$/Personal Finance Ravi Ghanta, MD, PSG President @RAVIGHANTA5
this has actually exposed many of the financial weaknesses prevalent amongst highly paid doctors.
As the saying goes, “when the tide pulls back, we can now see who is swimming naked.”
The COVID-19 pandemic has caused devastation not just from a health care point of view, but also economically. The global economy had come to a screeching halt as a result of the quarantine that has led to the downturn of most businesses including medical practices and endoscopy centers. Only now, after a few months of the economy being shut down, are we starting to observe an increasing volume of patients returning to our practices. The economic impact of the pandemic is not limited to private practice doctors alone but also to employed doctors in hospital systems. No one could have anticipated this in one of the most “stable” and “secure” professions. Physicians have now been experiencing significant pay cuts and, paradoxically, even layoffs. Financial security as a doctor is not guaranteed and not as certain as once perceived. As a result of the economic decline in the economy,
Consistently, gastroenterology as a specialty tends to rank in the top five to ten specialties with the highest salaries. However, this does not mean that GI specialists are immune to financial injury. It is highly unlikely that any bailout will come to the assistance of physicians and medical practices. Most GI doctors are unlikely to qualify for stimulus payments that many other Americans will receive. The public who perceive physicians as “rich” will unlikely be sympathetic to the economic woes that many doctors are facing. Gastroenterologists along with other procedural based specialists may have had the greatest financial hit due to the temporary shutdown of elective and non-urgent procedures which tend to be a disproportionate portion of their income. Unfortunately, doctors are in a mindset of trading time for money. In essence, most doctors can only make money when they are seeing patients. If there are no patients to be seen, they have no income. This is what is happening currently which has led to layoffs or substantially reduced salary. The doctors who are “weathering the storm” are those who have been very deliberate with saving and investing in assets that provide ancillary income. In this
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for Physicians during the COVID-19 Pandemic scenario, they are still receiving different streams of income even if they are not getting their full pay in their usual physician job. The reality is that many doctors have a high salary, but sadly have low financial net worth. In fact, a large percentage of doctors have a negative net worth meaning their liabilities (debts) are more than their assets. To add insult to injury, doctors tend to be in the higher tax brackets giving up almost half of their income to tax. Doctors may have nice material things like fancy cars, primary residence, clothes, vacations, etc., but these things are liabilities, not assets. Oftentimes, you will hear that one’s primary home is one’s largest asset. Many experts believe that your home is actually a liability since it is more of an expense and does not produce income. Most people don’t have a net gain in value after calculating years of expenses that are incurred with a home. If your highest percentage of your assets are invested in your primary home, you may want to reconsider this. Unless, you live in one of the highest appreciating regions for real estate, the likelihood of growing wealth to a significant degree is unlikely with just your primary home. With a decline in income and even decline in retirement and other investment accounts, this has led to panic amongst many doctors, young and old. So, what should a
doctor do in this situation?
Most importantly, one should focus on the basics. Oftentimes, doctors are lured into complicated investments and insurance products without first doing the basic steps.
