Paying Yourself a Fixed Salary From Your Practice

Most doctors I meet pay themselves in one of two ways. Either they take "whatever's needed" from the practice account whenever a bill comes up, or they take almost nothing and leave everything in the clinic "for growth".

Both feel sensible. Both cause problems.

The first lets your lifestyle rise with every good month and never come back down. The second leaves your family with no wealth outside a practice that still depends on you. The fix sits between them: a fixed salary, and profit taken out on a schedule.

Why should a doctor pay themselves a fixed salary?

Because when your spending is tied to whatever is sitting in the account, every good month quietly raises your lifestyle.

A strong quarter becomes a bigger car. A busy season becomes a renovation. And when a slow month arrives, the EMIs don't shrink with it.

A fixed salary stops that creep. It does three other things too:

• It shows the practice's real profit. With your pay as a fixed line, the profit left over is what the business earns beyond your own work.
• It makes investing automatic. A predictable salary lets you set up a fixed monthly investment before you spend.
• It's how buyers and investors think. One day, someone valuing your practice will ask what it would cost to replace you. A fixed salary answers that question.

Rule: Pay yourself a salary, not whatever's left in the account.

How much salary should you take?

There isn't a single right number. But there is a right way to find yours.

1. List every personal expense from the last twelve months, from your bank statements, not your memory. Home, EMIs, school fees, travel, household staff, support for your parents, insurance and everything else.
2. Divide by twelve. That's your real monthly lifestyle cost.
3. Add a fixed monthly investment you'll send out automatically before you spend the rest.
4. Check the practice can carry it in a slow month, without dipping into its reserves.
5. Set it, and leave it alone for at least a year.

Here's an example. Say your family really spends ₹3 lakh a month, and you want ₹1 lakh a month going into long-term investments automatically. Your salary is ₹4 lakh a month. On the day it lands, ₹1 lakh leaves for investments. You live on ₹3 lakh.

Now check the practice. If its slow months still leave enough to pay your ₹4 lakh along with every other cost, the number works. If not, start lower and raise it once the practice's numbers improve.

When do you take the rest of the profit?

Every quarter, on a fixed date, once the practice's reserves are healthy.

"Healthy" means the clinic has its own cash runway: at least three to six months when it's stable, and at least twelve months before you plan to scale or open another centre. Until the reserves reach that, extra profit stays in the practice.

Once they're there, take the quarter's extra profit out and give it a job. It goes into your three buckets, in order: safety first, then growth, then opportunity. Not into the next car.

Here's an example. Say after your salary and every other cost, the practice made ₹12 lakh of extra profit over the quarter, and its reserves are already at target. You move ₹12 lakh to your personal side and follow your written plan. Maybe your safety bucket is full, so it goes into your growth and opportunity buckets in the split you agreed with your adviser.

Why does a fixed salary matter so much for your future?

Because of what lifestyle costs at the finish line.

Your walk-away number, the investment pot that can fund your lifestyle forever, is roughly your annual lifestyle cost multiplied by 30. So every rupee you add to your monthly lifestyle adds thirty rupees to the finish line.

Here's an example. Say a good year tempts you to spend ₹50,000 more a month. That's ₹6 lakh a year. Multiply by 30, and you've added ₹1.8 crore to the money you need before you're free.

A fixed salary doesn't stop you from ever raising your lifestyle. It makes every raise a decision instead of an accident. Review your salary once a year, on a fixed date, and change it on purpose.

How does this work with tax and structure?

That depends on how your practice is set up. A sole proprietor drawing money, a partner in an LLP and a director of a private limited company are each treated differently, and the rules change with each budget.

So sit down with your CA and ask:

• How should my fixed monthly amount be paid and recorded in my structure?
• How should the quarterly profit be taken out?
• How much should the practice set aside for advance tax every month?
• Would a different structure make more sense at my stage?

Your CA gives you the answers. Your job is to ask the questions before you set the number, not after.

What does the whole system look like?

1. Practice and personal money in completely separate bank accounts.
2. Every patient payment lands in the practice's main account.
3. On a fixed date, money moves to operating costs, salaries, taxes, equipment and reserves.
4. Your fixed salary moves to your personal account. Your automatic investment leaves the same day.
5. Every quarter, once reserves are healthy, extra profit comes out into your three buckets.
6. Once a year, you review your salary and your walk-away number together.

It's dull. That's the point. Dull systems let your money grow without your mood getting a vote.

If you'd like help setting this up alongside your CA, that's part of our growth consulting work. The full money framework is in Rich Doctors Walk Away, and you can book a free growth call to work through your own numbers.

The short version

• Take a fixed monthly salary from the practice, set from your real twelve-month expenses plus an automatic investment.
• Take extra profit only quarterly, once the practice has three to six months of reserves.
• Send every quarterly payout into your three buckets: safety, growth, then opportunity.
• Every extra rupee of monthly lifestyle adds about thirty rupees to your walk-away number.
• Confirm how your salary and profit should be paid in your structure with your CA.