In this fictional scenario we explore how early-career physicians can take their finances further by working with financial professionals from MD Financial Management and Scotiabank.
Meet Dr. Jacob Stern. He is an early-career physician who is looking to purchase his first home and pay down his student debt.
The scenario
Dr. Stern has just completed his residency and entered the workforce as a newly incorporated physician. He is 31 years old and married to Andrea, who is a teacher. Recently, the couple has been contemplating whether to buy their first home. Dr. Stern also wants to pay off the $150,000 balance of his student loans in the same time frame but does not know where to start.
His questions:
- Can I purchase a home with 5% down?
- Is it possible to pay my debt in three years?
We turned to Scotiabank Healthcare and Professional Advisor David Smith to provide Dr. Stern specialized advice and banking solutions. David has extensive experience working with new-to-practice physicians, and brought in MD Advisor* and Early Career Specialist Rachelle Gallant to build Dr. Stern and his family a sound financial strategy. Together, they were able to guide him on how to best proceed.
From the lens of the specialists
If Dr. Stern paid off his student loans and bought a home at the same time, it would not only limit his financial flexibility but hinder his long-term savings plan.
Taking a holistic planning approach
“We focus on goal planning with early-career physicians and look at their short- and long-term financial priorities. For recent graduates, paying debt is often their immediate concern, but we explain there are many financial strategies available that focus on more than debt repayment,” says Rachelle.
The shift from residency into the workforce is a big milestone that sparks many questions. David and Rachelle are specialized in helping new physicians like Dr. Stern understand what they can do today to prepare for a financially secure tomorrow.
Dr. Stern thought it would be possible to pay his debt and purchase a home in the same time frame. Instead, David and Rachelle proposed a flexible, customized solution that would allow him to achieve both over the long term, while saving for the future.
First, David opened Dr. Stern a corporate bank account to separate his personal and professional transactions for accounting purposes. Previously, he was using his personal account to process business expenses, which was complicating his finances.
David and Rachelle then helped Dr. Stern identify his financial priorities as it was not possible to repay his debt and buy a home in the time frame he imagined. Homeownership was a greater priority, so he and Andrea pursued this first.
Dr. Stern didn’t have substantial savings, so Rachelle recommended that he and Andrea open first home savings accounts (FHSAs), which would let them save for their first home tax-free up to a certain limit. Once they had maxed out their FHSAs, Rachelle recommended putting any excess funds into registered retirement savings plans (RRSPs). With these, they could take advantage of the Home Buyers’ Plan to withdraw from their RRSP tax-free to buy a home. Since contributions to these accounts are tax-deductible, this strategy would help the couple save for a down payment while helping Dr. Stern budget to pay his debt and lower his tax bill as an incorporated physician.
“I also connected Dr. Stern to a Scotiabank mortgage advisor who helped him get approved for a mortgage based on his projected income,” explained David. “This program helps residents and new physicians like Dr. Stern qualify for a mortgage at the start of their careers.”
Despite his student loans and not having enough for a down payment, Scotiabank and MD Financial Management identified a solution that would allow Dr. Stern to purchase a home, while positioning him to achieve his goals and prepare for the next phase of his career.
Physician-focused solutions
Scotiabank and MD Financial Management understand the financial concerns physicians have upon entering the workforce. Scotiabank’s Healthcare Specialists bring decades of experience in practice financing and together with MD Advisors play an integral role in helping physicians make decisions that fit within their financial plan. Learn more about how we can help take your finances further.
Rachelle Gallant
Financial Consultant ECS, MD Management Limited
Email: rachelle.gallent@md.ca
Phone: 506-227-4504
David Smith
Healthcare & Professional Advisor, Scotiabank
Email: davidj.smith@scotiabank.com
Phone: 709-576-7771 ext. 4301
* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager. MD Management Limited was the first of the MD Group of Companies to be founded, in 1969. MD Financial Management Inc. wholly owns MD Management Limited. MD Financial Management provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies. For a detailed list of these companies, visit md.ca and visit scotiawealthmanagement.com for more information on Scotia Wealth Insurance Services Inc. All banking and credit products and services available through the Scotiabank Healthcare+ Physician Banking Program are offered by The Bank of Nova Scotia (Scotiabank). ® Registered trademarks of The Bank of Nova Scotia, used under licence. Credit and lending products are subject to credit approval by Scotiabank. All offers, rates, fees, features, reward programs and benefits and related terms and conditions are subject to change.
