Despite six-figure salaries and plenty of perks, more and more doctors are falling victim to preventable financial mishaps near the end of their careers. Although resolvable, this issue raises questions about how these situations are best mitigated and changed.
Even though physician-ship is lucrative, physicians are no different than any other worker in terms of their need to save for retirement, manage finances and budget costs. They need sound financial strategies in place to manage debt, day-to-day budgeting and future financial goals. Moreover, as with any other profession, the sooner a physician implements such strategies, the better his or her situation will be.
Here are some helpful tips that physicians may use to maintain a healthy financial position throughout the physician career cycle:
1. Adopt Realistic Financial Beliefs
There is one component common to all groups of workers who experience financial troubles: an unrealistic attitude toward wealth, savings and income. This is just as true for physicians as it is for auto mechanics and other professions. How one views money while young plays a definitive role in how much money one will have when he or she retires.
For instance, a 2012 CNN story regarding physicians’ financial troubles led to significant discussion in the physician community. Although physicians are credentialed, educated and positioned to earn large sums of income, they also have greater responsibility to pay off education debt and pay higher insurance premiums—factors oftentimes overlooked by the allure of a six figure salary.
Money is a tool – nothing more, nothing less. Physicians must be very careful about excessive spending if they wish to circumvent the common, yet avoidable financial pitfalls of physician-ship.
2. Reduce Debt First
According to Physicians News, 86 percent of those who graduate from medical school carry significant debt. Debt among private school graduates averages $185,000 as compared to $155,000 among public school graduates. It is also debt that will cost in terms of interest and maintenance charges. The best thing a new physician can do is concentrate on deleveraging that debt before doing anything else. Retiring student debt should take precedent over purchasing a home, car, etc.
3. Save and Invest
New physicians need to set aside fixed, pre-established amounts of money every month in savings. That money can be used as a rainy day fund in the event of a financial emergency. Without a rainy day fund, it is too easy to accrue credit debt. Additionally, young physicians should also establish an investment plan to which they contribute from every paycheck. Implementing an investment program as a young physician provides an optimal amount of time to build a solid financial foundation.
Please keep in mind that these three tips are to be viewed as beginning reference points. For further advice on financial matters for physicians, experts should be consulted.
This blog is made available for educational purposes only as well as to give you general information and a general understanding of this topic, not to provide specific financial advice (or any legal advice). You should always check with a trusted financial or legal professional before making decisions on how to handle your finances.
- CNN – http://news.blogs.cnn.com/2012/01/05/overheard-on-cnn-com-broke-doctors-...
- Physicians News – http://www.physiciansnews.com/2015/02/07/secrets-to-financial-success-fo...