Cash Flow Terms and Budgeting Definitions

A “Need to Know” Glossary for all Medical Professionals

Staff Writers 

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Regardless of how much current income a physician may earn, financial resources and assets are only useful when they are converted to cash. Doctors who are in the accumulation phase of their careers can only amass new assets from free cash flow.

Free cash flow is the result of budgeting for excess cash flow and the prudent use of debt. And, debt can be either a friend or foe!  

If used properly, debt can increase a medical professional’s standard of living by allowing him or her to enjoy an asset or goal earlier than if he or she had to pay cash.  Or, it may be a catastrophe as seen in the recent housing market value-decline and security backed mortgage-bubble bust.   

Yet, debt management has become a serious issue in American society, especially for non-secured debt because of easy access to credit via credit cards. And, it is not unusual to hear the story of a medical professional with $100,000 of credit card debt; or more.  Although perhaps an extreme example, it is not unusual for doctor’s to have $15,000 to $25,000 of revolving credit card debt.  

Glossary of Terms 

Adjustable rate mortgage: A mortgage loan that has an interest rate that changes in response to market interest rates during the loan’s term. 

Cash reserve: The amount of assets that are quickly convertible into cash for the purpose of meeting un-foreseen expenditures or reductions in income. 

Closing costs: Expenses that accompany the buying, selling, or financing of real estate. 

Consumer Price Index: A statistic published by the Bureau of Labor Statistics for the purpose of reporting the average consumer inflation rate. 

Debt consolidation: A debt management strategy that involves borrowing money in a single loan to repay other debts. 

Deferred expenses: Expenditures that are planned to occur several years in the future, usually requiring large outlays of cash. Examples include paying for college expenses, buying a vacation home, and paying for a child’s wedding. 

Discount points: Payments made to a lender at the inception of a loan for the purpose of reducing the interest rate of a loan.

Federal Deposit Insurance Corporation: An agency of the United States government that insures deposits in federally and state-chartered banks. 

Federal Depository Insurance: A program of the Federal Deposit Insurance Corporation that insures depositors in federally and state-chartered banks. 

Fixed rate mortgage: A mortgage loan that has a constant interest rate for its whole term.

Home equity loan: A mortgage loan, usually in addition to the primary mortgage loan, which allows the borrower to convert a portion of real estate equity into cash. 

Loan origination fee: Payments made to a lender at the inception of a loan to pay for the lender’s underwriting services.

Money market deposit account: An account offered at a banking institution that has features similar to a money market mutual fund. Accounts under $100,000 are insured by the Federal Deposit Insurance Corporation. 

Money market mutual fund: A registered investment company that invests in securities that have short-term maturities (usually from several days to several weeks). 

Mortgage broker: An intermediary who charges a fee to facilitate acquisition of a loan to purchase real estate. 

Mortgage insurance: A coverage that is often required by lenders, and paid for by borrowers, for the purpose of insuring the lender against potential default by the borrower. 

National Credit Union Administration: An agency of the United States government that insures deposits in credit unions. 

National Credit Union Share Insurance Fund: A program of the National Credit Union Administration that insures shareholders of credit unions. 

Non-recurring expenses: Irregular household operating expenditures, the timing of which during a year may not be determined precisely, or expenditures that occur less frequently than monthly. Examples include car repairs, home repairs, and insurance premiums. 

Personal Inflation Index: A statistic that adjusts the Consumer Price Index to specific spending patterns of a household. 

Recurring expenses: Regular household operating expenditures that occur every month. 

Reverse mortgage: A loan secured by real estate that allows the borrower to convert equity into cash without having to make monthly payments during the term of the loan. The loan plus accrued interest is paid from the proceeds of the sale of the property.

Savings Association Insurance Fund: A program of the Federal Deposit Insurance Corporation that insures depositors in federally chartered savings institutions.

Securities Investor Protection Corporation: A membership corporation of securities firms that was authorized by the Securities Investor Protection Act of 1970. 

Total Annual Loan Cost: The total annual financing costs associated with a reverse mortgage.

For more information: 

Note: Feel free to send in your own related terms and definitions so that this section may be updated continually in modern Wiki-like fashion.

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One Response

  1. Physician Cash Flow Bogged Down by New Standards

    New federal standards designed to streamline electronic insurance claims are instead slowing them down, hurting physician cash flow and pushing some practices into financial distress.

    Susan Turney, MD, the president and chief executive officer of the MGMA, urged HHS to postpone enforcement of the HIPAA Version 5010 standards for electronic claims and other billing transactions such as requests for claims status until at least June 30. In the meantime, physicians and insurers should be allowed to do business electronically based on the earlier Version 4010 standards.

    Ann Miller RN MHA


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