As we enter 2021, we’ve had many conversations with physicians throughout the COVID-19 pandemic. Outside of the obvious risks associated with frontline health services during this time, physicians need to be focused on other financial considerations for the year ahead. Here are our top five.
ONE: Look into available government relief programs
Canada Emergency Business Account (CEBA)
This economic support measure provides small and medium enterprises with access to credit through interest-free loans of up to $60,000. In order to qualify, an enterprise must demonstrate it paid between $20,000 to $1.5 million in total payroll in 2019 OR where an enterprise falls below this payroll threshold, it must have eligible non-deferrable expenses between $40,000 and $1.5 million. Repayments to ensure the loan is interest free should be done by December 31, 2022.
Canada Emergency Wage Subsidy (CEWS):
This economic support measure provides Canadian businesses who employ workers in Canada with a wage subsidy to cover their employee wages, up to 75% of one’s wage to a maximum of $847 per week (subject to qualification), if they have experienced a required revenue decline.
Temporary Wage Subsidy:
This economic support measure provides Canadian businesses who employ workers in Canada with a 10% wage subsidy to cover their employee wages for a period of 3 months, from March 18 to June 20, 2020.
Child Care Relief:
The government of Ontario will provide a one-time payment of $200 per child up to 12 years of age, and $250 for those with special needs.
TWO: Fortify a Rainy Day Fund & systematic savings plan:
Some physicians experienced reduced working hours throughout the first few months when the pandemic commenced, due to cancelled elective surgeries, procedures and a re-allocation of resources. As many physicians are compensated on a fee-for service basis, if they’re not working, they’re not earning revenue. However, like most individuals, monthly expenses such as a mortgage, car payments, food and children’s expenses continued.
Those with access to funds within their bank accounts, TFSA’s or Professional Corporations were able with withstand the brief income interruption and continue providing for themselves and their families without incurring additional debt. It’s for this reason we profess when establishing financial plans to remember the following simple objectives:
- Don’t live beyond your means: Spend less than what you make after-tax.
- Setup an automatic monthly savings program: Out of sight, out of mind. In our experience, those with a systematic plan are much more likely to achieve their annual savings targets as per their financial plans vs lump sum annual contributions. You also get to take advantage of “dollar-cost averaging” at times where there’s market volatility.
- Always keep liquidity within your bank account and investment portfolio for your “rainy day fund”. Pre-pandemic many of us would have put healthcare workers in the “recession proof” occupation list and for a few months in 2020 some professionals experienced a reduction in cash flow.
How does IP Private Wealth Help?
IP Private Wealth is a Family Office—a team of wealth management experts that operates as a round-table board of advisors. Our expertise in working with high-income medical professionals means we’re familiar with the challenges and questions you have. If you’ve been looking for a way to manage your wealth more effectively, reach out to us.
THREE: Review risk management and insurance coverage:
COVID had us all feeling vulnerable and aware of our health. You may be extremely healthy, and perhaps have never stepped foot in a hospital (as a patient, in any case). But many health care professionals are re-evaluating their personal insurance coverage as they reflect on their personal and family needs. Whether it was COVID specifically or a general reflection of the impact of other diseases, many discussions were had with physicians on the following:
Life Insurance Coverage: Does my family / dependents have enough capital and/or cash flow to provide for their needs with the loss of my income?
Disability Income: If I were unable to work due to a disease, illness or injury what would be the impact to my personal financial plan as my expenses continue but I would have no income.
Critical Illness: What if I were to incur a critical illness (ex: cancer, heart attack, stroke)? Would I work through my treatment? If so, you may not qualify for disability insurance depending on your specific policy. Critical Illness provides a one-time lump sum tax-free benefit 30 days post diagnosis and there are options where all your premium payments are refunded to you should you not incur an illness. From our experience this coverage can help bridge the gap while seeking treatment and provide additional peace of mind for you and your family.
FOUR: Review your financial plan and freedom date:
The COVID-19 pandemic had many re-evaluating their respective financial plans. The top questions asked throughout 2020 were:
- Am I still on track to plan?
- Can I still retire at my planned date?
- What type of cash flow can I live on?
- Will I need to work longer?
Always remember: “You can’t manage what you don’t measure”.When it comes to financial planning, it’s impossible to answer the questions above without a financial plan–whether you’re in a pandemic or not. When reflecting on our discussions with clients throughout 2020, the conversations for those who have an up-to date plan were much more personal and meaningful; we could specifically answer every question above and assist in reducing stress and emotionally based decisions.
FIVE: Estate Planning:
From my experience, it often takes the loss of a loved one or a close friend for individuals to re-examine their wills and powers of attorney. COVID-19 should now be added to those motivators. Many discussions were had with physicians on the following topics throughout 2020:
- We’ve been talking about completing a will for years. It’s now time.
- My children are now older; perhaps I should update my wishes?
- Are my current power of attorney & executor choices still valid and appropriate?
- What tax do I own upon my death? Are there methods to reduce taxation?
- I would like to involve charity and philanthropy in my final wishes. What is the best way to do so?
Throughout 2020, we helped update many wills, setup charitable foundations and worked collaboratively with accountants and lawyers to assist with the questions above. Every situation and family is different and it shouldn’t take a pandemic to re-evaluate the above. Estate Planning is an integral part of the IP360 process and needs be at the very least reviewed and discussed on an annual basis.
