The Financially Organized Doctor

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Paul Larson - President & CEO of Larson Financial, the nation’s largest financial planning firm exclusively for doctors, provides a guide to help doctors become more financially organized. By regularly setting time aside to maintain a good organizational system, doctors will be more financially informed and in a much better position to execute their financial goals.

Financial Advice for Doctors

The Financially Organized Doctor

Having a system to organize and review financial documents is vitally important for every doctor’s financial health.

Financial organization is essential a doctor’s financial health. A good organizational system can save doctors time and money. At the most basic level, financial organization saves time and money because it aids in paying bills, finding important tax documents, providing proof of payment, disputing billing errors and helps doctors avoid unnecessary stress. In reality, it is not important which organizational system is used, but it is important that an organizational system actually exists!

Investment Planning:

Having policies, statements, and other important investment account paperwork organized and accessible helps doctors (or their financial advisors) create a properly diversified investment strategy. A proper strategy would take into account diversifying assets according to risk tolerance, time horizon, financial goals, and other objectives. They are a good place to start when organizing financial records and paperwork.

     Checking accounts
     Savings accounts
     Money market accounts
     Certificates of deposit
     Brokerage accounts
     Mutual Funds
     Life insurance cash value
     Retirement plans
     Employee stock purchase plans
     Stock options
     Real estate
     Precious metals and other collectibles
     Business interests and other investments

Income Tax Planning:

Income tax planning for doctors is a forward-looking process that identifies strategies designed to reduce future income taxes. These may include tax-loss harvesting, investing in tax-advantaged vehicles, identifying tax deductions that may have been overlooked, or creating tax deductions such as setting up a qualified retirement plan. A variety of documents are required to prepare taxes and assess an individual’s tax situation. Keeping proper tax records is extremely important for IRS, accounting, and investment purposes. Tax documents that should be safely stored and easily accessed include:

     Income tax returns for the last three years
     Paycheck stubs or statements showing regular income as well as unusual taxable distributions that may change an individual’s tax picture this year
     Statements or other documentation showing the cost basis and current value of assets owned outside retirement accounts
     Retirement plan information showing the amount individuals are eligible to contribute
     Statements showing major deductions, such as mortgage interest and property taxes
     Information on charitable contributions

Married Doctors:

For married doctors, clearly establishing responsibilities for financial matters is an important priority. If one spouse manages the finances, the other spouse should be informed about what is going on financially, where important documents are stored, and the passwords for all online accounts.

Credit & Debt Planning:

Debt is often a significant part of a doctors overall financial picture. Statements for loans will help get a handle on your level of debt, interest rate of that debt, and loan terms on these kinds of revolving and installment credit debt. The following documents should be accessed and stored for periodic review:

     Credit cards
     Auto loans
     Student loans
     Business loans
     Personal loans

Retirement planning:

Retirement is the largest financial goal for most doctors. As such, it’s very important to keep track of all retirement accounts, including 401(k)s from current and previous jobs, traditional and Roth IRAs, and other accounts such as 457 plans. These documents are vital for staying on top of savings and investment goals:

Insurance planning:

Risk management is another vital aspect of a doctor’s financial life. This includes life, auto, disability, health, and other coverage you may need as well as current or future Social Security benefits. To manage and periodically re-evaluate coverage levels, deductibles, and premiums, retain these documents:

     Insurance policies and current policy statements for the following (including employer-sponsored insurance):
     Life insurance
     Disability insurance
     Health insurance
     Homeowner’s or renter’s insurance
     Automobile insurance
     General liability (umbrella policy)
     Professional liability
     Long-term care
     Social Security Personal Earnings and Benefits Estimate Statement (PEBES) showing survivor and disability benefits

Estate planning:

There are two key aspects to estate planning for doctors: wealth transfer (ensuring that assets are transferred to the right people) and estate tax savings. Planning for and monitoring an estate requires maintaining these records, including:

     A copy of the latest will and letter of instructions
     Index of all assets (see list under Investment Planning, but also includes real estate,
     Collectibles, business interests, etc.)
     Trust documents
     Advance directives
     Power of attorney for health care
     Power of attorney for financial matters
     Beneficiary designations for IRAs, life insurance, annuities, employer-sponsored retirement plans
     Prenuptial agreements
     Statements or deeds of trust showing how assets are titled
     Pet care

Miscellaneous documents:

There are also many other important documents that fall into a catch-all miscellaneous documents category. These include everything from a Social Security card to military service records to adoption and divorce paperwork. Keep the list current by adding new documents as appropriate.

     Birth, death, and marriage certificates
     Social Security card
     Vaccination records
     Military service records
     Deeds and titles to all real estate, autos, and other hard assets
     Adoption papers
     Divorce papers
     Prenuptial agreement
     Religious ceremonies such as baptism, confirmation, ordination, marriage, annulment paperwork
     Jewelry appraisal list for all items valued at more than $500

Make an “Account List”:

From employers to banks to insurance, most doctors have a large and constantly changing list of financial accounts. It’s important to update this at least once a year as this information usually changes frequently. In the event of an emergency or bereavement, family members need to know who to contact for important information about insurance policies, account balances, etc.
Key Passwords/PINs

Online accounts are becoming a perplexing legacy issue for family members and financial advisors. Many bereaved family members are struggling with gaining access to online accounts, especially as many brokerage, checking accounts and retirement accounts have converted to online access. Without passwords, family members can’t access statements and account numbers and may have trouble obtaining this information. Make a list of all the password and personal identification numbers (PINs) and update it once a year.

A Final Word:

Financial organization should be an important part of every doctor’s financial planning process. A solid organizational method, combined with a sound financial plan, can dramatically improve the likelihood that a doctor will experience excellent financial health.

By: Paul Larson
President & CEO of Larson Financial

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