By Katherine Vessenes, JD, CFP®

Welcome back to More Money Minutes for Doctors. Today we delve into a crucial topic: determining the minimum effective financial dosage for doctors to achieve lasting financial security.

In the realm of financial advice, countless articles offer tips for enhancing your finances. However, just as doctors prescribe the minimum effective dose for patients, should there not be a similar approach for doctors managing their finances? Let’s explore this concept.

Defining the Minimum Effective Dose: A Practical Approach

Let's assume you, a doctor, take home around $20,000 a month or $240,000 a year after taxes, retirement plans, and deductions. For young doctors, we propose a minimal effective dose of 20%. What does this mean? Allocate 20% of your take-home pay to savings and investments. If you’re older and haven’t started saving much yet, this percentage should be higher.

To illustrate, let's examine a few case studies.

Case Study #1: Doctor Jane's Journey to Financial Wellness

Meet Doctor Jane, a 35-year-old with significant debt. Her 20% (which amounts to $4,000 per month) is strategically divided into three places:

- $1,000 into an emergency fund (totaling ~3-5 months of fixed living expenses)

- $1,500 high-interest debt repayment (in addition to regular monthly payments)

- $1,500 into long-term savings

Once the emergency fund and high-interest debt are paid, she can shift more into long-term savings!

Case Study #2: Doctor James - A Prudent Approach

Doctor James, having no high-interest debt and an emergency fund, allocates his entire $4,000 to long-term savings. Once his take-home pay increases, we can increase his monthly savings amount beyond $4,000.

Case Study #3: Doctor Al's Unique Situation

Doctor Al, aged 50 with minimal retirement savings and health challenges, should consider a higher percentage, perhaps 30% ($6,000). Running the numbers becomes critical in this scenario. Analogous to Type 2 diabetes, Doctor Al seems to suffer from what we term "Type 2 financial disease."

Facing Type 2 Financial Disease: Planning for Retirement

This is a lifestyle illness–a preventable one, and delaying retirement planning can have severe consequences. We explore strategies to secure a comfortable retirement, especially for those approaching their 50s and 60s. There are a number of factors that go into this:

- Reducing expenses

- Working part-time in retirement

- Moving to a low income-tax state

- And more

Your Prescription for Financial Freedom

In conclusion, once you determine your minimum effective financial dose, you gain the freedom to allocate the rest as you wish. Whether it's a trip to Aruba or upgrading your furniture; paying yourself first sets the stage for financial peace.

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Remember that you can send us any questions at: Info@MDFinancialAdvisors.com

Katherine Vessenes, JD, CFP®, is the founder and CEO of MD Financial Advisors who serve 500 doctors from Hawaii to Cape Cod. An award-winning Financial Advisor, Attorney, Certified Financial Planner®, author and speaker, she is devoted to bringing ethical advice to physicians and dentists. She can be reached at Katherine@mdfinancialadvisors.com.