Physicians face a number of challenges in their careers. One challenge for many physicians is how to manage finances. Ideally, physicians will both maximize the amount of earnings they maintain and know how to successfully invest some of it. They can achieve this goal by taking a few key initiatives.

For example, physicians should not wait until they are middle-aged to start saving. Writer Jonathan Ford Hughes notes that although many physicians start out with a budget, this practice tends to wane as physicians’ salaries increase. No matter how large a salary one may earn, it is always wise for physicians to know where their earnings are going.

Seeking out the assistance of a financial advisor early in one’s career is most effective, according to W. Ben Utley, a professional medical financial advisor.  Investing writer Alana Benson suggests securing a financial advisor who is a fiduciary. This ensures that the advisor has an ethical duty to suggest investment options that are in a physician’s best interest.

Establishing an Emergency Fund Is Critical for Physicians

Another crucial error made by many physicians is not establishing an emergency fund. Consider the large number of canceled procedures, missed appointments, and decreased patient volume that occurred due to the COVID-19 pandemic in 2020 and 2021. Physicians with established emergency funds were better equipped to manage these drastic changes than those without a reliable financial source. A savings of around 3 to 6 months’ worth of expenses in cash is likely what one would need in a solid emergency fund, according to Hughes.

An additional financial error often made by physicians is the assumption that their retirement is covered by any retirement accounts offered by their employers. While employee offerings like a 401(k) may indeed cover retirement, it is by no means a guarantee. Hughes suggests investing in additional areas like real estate to provide more cushioning. Utley suggests that physicians hold on to more of their earnings by practicing some tax-saving basics like opening a healthcare savings account (HSA), which provides a triple tax break via contribution deduction, tax-deferred growth, and no taxes paid on a qualified account withdrawal.

Choose a Savvy & Reliable Certified Public Accountant

Utley also stresses the importance of obtaining a quality Certified Public Accountant (CPA). He suggests  choosing a CPA who promptly returns calls and is well versed in modern technology. A quality CPA should also commit to memory how the new 199A works, whether taxable bonds or municipal bonds are better for a client and why, how the alternative minimum tax works, and how the backdoor Roth IRA strategy works.

Physicians must make financial decisions with the understanding that they are mortal, and accidents or illnesses can happen not just to patients, but to doctors as well. Therefore, it is imperative that physicians secure disability insurance. According to Lawrence B. Keller, founder of Physician Financial Services, it is essential that physicians know the positives and negatives of one company and policy versus another so that they can invest in a policy that best suits their needs.