Keeping track of expenses? I mean who does that? This reply came from one of my doctor client who’s about to start with the financial planning exercise. I am sure many readers of this article are of the same view as almost all professionals are only concerned about the income part in their cash flow and do not pay heed to the expenses they do. They feel that they earn to spend. Which is true in one way but you also have to understand that it is your spending that designs your financial future.
Being unaware of expenses can be attributed to one of the following:

  •  Many professionals, especially practicing doctors, receive fees in cash and their inflows vary month to month. I think there are very few doctors who are able to exactly account for all the details of their income.
  •  The discipline required for recording accounts and creating financial statements is missing. Though many doctors have full time accountant to do this work, but still they have no clue of their profitability in a month or a month when their expenses have surpassed their income.
  • With good inflows of cash, they were told by their accountants to make the expenses in cash otherwise they will have to show the income and file income tax returns that will be taxed. So the unaccounted income turns into unaccounted expenditure.

Many doctors have not demarcated personal expenses with business expenses. So whatsoever expenses came in front of them they pay it from pocket. I understand that profession earns for personal expenses, but one also has to know what personal expenses are getting paid from professional income. The financial planning for personal finance and business finance are two separate subjects. I completely agree that income is what we work for but from the financial planning viewpoint, one’s expenses are the most important factor in his/her financial life. Your expenses decide your investible surplus.Your expenses reflect your lifestyle that determines your future. In other words, your retirement planning, your insurance planning, your savings towards your children’s future goals etc. all depend on your spending habits.
fiscalfitnessWhat should a doctor do to keep track of expenses?
Now here comes the difficult, but interesting and important task.
Why difficult? As this involves painstakingly keeping track of every expense made.
Why Interesting? Because this will give you a clear picture of the expense side of your financial life. That may throw light on problem areas that need to be dealt with.
Why Important? As discussed earlier that your expense structure will form the base for your personal financial planning.
Doctors can follow the following steps to be friends with their expenses.
1. First and foremost a doctor should understand that personal, financial and professional life has its own risks, demands and goals. So one should be convinced with the importance of financial planning in every sphere of life.
2. Then one should clearly demarcate the professional and personal expenditure. It’s better if a practicing doctor can start paying himself a fixed salary and all his personal family expenditure like grocery, utility bills etc. should be done from his personal account. Though the expenses made through cheque or credit cards are clearly visible, but one should also take a note of expenses that are paid in cash. Collecting receipts and/or slips of all the payments made may help.
3. There are many expenses which overlap each other like the home loan EMIs and you operate your practice from home, car loan EMIs and you use car for personal and professional purposes both and so on. One should clearly figure out how much of expenses should be allocated to respective areas.
4. Now write down a detailed cash flow statement showing your Income from all sources (practice, consulting, teaching, dividends etc.) minus clinic expenses minus personal expenses. Result would be the total investible surplus which you can use for your personal and professional goals. But if you have followed the point no. 2 mentioned above then you can figure out your personal investible surplus.
This exercise solves dual purpose, one it tells the doctor that if he/she’s generating cash flow surplus after all necessary and lifestyle expenses and other it will also point out the problem areas where he/she needs to work on. When income flow is good no one bothers about expenses but in the reverse situation one should be in a position to curtail the expenses. So why not to start this practice in the former scenario and use your surplus in a much better way.
Practicing CFPCM and the founder of Marvel Investments (

The Author is a member of The Financial Planners Guild India (, a non-profit organization, whose members are Practicing Financial Planners.