Wealth creation for health professionals: 5 places to start…
As a health professional, wealth creation and financial security is as important to you as to anyone else.
Smart strategies for wealth creation involve first reducing debt, improving cash flow, and improving your financial position to be able to build wealth sustainably.
These should be priorities for allied health professional or medical specialists alike.
Fortunately, after sacrificing so many years incurring large expenses while studying, there are many opportunities to improve the financial situation for you and your family.
Following are five strategies to get started with wealth creation for health professionals…
Using cloud-based reporting software and keeping your data up-to-date on a regular basis provides current financial information for you and your business.
This information can be used to assist with budgeting, cashflow forecasting and tax planning.
Measuring your financial information provides opportunities for developing strategies to manage your future and create wealth.
Budgeting for business and personal finances
Setting a budget for both your business income/expenses and your personal income/expenses will give you control over where your money goes.
Monitoring your expenses against your budget allows you to notice variances and focus on improving your budget.
Managing your budget ensures you don’t spend money owed to the Australian Taxation Office on items such as overseas travel or major home renovations. It’s better to know what you can afford before making the decision to spend your hard-earned money.
Preparing a cashflow forecast for your business provides you with greater transparency. You will be more aware of when you need additional funds injected into the business.
Monitoring your cashflow will ensure you have the funds set aside for upcoming payments such as income tax, business activity statements, employee superannuation, loan repayments and outstanding accounts payables.
It is essential you know your current debt position.
If you have additional cash and intend to pay debt off quicker than the agreed term, that usually makes good sense. One important strategy for improving overall wealth is to ensure you pay personal debt (which is not tax-deductible) before tax-deductible debt.
Tax-deductible debt provides you with tax benefits and therefore should be paid last.
Review your financial position regularly
Do you know the value of your personal and business assets and debts?
Regularly reviewing the market value of your assets and debts gives you a clear picture of your current net position. If you don’t review your personal position, you may be growing your debts rather increasing your wealth.
Once your debts are under control, you can look at investing to create a future income stream for your family. This may involve increasing superannuation contributions, setting up an investment trust for holding a share portfolio, investing money in a practice with the intention of future growth or investing in commercial or residential real estate. Your choice will depend on personal preferences.
There are implications for all choices, so consider carefully where to invest your excess funds, what structure you would like to invest in, the taxation implications of your investment, and the potential for long-term growth.
Getting started with wealth creation
Wealth creation for health professionals is about understanding and improving your financial position in order to develop passive income for the future.
Depending on your level of financial knowledge, you may require professional advice to achieve this. Please contact us if you’d like some assistance.