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    10 money mistakes physicians must avoid



    8  Steer clear of buying too much house 

    Lenders routinely offer attractive home-loan packages to doctors as they try to win other business from their medical practices, Persaud says. But just because a lender offers to underwrite a very large mortgage doesn’t mean the physician should consider buying the biggest house they can afford. The numbers bankers use for these offers often don’t consider a borrower’s complete financial picture, such as future obligations, so don’t get carried away here, she says. Some advisers have advocated buying large homes as an asset protection strategy in states with homestead exemptions for malpractice awards, but today retirement accounts are generally viewed as a better haven, experts say.

    A rule of thumb for home buying suggests spending about two years’ income on a house (including the mortgage.) That amount won’t come close to buying a home in cities where prices have increased substantially in recent years, however. Homeowners in those pricey markets often view their homes as part of their investment portfolio, though financial advisers often caution clients to remember that home values can also decline.

    Spending up to the maximum borrowing amount set by a lender—which can stretch to 31% of a borrower’s income for principal, interest, taxes and insurance—would be a major strain for physicians trying to make up for lost time on retirement savings, experts say. Strike a balance that will put a nice roof overhead without sacrificing the future.

    Financial advisers typically recommend that professionals who get a late start on retirement saving put 20% of their income in retirement accounts, and set aside another 5% for medium-range goals. From the remainder, calculate a monthly house payment that leaves room for other living expenses.


    9  Identify insurance needs early

    Large health systems, and some independent group practices, offer disability, life and long-term care insurance, but the coverages are generally insufficient to cover the true cost of these significant negative events, says Hank Mulvihill, CFP, principal with Mulvihill Asset Management LLC in Dallas. 

    To get a better picture of life and disability insurance needs, experts say, physicians should track living expenses and multiply that annualized figure by a generous estimate of the number of years they or loved ones would need to cover. For long-term care, check out estimates by state at bit.ly/LTC-calculator.


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