Three ways physicians can be more financially mindful

Mindfulness is a hot topic in health and wellness today. Experts say that when practiced regularly, it can help reduce anxiety, lower stress, and improve sleep, among other benefits. Simply put, mindfulness is bringing attention to the present moment; it’s being aware of what you’re doing and what is around you.

From my perspective, financial mindfulness can reap many similar rewards. Debt and inability to access funds can cause great stress, both personally and professionally. Being an active participant in your finances can help you capitalize on your strengths, repair your weaknesses, and seek opportunities. 

The numbers tell an unsettling story. The average American household carried $135,768 in debt in late 2018, according to a report from NerdWallet. A 2016 study from Experian reported that the average U.S. small business owner carries about $195,000 of debt. Debt and overspending are heavy burdens that can only get worse if ignored. 

Financial awareness can help you better understand and, if necessary, improve your financial situationby capitalizingon your strengths, repairingyour weaknesses, and seekingopportunities.  

Having a healthy financial profile can empower healthcare professionals with better access to funding, more competitive rates, and an improved ability to forecast and respond to the inevitable ups and downs.

The credit team at Bankers Healthcare Group processes over 2,000 applications per month, and I’ve seen a few common areas where applicants could have more awareness and control. Here are areas in which physicians can be more financially mindful. 

1. Taxes 

When receiving a loan application, lenders want to know about any outstanding tax balances you have and can perform searches to uncover balances that have been outstanding for a long time. Sometimes applicants aren’t even aware there are tax liens against them. Not paying your taxes-whether intentional or not-can cause serious issues for your finances, credit score, and your practice. 

How to be mindful about taxes: 

• Know if you owe. If you’re not sure if you owe back taxes, call the IRS or have a tax professional call on your behalf. 

• Plan early for tax season.Estimate how much you might owe by the end of the year and start setting it aside. It’s best to work with your CPA or financial advisor to figure out that amount and how to structure payments to the IRS throughout the year in order to avoid a large bill when filing your returns. 

• Revisit your business structure. If you’re a practice owner, know how you’ve structured your business-as a sole proprietorship or corporation-and understand the corresponding tax structure, implications, and restrictions.

• Pay your taxes. If you’re in default, then start making payments as soon as possible to whittle down the balance over time or pay it off in full today. Interest and penalties add up as more time goes on.Even if you get on a payment plan, know that the money often goes toward interest and penalties before touching the principal.

• Know when to ask for help. If taxes aren’t your area of expertise or it’s an area of stress for you, then lean on your office manager, CPA, or financial advisor for help.   

2. Resolving credit card debt

I would estimate that the average doctor we work with has about $25,000 to $75,000 in credit card debt. Maybe they charged some high-ticket items; or maybe they took advantage of a good interest rate, wanted to rack up travel miles, or get cash back on purchases. These are great card incentives, but you should exercise caution with how you use any line of credit.

How to be mindful about credit card debt: 

• Know your balance and pay it off monthly. Carefully review each statement to ensure the charges are accurate. Pay off the balance in full every month; otherwise, you’re incurring an interest expense. The larger your balance, the more it will cost you in interest. 

• Use your card as a convenience, not a necessity. A good way to keep your balance manageable is to only use it when it’s convenient, not when it’s a last resort to cover a cost. Evaluate what you could pay for with cash instead of a credit card. 

• Tackle any outstanding debt. Pay down as much of your debt as you can.If you’re a business owner, work on getting your balance paid down afteryou cover payroll and other key business expenses. You’ll run into cash flow crunches,and it’s always good to have an available credit line (not one that’s maxed out!), just in case.

3. Budgeting

Any time of year is a good one to create a budget so you have a clear picture of how much you’re taking home and paying out.The remainder is your spending money and your savings. 

How to be mindful about budgeting: 

• Review regularly. A budget is most useful when it’s looked at and adjusted regularly. See how your estimated costs align with actual costs. Be honest about whether at the end of the month you’re in the red or the green, and how you can adjust accordingly next month.  

• Cut expenses where you can. Look at where you’re spending money and cut what you can-everything from office magazine subscriptions and cable to salaries for those who aren’t providing value to your practice. Make sure all of your investments contribute to the bottom line and trim the rest.

• Save more by starting small. Start building up your savings, even if it’s a small amount every month. Consider increasing it each quarter, each year, or every time you get a raise. This is all about putting the idea of saving into motion and slowly building it up. This way, when (not if) something does pop up, you have a nest egg to fall back on. Not having access to savings is the leading cause of credit card use.  

• Evaluate your vendors. If you have to purchase medical supplies, then you know that can be a big expense. Look at those costs at least annually, make comparisons, and see where you can save by switching vendors. If this is out of your comfort zone, consider working with your CPA or hiring a consultant to analyze everything on your books to see where you can cut costs and make savings.  

I caution you to not run on autopilot when it comes to your finances. As a healthcare professional, you worked hard to get where you are today; being more mindful of your financial picture can help you get to where you aspire to be.

April Brissette is chief credit officer for FundEx Solutions Group and Bankers Healthcare Group, a leading provider of financial solutions for licensed healthcare professionals. To learn more, visit https://bankershealthcaregroup.com.