Planning Strategies For Physicians & Frontline Workers

Five priorities to manage the challenges of planning in pandemic

by Bryan Cannon

According to Glassdoor, the average frontline worker makes just over $33,000 a year while the average physician earns about $200,000. So it may seem strange to lump the two together, but both groups share a lot in common these days: the pressures of having to always be right, the long hours and call schedules, hospital politics, constant public policy changes and, of course, the threat of contacting Covid. Each of these could be daunting on their own. Taken together, the stress might easily prove overwhelming. Certainly, it’s distracting.

Frontline workers were largely unable to work from home during the pandemic, so their lives were disrupted far more than most. While physicians’ relatively large salaries provide a cushion of sorts–though that cushion is lessened by high insurance costs and student loans–low to moderate income “essential” workers were hit hard as their expenses rose while their paychecks remained about the same.

The Omicron variant is once again proving the importance of getting a firm grip on one’s overall spending and sticking to a budget, particularly for frontline workers. As many of them have already dipped into savings or taken on debt just to survive, it is critical that each focuses on a sound financial plan which includes rebuilding their emergency savings, reducing their expenses and refocusing on long-term savings.

Here’s my list of five priorities that every frontline worker should be addressing right now:

Reduce Bad Debt

Bad debt doesn’t necessarily mean debt that’s gone unpaid, rather debt that is being paid at a higher rate of interest than necessary. Credit cards and other forms of high-interest loans can quickly become what Senator Elizabeth Warren calls a “cement life raft.” The new killer app–for financial institutions, at least–is called “buy now/pay later.” As with credit cards, BNPL products offer a low teaser rate–0%!–that soars if the entire balance is not paid within a short period of time. According to Credit Karma, more than one-third of BNPL borrowers have already missed a payment, which not only rockets their interest rate into nosebleed territory but could lower their credit rating, making other debts more expensive.

Build A Liquid Emergency Savings Fund

We’re fortunate to have a lot of doctors as clients, especially because we tend to acquire them after they’ve finished their spending spree–the trophy home, the beach house, the new cars, and so on. It’s not uncommon for a physician to wake up in their early to mid-50’s and realize how tired they are of working long, stressful days and being on call over the weekend, then realize they may not be as good at financial planning and investment management as they previously thought. At that point they tend to check their pride and become very good clients who appreciate our hands-on approach. More times than not, their goal is to retire as soon as possible, so that they can live a normal life.

For most frontline workers, of course, retirement may seem like a dream–something unattainable–while the prospect of losing their job is very real, whether due to health or childcare obligations or even out of financial necessity. For these folks, security means a liquid emergency fund that will last three to six months, which should be enough time to wait out an illness, rework a living situation or find a new job.

Make A Plan

Whether a wealthy physician or a minimum-wage frontline worker, a properly structured financial plan should have the client’s goals at the center. What’s certain is that if you don’t have a plan as to where you want to be, you won’t get there. Realistic goals should be established first, then the client–and their financial advisor–must put together the roadmap as to how to get there. Once a proper financial plan is established, it is critical to readdress it at least annually to determine what’s changed and, as a result, what needs to change in order to stay on track.

A good financial plan produces benefits far afield of the pocketbook. It can, for example, relieve some of the frontline worker’s stress by building confidence and reducing the anxiety fueled by uncertainty. A comprehensive plan will tell you if you are overspending or under-saving relative to a budget as well as retirement goals. An annual review will keep tabs on the emergency savings fund, and signal how quickly it needs to be rebuilt or even increased in order to avoid reaching for the cement life raft and sinking.

Plow As Much Into One Term Savings As Possible

Just before the pandemic, the U.S. personal savings rate had been on an upward trajectory for several years and hovered around seven percent. In April 2020, as stimulus checks were being sent out and many of us were cocooning at home, the savings rate soared to just under 34%. Now we’re almost back to where we started but trending steeply downward. Yikes!

It’s worth noting the recent debate as to whether cash is safe or not, largely because of inflation. And while I respect the opinions of successful investors like Bridgewater’s Ray Dalio, there is simply no substitute for savings. Savings not only fuels long-term economic growth, it provides peace of mind, as well as options. True, one earns very little on a savings account or money-market fund or even a 10-year Treasury these days, but if those savings prevented the need to tap a credit card charging 20% interest, well, that’s a great deal, don’t you think?

And savings is just as important for high-earners. Unlike many business owners who reinvest into a company that can be sold at retirement, physicians don’t have that option. They make above-average incomes over their careers and need to deploy that capital toward their retirement and investment savings along the way, as opposed to a business owner who might rely on a single large liquidity event to fund their retirement.

Put Together And Stick To A Budget

Our physician clients appreciate our hands-on, comprehensive approach. Without it, the financial burden of connecting all of their advisors would fall upon their shoulders, which 99 times out of 100 would lead to gaps and missed tax planning opportunities. Physicians are, understandably, just too busy taking care of others to properly manage their own financial affairs. Of course, not everyone has the assets that may allow them to afford the white-glove treatment, but everyone can put a budget together and at least try hard to stick to it.

There are, for example, grant opportunities for those frontline hospital workers who qualify, as well as loan and credit card relief options for those experiencing financial hardships. In addition, there are possible financial incentives including student loan forgiveness programs available which are endorsed by the Association of American Medical Colleges (AAMC). And who knows? In a decade, maybe that minimum-wage frontline worker will become a nurse, or maybe that nurse will become a physician’s assistant–or a doctor themselves?

In that case, they’ll be able to hire a firm like ours to connect all of the financial dots for them, to identify the gaps in their plans and even take full advantage of any tax saving opportunities. We’d work hard to reward their efforts with the most precious commodity…one you can’t buy: more time.