Why Doctors Should Keep Financial Records

Yes, it is possible to jump-start into creating a system to organise your bills, statements, policies, and other financial records. Here’s how.

Financial Organisation for Doctors

Financial organisation for doctors is an important step towards a healthy financial life. At the most basic level, financial organisation saves time and money. It helps you to pay bills on time, provide proof of payment, find important financial records during tax season, dispute billing errors, and avoid the stress of dealing with piles of unorganised paperwork.

You will start making better financial decisions about investments, debt, budgeting, and financial planning. Overall, you’ll spend less time looking for paperwork and you’ll have more clarity around the overall financial situation, leading to more informed decisions about investments and financial plans.

What documents should you keep?

Investment Planning

While you may not have all of these different kinds of accounts or investments, there are different kinds of accounts that doctors have. Having the policies, statements, and other important paperwork of these accounts organised and accessible helps you and your financial advisor plan an investment strategy according to your financial goals, and other objectives. 

  • Savings accounts
  • Checking accounts
  • Certificates of deposit
  • Brokerage accounts
  • Mutual Funds
  • Annuities
  • Life insurance cash value
  • Retirement plans
  • Stock options
  • Bonds
  • Real estate
  • Business interests and other investments

Income tax planning

Income tax planning for doctors is a process that allows implementation of strategies to minimise future income taxes. Remember that income tax planning is not the same as income tax preparation, which focuses on documents required by the ATO. For income tax preparation, you will need to talk to your Medical Accountant.

Many financial documents are needed to prepare taxes and assess your tax situation. Keeping proper tax records is extremely important for accounting, and investment purposes. Tax documents that should be safely stored and easily accessed include:

  • Income tax returns for the last three years
  • Paycheck stubs, receipts, or statements showing regular income and any taxable expenses 
  • Documentation showing the cost and current value of assets owned outside retirement accounts
  • Retirement plan information showing the amount you are eligible to contribute
  • Statements showing major deductions, such as mortgage interest and property taxes
  • Information on charitable contributions

Credit and debt planning

Debt is often a part of a doctor’s overall financial situation. Loan statements will help you identify the level of debt, and loan terms. Note that you should file and store the following documents:

  • Auto loans
  • Student loans
  • Business loans
  • Personal loans
  • Credit cards
  • Mortgages

Other Documents you need to Keep

Keeping financial records is an important part of the financial planning process for Doctors. A solid organisational system and process will save you hours of time, especially during the tax season. Whether it’s a paper-based system or a simple file organiser, you’ll be in a better situation and it will make it easier for you and your financial advisor.

Retirement Planning Documents

Retirement is most probably the largest financial goal for every doctor. Hence, you must keep track of all retirement accounts. These documents are vital for staying on top of savings and investment goals:

Insurance planning Documents

Risk management is another vital aspect of your financial life. This includes life, auto, disability, health, and other coverage you may need as well as current or future Social Security benefits. 

Estate Planning Documents

The important aspects of estate planning for doctors include two things:  wealth transfer (ensuring that assets are transferred to the right people) and estate tax savings. Planning for and monitoring your estate requires maintaining these records, including:

  • A copy of your latest will and letter of instructions
  • Index of all assets (see list under Investment Planning, but also includes real estate,
  • collectibles, business interests, etc.)
  • Trust documents
  • Advance directives
  • Power of attorney for health care
  • Power of attorney for financial matters
  • Beneficiary designations 
  • Statements or deeds of trust showing how assets are titled

Where should you keep your records?

Keeping financial records in a file drawer

You could go the traditional route and use a simple set of labeled folders in a file drawer. More important documents should be kept in a fire-resistant file cabinet, safe, or safe-deposit box.

If space is tight and you need to reduce clutter, you might consider electronic storage for some of your financial records. You can save copies of online documents or scan documents and convert them to electronic form. You’ll want to keep backup copies on a portable storage device or hard drive and make sure that your computer files are secure.

You could also use a cloud storage service that encrypts your uploaded information and stores it remotely. If you use cloud storage, make sure to use a reliable company that has a good reputation and offers automatic backup and technical support.

Once you’ve found a place to keep your records, it may be helpful to organize and store them according to specific categories (e.g., banking, insurance, proof of identity), which will make it even easier to access what you might need.

What’s next?

It’s important that your accounts are accurate and up to date. Your accounts should be backed up with full and detailed records of all business income and expenditure, such as receipts, invoices and purchase orders, payments in and out, etc.

As always, we recommend consulting with an accountant for doctors if you need financial advice about your budget. By doing so, you can have financial peace of mind because the monetary aspect of your medical practice is handled by a competent and reliable expert.

BloomWealth are specialist medical accountants for doctors and health professionals. We are qualified tax accountants as well as wealth creation advisors/financial planners.

Book in for a Free Financial Health Check or contact us to speak further about our full range of services.

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