Medical career in India often comes with a substantial financial burden. According to recent data from the Indian Medical Association, young medical professionals in India start their careers with a financial deficit compared to their peers in other industries.
The deficit can be attributed to a unique set of financial challenges associated with their career choice. While their peers in different fields start saving and investing, medical students in India accumulate debt, missing out on years of potential savings and goal-based investing. These missed savings opportunities can amount to a significant figure during their years of medical training. Additionally, the debt incurred to enter the medical field in India is substantial, with student loans ranging from INR 10 lakhs to over INR 20 lakhs on average.
Furthermore, medical professionals in India lack financial literacy, with only a tiny percentage of those under 40 feeling confident in their understanding of personal finance.
It is, thus, no surprise that there is a dire need for financial education and the introduction of a fresh Financial approach to help them catch up and reach their financial milestones. Here is where goal-based investing shines. It aligns well with the financial needs and dreams of doctors, surgeons, and other healthcare experts, offering a structured path toward wealth creation and financial security.
Understanding Goals-Based Investing
Goal-based investing is a unique strategy centred on aligning your financial decisions with your life’s objectives.
A method that links your savings and investments to specific milestones, instilling discipline into your financial journey.
You may be familiar with allocating your savings across diverse market-linked options such as fixed deposits, public provident funds, mutual funds, stocks, or real estate. However, lacking clear goals, these investments often feel aimless, with no defined timeframe or expected returns.
Goal-based investing eliminates uncertainty by aligning financial objectives with tangible, achievable targets. In essence, it replaces randomness with a customised roadmap for your financial aspirations, making the path to achieving them much more straightforward.
Implementing Goals-Based Investing
When embarking on a goals-based investing approach, there are a few things to remember.
Understanding Investment Goals – The first step is – Defining your Objectives. Next is to create a plan that links each investment to a specific objective. This clarity helps prioritise goals and assign a monetary value to each one. Once done, categorize investments based on their timelines to ensure that your savings, investments, and risk levels are in harmony, creating a clear path to reach them.
Let’s see the types of goals you need to define.
Short-term goals are those you aim to achieve in a few months to 2 years. Examples of short-term goals may include international vacations or purchasing a new car.
Medium-term goals extend over 3 to 8 years and can involve substantial expenses such as buying a home or establishing a medical practice.
Long-term goals are ambitious plans set for 10 years or more, like retirement.
Clearly defining and organizing your goals as suggested helps you invest with purpose, and each financial move propels you closer to realizing your aspirations.
Risk Assessment – Goal-based investing necessitates a careful balance between risk and potential return, highlighting the need for careful selection of the asset class and in the appropriate proportion.
Mutual funds offer a wise choice with their diversified investment portfolio, which includes a mix of asset classes. Given the wide variation in financial goals and timelines, their inherent diversification proves to be a blessing.
When dealing with long-term goals, the primary objective is to maximize returns on investment and wealth accumulation, for which equity and fixed-income securities in asset allocation make a good fit.
However, individual investors have unique risk tolerance levels and beg for a personalized investment strategy. Here is where seeking a doctor’s financial coach equipped with specialized qualifications and expertise in financial planning for medical professionals is a good move.
Much like you’d consult a doctor for medical advice rather than a pharmacist due to their expertise and domain knowledge, a doctor’s financial coach brings valuable insights to the table. Their guidance can help align your investment strategy with your risk comfort zone, ensuring that your financial health steadily progresses towards achieving your goals.
Diversification and Asset Allocation – Once the investment portfolio is aligned with your risk appetite, the next step is to see if your financial goals and investment timeframe are well-defined.
Your investments can be allocated across debt, equity, or hybrid instruments, each carrying its unique set of risks and rewards.
Diversification is vital for navigating market fluctuations and striving for optimal returns. By distributing your funds across various asset classes, you establish a financial safety net. In other words, when equity markets face turbulence, your debt instruments can act as a stabilizing force for your finances and vice versa. It’s all about crafting a well-balanced financial portfolio comprising a mix of assets that can withstand market uncertainties and keep you on course towards achieving your goals.
Periodic Reviews and Adjustments –
Goal-based investing is not a one-time endeavour; instead, it’s a continuous journey. One needs to regularly monitor your portfolio’s performance, reassess your financial objectives, and adjust your allocations accordingly. It is vital to stay on the right financial path.
A generic, one-size-fits-all approach doesn’t work well when it comes to goal-based investing, as each individual has unique needs. It’s essential to be aware of the diverse investment products available for various goal-based investing.
For doctors, who often have demanding schedules, managing these tasks can be challenging. However, aligning investments with the ever-changing financial landscape is more critical than ever in today’s dynamic world. Regular reviews and adjustments can ensure that your financial strategy adapts to your evolving circumstances, keeping your financial goals well within reach.
How Medical Professionals Can Use a Goal-Based Approach to Save
Let’s consider an example in an Indian context to illustrate how a Goal-Based Approach can work for medical professionals like Dr. Rajesh Kumar, a 40-year-old physician with a young family. During his years in medical school, Dr. Kumar had no specific financial goals and managed his finances haphazardly.
A few years down the line, Dr. Kumar decided to work with a financial advisor to implement a goal-based investment strategy. Together, they identified his financial objectives, which included building a retirement corpus of ₹2 crores, funding his children’s higher education, and providing financial support to his parents during their retirement years. His advisor developed a diversified investment portfolio customized to Dr. Kumar’s risk tolerance and time horizon. Additionally, Dr. Kumar began contributing to a retirement savings plan offered by his employer.
Today, Dr. Kumar’s investment portfolio comprises a mix of assets, including stocks, bonds, and real estate, strategically spread across various investment avenues. This structured approach has brought clarity and placed Dr. Kumar on the path to realizing his financial goals. It underscores the effectiveness of goal-based investing for medical professionals, even amidst their busy schedules.
Conclusion
Goal-based investing serves as a lifeline for medical professionals, helping them navigate the complex realm of financial planning within the demands of their careers. It provides a structured and personalized route to attain financial milestones, whether ensuring a comfortable retirement, funding education, or homeownership. Given the distinctive economic challenges that doctors encounter, a tailored approach is essential, one that harmonizes seamlessly with their professional and personal aspirations.
By adopting Goal-based investing, medical professionals can construct a financial safety net for their future while saving in a personalized and purposeful manner. It empowers them to secure their financial well-being in alignment with their unique goals and circumstances.