Financial Advice for Locums Docs
A locum tenens physician runs his or her own medical business. As both employer and employee, a locums doc needs to acquire a solid understanding of taxes as well as recognise additional opportunities for investment. Most physicians receive little or no training in these matters in college or medical school.
Consequently, self-education in these matters is critical. Chapter 14 of my book, “The Locum Life: A Physician’s Guide to Locum Tenens,” focuses on taxes and business expenses—it’s a good place to start. Financial advice for physicians also abounds on the internet in the form of financial blogs and podcasts. Useful resources include PassiveIncomeMD, PhysicianonFire, Physician Philosopher, White Coat Investor, and others.
Interview with Ben Nanney, CPA, CFP
The assistance of a sympathetic and qualified professional may be even more helpful. Here’s some advice from Ben Nanney, owner of Crossroads Financial Consulting, LLC.
AW: Ben, thanks for joining me. How did you come to specialise in helping locum tenens physicians?
BN: I’m both a certified public accountant (CPA) and a certified financial planner (CFP). I spent the first part of my career with a non-profit accounting software company. Later I transitioned into public accounting and financial planning firms. Recently, I worked at a sister CPA and CFP firm, where there was a strong focus on physician clients throughout the US. I became aware of the unique needs of locum tenens physicians and thought I could help.
AW: I found one of the biggest challenges while working as a locum tenens physician was constantly reminding myself that I didn’t get to keep my whole paycheck. I was ready to buy a Tesla until I realised that my debt to Uncle Sam was the same as the car’s purchase price! Can you give an example of how gross income translates into disposable income for self-employed physicians?
BN: Cash management is essential to managing taxes as a locum provider. For example, based on a $10,000 deposit, a high earner would discover that only $5,000 was available for personal spending because of taxes, retirement contributions, and other expenses. Here’s what happens:
Gross $10,000 (100%)
Tax $3,500 (35%)
Retirement/Savings $1,000 (10%)
Expenses $500 (5%)
Spendable $5,000 (50%)
AW: That looks about right. Any tricks to control this type of excessive spending?
BN: Some people find that opening separate accounts (i.e., personal checking, business checking, tax savings, general savings) for each of the above purposes keeps them disciplined.
AW: What do you recommend to your clients who have difficulty with tax planning?
BN: If I were to highlight three of the most effective rules for successfully managing taxes as a locum tenens physician, they would be:
1. Disciplined cash management
2. Organised record keeping
3. Proper proactive planning
Of course, none of these are effective if the physician doesn’t commit to action. A financial advisor can only do so much!
AW: What are the tax advantages to being a self-employed locums doc?
BN: Physicians can reduce their tax bill by funding a Solo 401K or Health Savings Account (HSA). Tax savings can be significant.
AW: Yes. I have done both, which has definitely enhanced my retirement savings. How can locums docs find you if they have questions about tax planning or managing their finances?
BN: I offer a complimentary consultation and tax projection to prospective clients. Contact me at: email@example.com.
AW: Thanks for sharing!