3 minFinancial planning tips for healthcare professionals
Building, protecting and growing their assets can be a very real challenge for healthcare professionals. It is essential to start by asking the right questions on both a professional and personal level. To get to grips with what can be a complex set of needs, from the disposable income for your practice, to asset composition and diversification, we have a thorough understanding of the specific needs of the medical profession to make sure you get the right advice to make informed decisions.
How to calculate disposable income?
The first step when building your asset portfolio is to calculate your disposable income to determine how much you can allocate to savings and investment. First calculate your net income, which is your income after tax and social security contributions, in order to work out how much you need for your everyday expenses. The next step before you decide on an investment is to calculate your total professional and personal expenditure.
Example of how to calculate net income for a freelance professional
| Professional income | €300,000 |
| - Soc Security | -€37,620 |
| - Mutual insurance | -€3,660 |
| Taxable income | €258,720 |
| - Tax | -€99,547 |
| - Long-term care insurance | -€3,622 |
| Net income | €155,551 |
-> Net income = +/- 50% of professional income
-> Net income - Personal expenses = Saving and investment capacity
What your assets consist of and how to diversify your portfolio
Your assets are the sum of everything you own as an individual and as a professional. They are made up of:
- Cash or liquid assets
- Money market products (such as term deposits)
- Financial investments
- Property
- Provident products
- Other assets, such as art pieces or classic cars
The tools available to grow your assets
Term deposit account
Term deposits are one of the first options to consider to earn interest on your money. In a term deposit account, your money is deposited for a fixed period of time at a fixed rate of interest and your capital is guaranteed. Your money is invested in the currencies and amounts you choose for a fixed term, based on the market rate on the date of your investment.
Investment in securities
Investing in bonds, equities and investment funds is another way to make your money work for you over the long term. Of course, risk, returns and the applicable tax rules can fluctuate, so it is crucial to know how much risk and uncertainty you can tolerate and to consult your adviser about the best diversification strategy by asset class to spread the risk. Your adviser will determine your risk tolerance level, help you find the best asset allocation for your needs, and, where appropriate, manage your portfolio. These financial instruments can play an important part in protecting your capital and purchasing power to keep pace with inflation. Since the return is typically higher than what you can expect from term deposits, this type of investment will help grow your wealth over the long term.
Investing in property
Property is a very attractive asset class for investors. The type of real estate you choose to invest in, whether for private use, professional use or as a rental property, will depend on your objectives. Different tax rules apply to different categories. The Luxembourg government has introduced a number of attractive, time-limited tax incentives to encourage investment in property and boost the housing market.
Retirement savings
It might seem far into the future, but planning for retirement is vital to maintain your quality of life and enjoy the lifestyle you want. In 2019, Luxembourg introduced a supplementary pension scheme for the self-employed (RCPI). Open to professionals, the new system allows you to set aside money in a supplementary pension fund. It offers several tax advantages, including tax-deductible premiums.
Get expert advice on managing your wealth
Consulting the experts will help you make the right decisions on how to structure your assets to protect and grow your wealth over the long term. No two situations are the same. You need a reliable partner to provide financial planning advice and guidance at all stages of your medical career and for your personal plans.
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