There was a story making the rounds last year about doctors filing for bankruptcy. Several versions of it by different authors attempted to diagnose the reasons a doctor would go broke. What about other professionals? What about the lawyers, the authors, the teachers, the nurses, the engineers, the scientists that are struggling to make ends meet.
Why are some professionals broke?
Definition of a professional can vary, the simplest of which define a professional as someone pursuing an activity for pay for a period of time. Most people, however, when they define someone as ‘a professional’ are talking about a person who trained in depth for a particular job or career and has experience working in the field.
If someone has training and experience in their field of work, why would they be broke? After all, isn’t a college degree the doorway to success?
Here are a few thoughts on this very broad topic.
Professionals may be saddled with student loan debt.
College costs money – lots of money. A typical professional degree may require 5 years of undergraduate work. Others may tack on 1 – 4 years of additional study and on the job training before bestowing the title of the profession on a person.
The lucky ones get their tuition/room and board paid, by their parents, grandparents or through scholarships or work study programs. The not so lucky ones have to take loans. Many of you have been through the process, as has Michael Lux. He holds both an engineer and a law degree is the founder and editor-in-chief of the Student Loan Sherpa which tries to help others de-tangle the complex web of student loan issues.
Professionals may be targets for lawsuits.
Medical malpractice lawsuits have risen to ridiculous proportions and the lawyers advertise to encourage folks to sue drug companies.
Maintaining liability insurance and medical malpractice insurance or errors and omissions insurance can be expensive, but not as expensive as losing an costly lawsuit.
The Pittsburg Post-Gazette in Malpractice insurance for professionals tries help you get the most of your Errors and Omissions insurance.
Professionals may be trying too hard to keep up with co-workers.
By now, most of you have probably read, or at least heard about, the Stanely/Danko book “The Millionaire Next Door”. If not, here’s a hint, many professionals don’t make it to millionairedom because they try too hard to keep up with the Jones. It may seem important to maintain a certain lifestyle in order to maintain your professional practice, but it can keep you from being fiscally fit as well.
Professionals may be too focused on their profession and not enough on finances.
Some professionals choose their careers for reasons other than money. A teacher may just want the joy of passing knowledge to a student. A nurse may just want to help sick people and a doctor may be focused on furthering research in the fight against a disease, an athlete may be focused solely on improving their game.
These professionals have enormous drive and intensity, but directed toward a non-monetary goal.
If this is your gig, you may not even realize it. Having a partner that can manage the financial aspects for you might be the ticket – a spouse, a financial adviser or accountant or someone else close to you. If you want diy help, you can check out the University of Wisconsin website Financial Capability for Help Professionals which offers free resource materials just for you.
Professionals may use money to ‘fix’ family issues.
Sometimes professionals spend so much time at their profession that family life suffers. To assuage their guilt and ‘make up for’ time away and inattention, some may be tempted to substitute money and things. Families can come to expect these extras in their lives and, even when times are not so good financially, demand to have them. This is expensive and can ruin lives. If you are interested in learning more, check out Jessie O’Neill’s book, The Golden Ghetto. She dives deep into the psychology of affluence in it.
Professionals may be impacted by outside influences.
Government rules, laws and regulations can impact your finances as a professional, especially if you are a self employed one. Doctors, for instance, are affected by regulations governing the Medicare program which specify how much they can be reimbursed for procedures.
Writing from the viewpoint of the left, Rick Unger in If American Doctors Are Going Broke, Who Is Really Responsible? Says:
“Private insurers also put a bite on physician compensation by denying treatments recommended by physicians which the insurers deem to be too expensive. This leaves conscientious physicians, bent on doing what is best for their suffering patients, to assume the financial risk of providing life-saving care knowing that there will be insufficient payment from the insurer and that their patient may never be able to pay the difference for the drugs administered.”
Professionals may not be good at running a business.
In the Doctors going broke story on CNN Money the author said:
“Doctors list shrinking insurance reimbursements, changing regulations, rising business and drug costs among the factors preventing them from keeping their practices afloat. But some experts counter that doctors’ lack of business acumen is also to blame.”
Professionals are trained to work at their profession, not to make money from it. Managing a private practice, whether that is a medial office, a dental practice, an engineering or architectural consulting firm or an accountant’s practice means you are running a business. When I attended Fast Trac, New Venture in 2010, I encountered a newly minted architect. His purpose in attending Fast Trac was to gain insight into how to run his practice. He knew that to be financially successful as an architect, he would need that knowledge.
If you are a professional with your own practice, either hire a great business manager or get help to learn how to run a business! Help can be had from a variety of sources including the Small Business Administration , sites like Entrepreneur , Score or some of those listed in this Forbes post: The Best Ways to Get Free Help Starting a Business
Are you a Broke Professional? How did YOU get there?