Managing relatives’ expectations concerning money can be a minefield. Here are some tips on how to get the conversation started.
Every physician knows how important it is for families to have discussions about their physical health and well-being. But when it comes to discussing their own family’s financial health, many would rather avoid the subject. After all, for most people, money is still a taboo subject—and talks about it can get emotional, especially if family members aren’t on the same financial page.
The topic can be even more fraught with expectation and misunderstanding when a physician is the first in his or her extended family to be a high-income earner.
Income versus net worth
“One of the things I have become aware of working with physician-families is that just because doctors are high-income earners does not mean they are high net worth,” explains Dr. Moira Somers. “A percentage of them struggle financially for a whole host of reasons.” Dr. Somers, the founder of Money, Mind & Meaning, is a clinical neuropsychologist, professor and executive coach who often works with professionals looking to achieve both greater business success and greater personal well-being.
Many physicians, especially those who are the first in their family to spend an extended period in graduate education, incur a substantial debt when they’re students—typically $100,000 in Canada for med school graduates. Though the debt load of these students may be huge on graduation, often banks are only too happy to offer loans for homes and cars once they’ve launched a successful medical career. “New physicians can easily find themselves moving from one level of indebtedness to the next,” says Dr. Somers. That debt can become even more daunting if a physician gets added financial pressure from extended family.
“Many physicians get caught up in extra debt because they feel they are expected to play the part,” says Dr. Somers. Some family members might try to benefit from their “wealthy” relative, but it’s more likely that first-in-family physicians will want to take care of family members who were there for them in the past. They can overextend themselves because they want to give more.
It’s that wish to do more (combined with a reluctance to set limits) that can lead to trouble. It’s important for physicians to take the time to understand their financial situation and take the necessary steps to get to—or remain on—a firm financial footing.
Setting the groundwork
First-in-family physicians don’t have access to parents or other relatives who have successfully navigated medical school, student debt and a medical career. It’s up to them to give serious thought to “making the math work”—through setting goals and meeting with a financial professional to discuss how best to achieve their targets.
To guide her clients, Dr. Somers applies both financial and psychological research. She says physicians must be willing to discuss money with their family even if that sometimes seems awkward. “Like any other skill, it gets easier—and better—with intentionality and practice.” These discussions should not be just about the math, but also about values.
After they’ve established a career and paid off their debts, first-in-family physicians may soon discover their extended family relationships being undermined by envy. “Whether it’s true or not, the assumption may be made that doctors and their kids are rich. Being identified as a rich kid can cause a lot of pain,” notes Dr. Somers. The physicians may have to discuss matters with their spouse and children to equip them to deal with this type of pressure.
Addressing expectations about your legacy
Talking about money as a family ensures that everyone’s expectations are clear. All family members should understand, early on, what you—as a high-income earner—are and are not prepared to do to support their goals and/or supplement their lifestyle.
That same intentionality applies to legacy issues. Dr. Somers says that all too often, adult kids and other relatives learn about the legacy plan at the will reading, rather than before. It could be damaging to family relationships if your legacy wishes come as a complete surprise. To avoid this, make the time to have conversations about your plans for your money, and also about your hopes for the transmission of values from one generation to the next.
“If you make the time and effort to have peaceful and productive money conversations with your family,” she explains, “you’ll be well-positioned to continue to have thoughtful conversations as you age and if your financial circumstances change.”
That’s where financial advisors can provide an important service for physicians. They can help them talk through all these issues and work with them to define their own values, limits and plans. And that’s time well spent.