Spotlight on Health – Financial Wellness for Women Physicians
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Georgia Balogiannis: In this podcast the Ontario Medical Association looks at current issues of interest in health care. Spotlight on Health gives you all the straight talk. We're Ontario's doctors and your health matters to us. I'm Georgia Balogiannis for the Ontario Medical Association.
Doctors spend years studying to practice medicine, yet most get little to no training on how to handle their finances. This podcast looks at the financial challenges faced by women doctors. Dr. Jane Healey, a paediatrician and cofounder of the online Physician Financial Independence Group, is helping women physicians navigate the financial industry. She offers tips for the road to financial freedom.
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Dr. Jane Healey: Physicians were talking about financial issues, and there was just so much misinformation. And many, many of our colleagues were getting taken advantage of. There's a "rich doctor" myth out there where a lot of our family members and friends misinterpret our high income for having high net worth. You're often seen as being very stable and capable, and a great lifeboat in high seas, but we don't get a lot of financial education on during our training. And so, it's no wonder that a lot of physicians have questions. Having financial literacy and the skills to save your hard-earned money so that you can trade it for autonomy is really what we're talking about here.
So, let's face it, as women in medicine, we have additional challenges. Women feel fairly confident being the CFO of the household, managing day to day finances. So, about 54% feel confident making a large purchase, or managing the household budget and balancing a chequebook. But, over here, when we look on the other side, women are far less confident when it comes to long-term planning.
Having children impacts a physician’s earning potential, and that largely falls to women. There's the issue of financial confidence. As women physicians, we often experience self-doubt — am I good enough, imposter syndrome — and that extends into even managing our finances.
And then there's of course, the gender pay gap. It's something that is a further challenge for us as women physicians, so we need to be even more careful with our money. On the whole, we're a very trusting profession. And we trust each other within our medical system to do what's best for the patient, not necessarily best for one's wallet.
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Dr. Healey: Debt control and the savings rate. So, this is kind of the least popular — not as sexy, not really to do with investing — but it's actually really, really important on someone's path to financial independence and financial freedom and autonomy.
Your savings rate is the key. Someone cannot become financially independent if you don't save, and you can't save if you spend most of what you earn. And so, what we really advocate for is that you are mindful about what you spend your money on so that what you are trading your money for is something that's bringing you value and something that's bringing you happiness.
Let's talk about financial independence. This is what you'll often hear about financial independence, F.I.R.E., which is Financial Independence, Retire Early — what does that even mean? So, what it means is that you don't have to work to fund your lifestyle. It means that you've saved and you've invested wisely and you can live on the interest and on the dividends of what you've saved. And you might be asking, wait a second, isn't that what retirement is? And it's not. Financial independence is the freedom to work as much or as little as you want.
You have to first make money, you go to work, which we're all quite good at, we're all hardworking and very, very tired after this pandemic has dragged on. You need to save money, and then finally you need to invest that money so that it grows.
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Dr. Healey: What insurance do you actually need? Well, you definitely need your CMPA insurance, you need disability, because your earning potential is your most important asset. You generally need term life insurance if you have any dependents, and then things like auto, home insurance, these policies you definitely need.
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Dr. Healey: People will often ask, "How do I organise my finances? What's, you know, what do you suggest for budgeting?" Rather than budgeting, we like to talk about something that we call the "Fate Rate," and the basic concept here is trying to figure out what you actually make per hour after you pay your expenses and your taxes. Because really our time is our most precious commodity, and so we really should know how much our time is worth.
So how do you calculate this? The first number is pretty simple. You need to know how much you made this year after taxes and expenses, and you can get this from your tax filing. The number of hours worked is a bit trickier to figure out, because you have to consider all of the things that we do that are related to our practice of
medicine. So, divide those numbers of hours by how much you made and that will give you your "Fate Rate."
Active management and passive management. So, what does that actually even mean?
Active involves buying and selling stocks frequently to try and turn a profit. So, this is when fund managers are charging you fees and trying to apply their knowledge to the market. And they believe that their skill will offer you higher returns. Passive management, on the other hand, involves buying an index or a basket of stocks and holding them for decades. And there's no fund manager, so the costs are low.
And you might say, well, but active management sounds better, because you know, there's people and big computers and suits, and they're, you know, they're really looking after my money and doing their best. But active management doesn't work. Seventy-five to 90 percent of actively managed funds do not beat a comparable index. Warren Buffett is probably the most successful active investor in our history, and yet Warren actually believes that passive investing is the way to go. And that is now what he advocates for.
If the stock market drops, the correct action is to do nothing. Stock market fluctuations are normal and expected. What you want to do is you want to buy and hold investments when new money becomes available. Understand that you're not losing any money unless you sell. And the stock market will recover. Ultimately, you don't care what the stock market is doing today or even next month, if you don't plan to retire for another 20 years — you buy and hold, you leave that money alone, you forget about it. And women do very well investing.
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Dr. Healey: Often you have to cover a shortfall. So, that can come from your personal savings or your line of credit, if you have savings within your TFSA — reasonable to withdraw at that time, and even your RRSP. You do lose that RRSP room if you make a withdrawal, but if you have a lower income for that year, you'll be in a lower marginal tax bracket, so taking some funds out — out of your RRSP — may actually be fairly beneficial. You want to review your insurance coverage and set up and update a will.
And then finally, how much do I need to retire, also a common question. That really depends —it depends on how much you spend, it depends on the length of your retirement, but a general rule that's out there is that you can withdraw four percent of your savings adjusted for inflation. That's safe for 30 years. It gives you a 95 percent chance that you won't run out of money.
We're generally fairly poor at estimating how much money we're going to need per year because you have to remember that a large number of your expenses will disappear when you retire. Children will hopefully be independent by then. You won't have a mortgage, hopefully, by then. And also, you're no longer saving for retirement, those RRSP and TFSA contributions that you've been making during your working life.
And so, you usually, generally, need about only 50 to 70 percent of what you spent while you were working. And also, know that no one can manage your finances better than you. And we hear a lot from physicians, people will come up to us and say really incredible things like, you've changed our lives but we're investing well and we're on the right financial footing because of you and your group.
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Balogiannis: This podcast is brought to you by the Ontario Medical Association and is edited and produced by Jodi Crawford Productions. To learn more about the Ontario Medical Association, please visit oma.org.
This podcast is for informational purposes only and should not be considered investment, tax, financial or other professional advice.
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