worked out at the time of the divorce.

Finally, if you are a physician that will or does own your own practice, a prenuptial agreement may someday save you from having to give some value of your practice to an ex-spouse through a buyout.

Consider this: you are a mid-career specialty physician making, say, $650,000 per year. Early in your marriage and career, you and your spouse both worked, lived frugally, and saved diligently. You held off having children till your early 40s. The kids are now in high school and going to private school.

You and your spouse have amassed an eight-figure net worth. Your spouse currently does not work outside of the home and is taking care of the children. You decide to file for divorce.

After two years of legal battles and a lot of legal fees, you lose a large portion of your net worth to your spouse and are required to pay a substantial amount of your annual earnings in alimony to keep your spouse in the lifestyle accustomed. Additionally, you are going to pay for your children’s private school tuition.

While you still have a sizable net worth and are certainly not broke, you have just experienced a large and significant financial blow late in your medical career. More than likely, you will never recover from this sizable hit. 

As you consider a prenuptial, just know getting one is not very difficult nor is it terribly expensive, especially compared to the time and cost of a contentious divorce. It is recommended the agreement be negotiated and signed well in advance of the wedding date. Do not wait till the last minute to get this done.

Getting a prenuptial may seem unnecessary at the time of your marriage and a lot more effort than you want to put in at the time, so many people just forgo it and hope things work out. Well, as I always tell my physician clients, hope is not a strategy.

 

Rx Wealth Advisors is a physician-focused financial advisory firm. Their primary focus is to help medical doctors maximize their earnings, keep more money in their pocket, and cultivate wealth so they can live the life they’ve earned and deserve. Rx Wealth can be reached at 412-227-9007, via email at croe@rxwealthadvisors.com, or on the web at rxwealthadvisors.com.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Simple and Practical Wealth Building Advice for Physicians

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This article may appear to contain only simple advice that everyone already knows. However, it’s this advice that can lead to confident wealth creation. And the reality is, the goal of creating significant wealth has become far too elusive for many physicians.

If following this advice is so simple, then why is only 1% of our population wealthy? Interestingly, more people are making earnings sufficient to be in the 1% than those who actually reach the 1%. In fact, many physicians are among the top earners who, somewhat antithetically, have created relatively little wealth.

Well, the answer is simple. Creating wealth is common sense and easy to understand but hard to execute.

When seeking to create wealth, there are some important points you should consider while focusing on long-term investing and goals.

1. Commit to Growing Wealth

Just like you made a commitment and followed through on becoming a physician, you can make a commitment to grow your wealth. Do you think it is harder to grow wealth than becoming a physician? Of course not. You can do it if you commit!

2. Develop a Specific Plan for How You Will Grow Your Wealth

Stay away from “get rich quick” schemes or “too good to be true” investment deals from friends. Your plan should be based on a slow, methodical approach, and most importantly, you should hire a financial advisor who knows and understands you and your family and can hold you accountable to your commitment to wealth.

3. Stop Paying Others and Pay Yourself

You have worked extremely hard to become a doctor. While others pay you for your expertise, do you pay yourself for your expertise? Committing to saving your earnings is your way of paying gratitude to yourself for your hard work. Purchasing stuff and living a large lifestyle you cannot sustain does not reward you but adds additional stress and anxiety. Instead, target saving 35% to 40% of your net earnings.

4. Monitor Your Cash

No one can adequately save when they spend more than they make or are racking up high-interest debt to cover an excessive lifestyle. Think of the U.S. Government; someday, we will have to pay the debt back, and those days will not be sunny or happy for most Americans.

5. Create a Simplified Budget and Follow It

You read about this all the time. And no, saving money on the $5 latte is not what it takes to create wealth nor is tracking all your expenses in detail. Take it from me, a CPA: you will not have the time nor want to put in the effort to track the details. And by the way, it’s unnecessary.

Here’s an easier way to create a budget. Start with how much you want to save and subtract that from your earnings. This is how much you’ve got to spend monthly. Allocate the big, fixed-cost items, such as mortgage, real estate taxes, automobiles, and insurances. After considering these big items, the leftover is your discretionary spending. Go wild, but do not fund your lifestyle with debt, as you have already factored in your savings (i.e., paid yourself first).

6. Avoid Peer Comparison and Marketing Scams

Avoid trying to keep up with your friends and colleagues and their perceived successes. Over a long career, you learn rarely does the picture or perceived success you are seeing tell the whole story. Additionally, advertisers tell us what we should spend money on to make us happy and successful, but happiness and success are a mindset, not material items. If you stay away from personal comparisons, you will probably be happier, less stressed, and have more time for your personal growth and family.

7. Good Debt vs. Bad Debt

Stay away from credit cards and personal debt to buy unnecessary things. But do not shy away from incurring good debt, such as a low-interest automobile, mortgage, or business debt, to increase earnings.

8. Plan For Higher Cost in Future

You must consider that things are going to cost more in the future and you need to save and invest accordingly so as to not reduce your purchasing power over time.

9. Mute Your Expectations About Big Investment Returns

People who believe their investment returns may be large over time tend to save less money. It’s better to save more money and have large returns than the opposite.

10. Follow Long-Standing, Time-Tested Investing and Not the Fad of the Day

There is a lot of investing advice that gets thrown our way—from CNBC talking heads to investing articles, all designed to grab our attention. However, it’s best to stick to the basics and follow time-tested, evidence-based investing practices. These strategies have been heavily researched and continue to hold water.

11. Stick to Your Investment Strategy in Good Times and Bad

In my experience, more money is lost trying to not lose money by attempting to time the market than just riding the wave of market ups and downs.

12. Protecting Hard-Earned Assets Should be Paramount

Being proactive, not reactive in protecting your assets, is best. Trying to protect them after a lawsuit or claim arises is generally too late. While most medical lawsuits may be covered under malpractice insurance, you still want to make sure your hard-earned assets are locked down and protected to provide extra peace of mind.

13. Estate Planning is a Necessity and Do Not Forget About Your Parents

A basic estate plan is a good start, but a physician’s wealth is more complex than the average person’s. Moreover, your children may stand to inherit significant wealth from you, so you should consider how much you want them to have access to and how you can protect them from future creditors, ex-spouses, and the like.

You also need to coordinate with your parents on their planning if you stand to inherit wealth from them. Because you are a physician, it’s important to make sure any money you inherit from your parents is protected from lawsuits; this is often overlooked and rarely addressed in estate planning.

14. Real Estate Investing Can Work But is Not as Glorious as You’d Imagine

Investing in real estate has been proven to generate large wealth over time for many people, but it is not as easy to do as you may think. Just like the marketing for luxury products, real estate investment marketing is meant to attract you. To be successful in real estate investing takes a long time, a lot of work, and many headaches. It is not a part-time job but a full-time focused business. Most of the physicians I talk to are just as well off, if not better, by just getting real estate exposure through their regular investment portfolio.

15. Have a Lawyer and Financial Advisor on your Team

Before you sign any contracts, especially ones with non-compete clauses, or get involved in a business deal, make sure you have a lawyer and financial advisor looking out for you. Bad agreements can have adverse effects on your wealth and health.

16. Purchasing a Home as an Investment is Dumb

A primary home is a lifestyle choice we all make, not an investment. It is actually a liability that continually needs money fed into it to keep it up and to pay real estate taxes. Additionally, a second home (although you may rent it) is not generally a good investment, although it may turn out to make some money; a second home appreciating is more luck than a skilled investment. Do not base your future wealth on luck. Also, keep in mind real estate is not easy to sell and turn into immediate cash if the need were to arise.

17. Legally Minimize Your Income Taxes

Always pay the taxes you owe, but afford yourself legal and appropriate tax deductions or implement prudent tax-saving strategies to keep more money in your pocket. However, I caution you to avoid tax strategies that sound too good to be true. You do not need aggressive tax strategies to build wealth. There are plenty of tried-and-true tax reduction strategies you can use.

18. Life Insurance and Disability Insurance Is Paramount (Even If You Do Not Currently Have a Family)

Having disability insurance to protect yourself and your family should something happen is a must. Do not rely on group disability provided by your employer since you may not work there your entire career. Control your own insurance coverage by having a personal policy; thus, giving you the freedom to move jobs.

You can not rely on group life insurance for the same reason you should not rely on group disability. Association-based insurance looks cheap at first but gets very expensive as you age and may not be available when you need it the most. Again, own your own policies and control your future.

Rarely have I found a person who needs whole life insurance coverage. Term is usually best at a younger, healthier age. While you are young and single, you may not think you need life insurance; however, it is good to get insurance when you are healthy, and it is cost-effective. This will enable you to maintain your insurability. Also, get as long of a term as possible. As a physician, you, of all people, know that health can change unexpectedly and make you uninsurable.

The Bottom Line – Hire a Team to Look Out for Your Best Interest

It is important to hire a financial advisor, accountant, and lawyer that looks out for you and your family. A good financial advisor will serve as a leader of your team and hold your team of professionals accountable for providing you and your family with exceptional service and advice. A good financial advisor can also guide you in adding team members as you need solutions to financial issues that arise.

As you seek to grow wealth for yourself and your family, I hope the above thoughts guide you into making better-informed decisions.

Disclaimer:

Rx Wealth Advisors is a physician-focused financial advisory firm located in the Pittsburgh, Pennsylvania metropolitan area. Their primary focus is to help medical doctors maximize their earnings, keep more money in their pocket, and cultivate wealth so they can live the life they’ve earned and deserve. Rx Wealth can be reached at 412-227-9007, via email at croe@rxwealthadvisors.com, or on the web at rxwealthadvisors.com.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The Missing Framework Required to Build Wealth as a Physician

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As a physician, you are making a significant investment of your energy, time, and money into your finances and the well-being of you and your family. It is your financial advisor’s obligation and duty to be prudent with your wealth and manage it wisely. In partnering with you and your family, we follow what we call the “Physician Wealth Management Framework.”

By carefully using thought-out processes and procedures, assigned accountabilities, specific schedules, and set boundaries, this framework creates the appropriate financial infrastructure to help you reach the success and wealth you are entitled to.

In developing a working partnership with your advisor, it is important to set clear expectations and guidelines to promote success. Our Physician Wealth Management Framework, explained below, is designed to do just that.

Initial and On-Going: Wealth Assessment, Implementation, and Monitoring

  • Developing an “Rx Wealth Vitals” profile to know where you and your family currently stand
  • Identifying annually your key finance areas to focus on and opportunities to take advantage of
  • Maintaining a list of annual specific actions, based on each phase of our framework, we need to take to keep your and your family’s finances on track
  • Assembling and coordinating with a team of other professionals to benefit your and your family’s well-being and finances

Phase One: Protecting You and Your Family Reduces Anxiety

  • Protecting your lifetime earnings
  • Protecting your family in the event of premature death
  • Protecting your assets
  • Protecting your health
  • Building an adequate fund for emergencies
  • Implementing the legal documents, such as a Will or Power of Attorney
  • Developing the proper business structure and legal documents to limit liability, while protecting your business and you

Phase Two: Planning and Saving for Your Future

  • Learning and memorializing what is important to you and your family
  • Building a realistic monthly/annual spending and saving plan based on your priorities
  • Implementing a systematic, long-term savings plan
  • Defining what investment vehicles to use, based on your priorities, to begin building your nest egg

Phase Three: Growing in order to maintain future lifestyle

  • On-going Investment planning and monitoring
  • Focusing on taking advantage of fundamental tax savings strategies
  • Investing for market-like performance through a diversified portfolio
  • Enhancing your career and practice
  • Identifying areas of increased earnings potential
  • Improving your financial knowledge
  • Growing toward financial independence

Phase Four: Enhancing Your Plan and Wealth

  • Implementing 529 plans & education savings on a tax-advantaged basis
  • Monitoring your investment expenses and fees
  • Using more sophisticated tax structures to reduce taxes and benefit your family
  • Panning for tax-efficient philanthropy
  • Investing for your next generation
  • Taking measured risk with investing in exchange for potential return enhancements

Phase Five: Legacy

  • Teaching your children about money and family values
  • Your estate plan and related estate documents
  • Your personal and charitable legacy

Much like becoming a physician, successfully building wealth and achieving your financial goals takes focus, determination, a defined path, and consistency. Without these key characteristics, a physician is just using hope as a strategy, and hope is rarely the best option for achieving success and wealth. If you are not using a defined framework to manage your wealth, please call us for a complimentary consult.

Disclaimer:

Rx Wealth Advisors is a physician-focused financial advisory firm located in the Pittsburgh, Pennsylvania metropolitan area. Their primary focus is to help medical doctors maximize their earnings, keep more money in their pocket, and cultivate wealth so they can live the life they’ve earned and deserve. Rx Wealth can be reached at 412-227-9007, via email at croe@rxwealthadvisors.com, or on the web at rxwealthadvisors.com.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.