Why Traditional Financial Planning Does Not Work for Canadian Physicians
Welcome to my first solo episode!
If you've ever Googled a financial planning question and walked away more confused than when you started, you're not alone.
I put a survey out to over 100 Canadian physicians and asked how they felt about their financial situation. The results were telling: 58% said they were confused about where to start with financial planning and didn't know who to trust. And when it came to their corporation specifically, 80% said they were not at all confident or only somewhat confident that they were using it efficiently.
That's not a knowledge problem. It's a relevance problem. Most of the financial advice out there simply doesn't apply to the reality of an incorporated physician in Canada.
In this episode:
Why the financial advice you find online doesn't fully apply to physicians
How the Medical Professional Corporation changes every financial planning question
Why even the question of RRSP vs. TFSA is more complicated for physicians
What to focus on first if you're incorporated
The Problem with General Financial Advice
There's no shortage of financial content available to Canadians: books, articles, podcasts, YouTube channels. A lot of it is genuinely good. But when a physician reads a highly regarded personal finance book and comes to me excited about it, I often have to say: yes, but it doesn't fully apply to your situation.
The most common topics you'll find when you search for Canadian financial advice are things like RRSP vs. TFSA, what kind of insurance to get, and whether to pay off debt or invest. These are all relevant questions. But for incorporated physicians, none of them can be answered properly without first understanding how your corporation changes the picture.
There's also the issue of conflicting information. I've literally seen two physicians standing side by side at an event where one said a particular strategy was a great idea and the other immediately said it was a terrible idea. And it goes beyond opinions. I found one article from a highly regarded Canadian accountant saying physicians should use a TFSA, and another article from another highly regarded Canadian accountant saying they shouldn't. Even the experts don't always agree, because the right answer genuinely depends on the specifics of each person's situation.
One more thing worth mentioning: a lot of the physician-specific financial content that's gained popularity comes from American physicians. The American situation is completely different from the Canadian one, and in almost every topic there's something that applies in the US that simply doesn't apply here.
What Makes the Physician Situation Different
The answer comes down to one thing: the Medical Professional Corporation.
Without a corporation, when you earn income it flows directly to you, gets added to your marginal tax rate, and the more you make the higher you go. You don't have a lot of control over how that income is treated.
Once you're incorporated, the money lands in the corporation first. From there, you have to decide how to pay yourself: when, how much, and in what form. The money that stays inside the corporation has to be invested in a tax-efficient way that accounts for passive income rules and the different types of tax that apply to corporate investments. That's a layer of complexity that makes every other financial planning question harder to answer.
One physician I interviewed on the podcast called the corporate structure a gift to physicians, and I'd agree with that framing. It is a powerful tool for creating and building wealth. But it requires a different approach than what most general financial advice covers.
Want to go deeper?
I have a private Facebook group specifically for Canadian physicians where I answer financial planning questions and post new content first. Join the group here.
Where to Start
The traditional financial planning conversation spends a lot of time on RRSP vs. TFSA. That's not an unimportant question, but for an incorporated physician, how to use your corporation efficiently is a far more important conversation to have first. Everything else flows from there.
Future episodes will go deeper on the specific questions that came up most in the poll: paying off debt vs. investing, whole life vs. term insurance, how to make the most of your corporation, how to build your own pension, and index funds vs. mutual funds. But this is the foundation that makes all of those conversations make more sense.
If you'd like to work through what this looks like for your specific situation, book a free discovery call and we can figure out what actually applies to you.