Loans up or for expansion eat into a dentist’s

Loans and debts taken for study,
new clinical set up or for expansion eat into a dentist’s income on monthly
basis since we need to invest a lot in today’s time to sit at a work place
(clinic) which seems comfortable both to patient and us. Secondly, if we have
loans and EMI’s running into several big thousands and we suffer from poor debt
management, we need to act surely and really fast. A realistic plan needs to be
devised which can transform our monthly EMI’s to monthly savings instead. As
usual, there will be two ways to do this task, either do it ourselves by
enlarging our knowledge database or seek the help of a genuine professional a.k.a.
the financial consultant to get us back on track. EMI’s take away from both our
day to day income and savings and any acquired extra interest. Loans can
seriously jeopardize the investment strategy and put a constraint on the
retirement nest egg, thereby reducing our ability to build a fortune. The
biggest effect will be on the tax outcome as we can’t make use of the tax-effective
investments which ultimately serve a double purpose of growing our wealth and
reduce our tax liability over long term. There are various ways, means and strategies
which can assist us in converting bad debt (non-deductible) into good (tax-deductible)
debt.

 

 

Working with the wrong financial
advisor

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All categories of dentists and doctors (beginners to experienced
ones) can benefit from working with the right financial consultant and
beginners here means the ones with limited or fewer investments and assets. One
of the biggest blunders committed by us (dentists and doctors) is retaining the
same financial consultant when our financial situation and practice outgrows
our initial start up and so do our tax planning requirements because that is
the time to change as our financial consultant’s experience also outgrows. The
routine financial specialist may lack the knowledge and skills to deal with medical/dental
fees and how to add income from multiple sources such as share basis, lease
basis, salary and private practice, out-of-pocket gaps, all clubbed together
even if they follow one basic method of accounting for us, along with the many
complexities associated with running a dental/medical practice. This can
potentially lead to us stuck with a heftier tax liability. There is a big
dearth of our field or say medical/ dental financial consultants/specialists
who are knowledgeable about the nuances of allowable deductions for dentists, doctors
and medical specialists. We need those guys who know more about tax-effective
structures for dentists and doctors like service and investment trusts. Tax regulations are changing all the time and for dentists/doctors
with their own practices and with many income-generating assets, tax returns
can be a minefield. Due to these shortcomings, some dentists/doctors are
tempted to prepare their own tax return but yes, lack of specialist knowledge
of investments can most of the times make us miss out on opportunities for
large tax savings. We are usually awed by TV ads of mutual funds (Sahi Hai,
Yaar), to put in monthly investment as SIP (Systemic Investment Plan), but
which fund, which types, how much amount, we don’t know. That is where we peep
on our friends’, neighbours’ and colleagues’ investment portfolio without
knowing their actuality of funds and tax structure and believe me friends, that
is a very big hole to fall in. Your tax return should ideally be completed by a
financial advisor or tax specialist with niche knowledge about our field
(dental/medical). Some dentists/doctors (who make their own returns)
neglect to claim small deductions which can gradually add up to large tax
savings over the course of the whole financial year. Remember, you can claim a
deduction on everything from hiring a chartered accountant or financial
consultant to professional membership fees, if we are going the conventional
way and not the Section 44ADA way as explained in the last issue of i-dentistry.
Smaller deductions usually include work-related car expenses, home-office
expenses. Often it’s just a matter of the implementing the right record-keeping
processes to generate accurate deduction amounts for these items; work with
your accountant or financial advisor to ensure you’re getting the most out of
your tax deductions.                                                                Dentists and Doctors also need sound financial advice just as much as
anyone else, but they may be stumped about where to go to find it. We usually
have many patients in the form of financial salespersons banging down our
doors, but these people may not have the best interests in mind. As I mentioned
in the last issue, we the dentists or doctors tend to assume that we are able
to make sound financial decisions just because we are qualified to save teeth
and lives respectively, but at the cost of repetition, we know by now that this
line of logic is faulty and we the dental and the medical professionals lack
acumen in this area and desperately need find a financial consultant who can
sail us through in torrid times.

Health Professionals love Real
Estate especially when both are in same
profession (practice) – reasons of poor Financial Planning

Many
dentists and doctors in India
invest in real estate for investment after setting up their practice and
earning handsomely. We tend to be invested much overweight in real estate which
is usually not a good idea. A part of that thinking goes on to believe that
real estate is a safe bet as it will grow upwards only unlike stock market
which can go downwards anytime and secondly, it can be withdrawn as and when
needed with no time based bond like a few mutual funds, market linked
securities and debentures. We have to understand real estate is one of the
asset classes and there will be periods of exacerbations & remissions
(meaning over-performance and under-performance. The real problem is sometimes,
when husband and wife, both are dentists/doctors; let us assume practicing in
separate outlets.