I was fortunate to interact with a doctor in his 40s who was kind enough to share his life story with me.
He came from an extremely modest background, where even having two proper meals a day was a challenge.
After completing his medical education, he established his own clinic. Through sheer hard work, dedication and commitment to his profession, his practice flourished. His lifestyle gradually improved, and his income grew substantially.
However, with higher income came a different set of challenges.
He was unsure about how to invest in appropriate financial instruments, how to account for and deploy the cash income received, and how to manage the increasing tax burden. A significant portion of his unaccounted income was finding its way into real estate.
More importantly, he had not given adequate thought to funding important financial goals such as his children's education, retirement and, above all, protecting his family's financial future in the event of an untoward incident.
While appreciating his passion and dedication towards his profession, we highlighted a few shortcomings in his financial planning approach.
1. Higher income does not automatically translate into higher sustainable wealth.
Wealth creation requires discipline, planning and a conscious effort to convert income into financial assets.
2. Unaccounted income restricts investment choices.
When income is not properly accounted for, investing in regulated financial instruments becomes difficult. The choices often get restricted to assets such as real estate and gold. Any perceived tax savings can easily be offset by suboptimal investment decisions.
Engage a competent tax professional, maintain proper accounts and meet your tax obligations.
3. Invest your post-tax, accounted income wisely.
Build a diversified portfolio across well-regulated asset classes such as equity, debt, gold and, where appropriate, real estate. The allocation should be driven by your financial goals, investment horizon and risk appetite.
4. Protect your family's financial future.
Have adequate term life insurance to ensure that your family's financial goals are not compromised in the event of an unforeseen tragedy.
5. Engage an unbiased professional financial planner.
A good financial planner can bring structure, discipline and objectivity to your financial decisions, helping you avoid costly mistakes and stay focused on your long-term goals.
Our final advice to him was simple:
Continue doing what you do best. Focus on your medical profession, spend quality time with your family and allow your wealth to compound in the background with the support of professional financial guidance.
You have worked hard to increase your income. Now, make sure you work equally hard to convert it into sustainable wealth.
Higher income is not wealth. What you retain, protect and compound over time is what builds wealth.
If you have missed any of our previous articles, please visit https://naveenrego.com/blog-grid.php?aW5pdGlhdGl2ZXNfdHlwZV9pZA=MQ
Happy Financial Planning!
Naveen Julian Rego – CFP®
MD & Principal Officer
Naveen Rego Capital
SEBI Registered Investment Adviser
Reg No: INA000019211
BSE Enlistment No: 2178
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