The Financial Planning Guide for Optometrists
Austin Coley, CFP®
I like to tell people that good eyesight runs in my family.
The truth is, my mom and brother wear glasses every day, and I’m wearing my frames right now. What I mean is my parents have served my hometown of Murfreesboro, Tennessee as optometrists for more than three decades. They graduated from Southern College of Optometry in ’86 and started their private practice together not long after. In fact, my sister is considering studying ophthalmology when she starts medical school this fall.
I say that because even though I wasn’t bit by the OD bug myself, I was fortunate enough to experience the journey of two ODs that started, built, and successfully exited a practice firsthand. I even had the opportunity to work for the practice in various roles during a few off seasons while I was playing minor league baseball.
What I learned is this: It’s a lot of hard, grueling work to build a career as an OD, whether you distribute the W-2s or receive one yourself. There are peaks and valleys, and a long, winding road in between.
Clearly my life has been influenced by the OD field, and it’s my goal to add value to the community that has given so much value to my family over the years. I wasn’t given the skill or desire to work in the medical field, but how can I use my skillset to make your life and job a little clearer, simpler, and easier?
While this isn’t an exhaustive or individualized plan for your unique situation, I hope it kick starts your thought process and makes you ask some intentional questions. Your goal is to help your patients see the world healthier, clearer and crisper, and my role is to do the same through the lens of your financial plan.
One last thing to note: these keys can be applied to anyone who wears a white coat. While the specialization may differ, the main financial points remain the same.
1. Prioritize Cash
With several options for your money, including paying off student loans, saving for retirement, purchasing or investing in a private practice, or buying a home, it’s easy to neglect a savings account. Truth be told, it’s uninteresting. The cash has practically no growth rate and no plan to be used. But that’s the true value of an emergency fund. When you do have an urgent need for capital (because life happens), that money is there for you, safe and liquid.
Most sources will tell you to keep 3-6 months’ worth of expenses on the sidelines. While I agree with that as a rule of thumb, let your situation guide that safety net for you. If your car is running on its last leg, you might need to have a little more cash saved up. When you get to the amount that allows you to sleep well at night without worry of a short-term emergency wrecking your plan, you’re probably at a good number.
2. Income - Expenses
Positive cash flow is the result of three concepts: living below your means, spending less than you make, and holding yourself accountable. A general rule of thumb is to spend 50% of your income on needs, 30% on wants, and save 20%, but general rules aren’t unique to you.
I wrote a blog about how to build a budget last summer that should help you tackle this principle. Just remember to make it reasonable and achievable.
3. Protect Yourself, Your Business, and Your Family
Have you ever played the game Monopoly Deal? For those who haven’t, it’s a card version of the famous board game where a player wins when he or she has three complete property sets. When you are first dealt a hand, your focus immediately goes towards the properties. You start to strategize a plan to play them. As the game goes along, you play your properties and feel the victory inching closer….. until someone unexpectedly charges you rent. If you don’t have a stockpile of cash in the bank, you must give up the properties and your hopes are dashed.
Insurance, like an emergency fund, is just like the stockpile of cash in Monopoly Deal. The hope is that no one will ever come looking for cash, but you need a plan in place in case the unexpected happens. Here are some policies you should highly consider to keep your assets safe:
- Health Insurance
- Car Insurance
- Home/Renter’s Insurance
- Term Insurance (If needed)
- Malpractice Insurance
- Disability Insurance
- Umbrella Policy
4. Have a Plan for Student Loans
While schooling is a necessary step for any person wanting to become an O.D., the price tag isn’t always friendly. Couple that with the rising cost of undergrad, and a lot of doctors find themselves in a hole from student loans. For those of you who are in the thick of it, you know this liability can be an anchor to your aspirations. Contrary to some, I don’t believe planning on widespread loan forgiveness is a viable strategy for most situations.
The tricky part is that there’s not one universal answer on how to attack student loans. Every doctor’s situation is different. Interest rates, consolidation options, and public service forgiveness can all influence the best path for you. Understand your unique situation and carve out the student loan plan that is best for you, both mathematically and emotionally. Don’t know where to start? Click the button below to discuss your student loan situation.
5. Save for the Future
With the confidence of a strong foundation, you can turn your attention to building the metaphorical house. Saving for the future can look different to everyone, which is why it is ultra-important to let your unique goals be the driver for these decisions. Luckily, there are a lot of vehicles that can do the trick, such as owning a practice, after-tax investment accounts, real estate, retirement plans, and IRAs, just to name a few.
Take some time to understand what you and your family want from life and create a savings plan of attack that aligns with those desires.
6. Have an Estate Plan
No one wakes up in the morning itching to craft an estate plan. If you do, I’d like to shake your hand! Even so, it’s critically important to the foundation of your plan. If you don’t provide the directions on how to handle your estate, the government will decide for you. Key components here include:
An up-to-date will and durable power of attorney both financial and healthcare matters
Term life insurance (if needed)
A succession plan for your practice if you are an owner
Trust establishment if you would like to maintain control over your assets
It doesn’t have to be complicated. We know a couple of estate attorneys who make the process really easy. There are also online websites (https://mamabearlegalforms.com/) that make establishing a simple will and durable power of attorney a breeze.
7. Practice Ownership
Obviously, this won’t apply to everyone. But for some, it’s a biggie. Practice owners realize that not only is their business the source of current income, but it also plays a big role in future planning. That’s why you should surround yourself with a team that makes your practice more efficient. While this certainly applies to your staff, a team also includes well-versed professionals who are specialized in their fields. Here is a good list to get you started:
Accountant / Bookkeeper
Insurance Agent
Financial Advisor
Practice Consultant
Bank / Lender
Realtor
We’re lucky to partner with professionals who provide exceptional service to clients and put their interests ahead of their own. If you need a referral, we’d be glad to help.
At McCall & Associates, we help provide our clients with the clarity to know where they’re going, the conviction to know it’s right, and the accountability to stay on track. If you’re an OD who is looking for 20/20 financial vision (bad joke, I know..), send us a note in the box below. We’d love to help.
Any opinions are those of McCall & Associates and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
The investments mentioned may not be suitable for all investors. Raymond James and its advisors do not provide tax or legal advice. Be sure to consult with the appropriate professional in regards to your particular situation.