As DCs, we place much of our time, energy, attention and focus on the health of our patients…as it should be! We spend hundreds of thousands of dollars over our careers to become chiropractors and to maintain our clinical expertise. While our intentions are good, one of the most disappointing and troubling things in our profession today is the financial health of a great many of our doctors.
I first learned just how serious the “chiropractic financial situation” was while reading an article in 2013 about the “Top 20” professions to be a part of. In that article, chiropractic was listed as the 11th best professions based on an annual income of $69,000. I thought it had to be a mistake…$69,000?!?! Upon looking into it further, the number was consistent with what I had read. Prior to writing this article, I looked again and saw one number that was reported at just over $80,000 annual income. While $80K is not a horrible number, for our new doctors, the likelihood of them being one of those earners (they would presumably earn less since they had less expertise, experience, fewer patients, etc.) is low, and the cost of their education is approaching the $200,000 or higher mark. Add to student loans the cost of living and practice overhead, decreased insurance reimbursement and increased scrutiny by third party payers, and it’s easy to understand why so many within our great profession are suffering financially, or worse, are looking to get out of practice.
With so much of what seemed to be “bad news,” I decided to spend some time with a bank executive, Mrs. Robin Wandschneider of Commerce Bank, to learn about how the banking industry views DCs and what we can do to improve our financial health. During our conversation, I winced when Robin told me that they “typically don’t lend to chiropractors” because we are “bad risks.” I needed to know why. She said that the statistics show our profession defaults on loans more than virtually any other health care provider type. My next question was designed to turn things to the positive: “What can we do to become a highly desired customer group for your bank?” Her answer was interesting and lead to what I want to share with you today.
Do you want to be attractive to financial institutions? Look to be solid in the following areas:
- Have some money in savings. The more assets you have, the better risk you are for the banks. Right now, the banks have LOTS of money to lend, but they are very careful about checking the background of their “partners.” If something goes bad in the business, they want to be confident that they will get their money back.
- Have good cash flow. A good rule of thumb is to have roughly 1.2 times the amount of total monthly debt service in monthly cash flow. This assures that the activity of the business can service the debt without having to dip into reserves (the banks don’t want to take possession of most types of collateral since they are not specialists in the business of those companies they loan money to).
- Understand how credit works and use it wisely. A DC’s credit score tells any potential lender volumes, with respect of his or her spending habits and financial responsibility. Managing credit is key to becoming financially healthy and a great lending partner for any lending institution. It also allows you to get money at a better rate. Here are some fundamental credit management rules:
- Pay your bills on time. Payment history (timeliness) is 35 percent of the overall credit score!
- Manage credit card balances. Having credit cards that are maxed out shows that there are issues with spending habits or earning ability. Closing a credit card that still has a balance remaining is a bad idea because once the account is closed, the credit that was available is eliminated but the balance still remains as debt that needs to be serviced monthly. This combination results in a higher debt-to-available credit ratio, which reduces the credit score. **If you are going to close a credit account, it is best to close newer accounts, rather than older ones, and those with the smallest credit limits since credit history (length of time an account has been open) and amount of available credit affect the credit score.**Credit scores are more favorable with smaller balances on multiple cards than large balances on one or two cards.
- Limit the number of credit accounts you have. It’s recommended that the number of credit cards be between two and six. Having too many cards is viewed negatively by credit scores.
- Review your credit score regularly and address mistakes quickly. Sometimes there are mistakes that result in a falsely lowered score. Reviewing the credit score regularly for any inaccuracies will keep your score as high as it should be! A great place to monitor you score is annualcreditreport.com.
You’ve worked so hard to become a great doctor, so why not spend some time in 2016 becoming a master of your financial health?
For any questions about the information in this article, Dr. Hoven can be reached at firstname.lastname@example.org. Click here to read more about Dr. Hoven. The author’s opinions are their own and DC Aligned does not take responsibility for content statements and opinions. You should seek expert counsel in evaluating opinions, treatments, products and services. For more info see our Editorial Policies.