With COVID-19’s appearance, healthcare’s financial footing has been losing grip, frequently leading to frightening and harmful outcomes for physicians. A California Medical Association survey found that 64% of physicians expressed a need for financial assistance, 47% of physicians required temporary housing, and 95% of physician practices reported concern about their financial wellbeing.
A study published in the International Journal of Medical Education found that medical residents and fellows have low levels of financial literacy and, as a result, high debt. Nearly 33% of respondents noted struggling to find funds for monthly expenses, regardless of their median income being around the national average. Researchers concluded that training in budgeting, estate planning, investing, and retirement planning are essential for providing medical school students (and doctors) with the ability to effectively manage finances.
Emergency physician Jim Dahle, MD, suggests a common and basic financial error that plagues physicians is simply not devoting adequate time to their finances. As a result, economies of scale are not achieved. Dr. Dahle’s solution is for physicians to learn how to put their money to work and how to save money wisely. This can be achieved as long as physicians gain an understanding of how to invest, what risks might be involved, and how to avoid negative outcomes.
Climbing medical school debt is a growing financial burden. According to data from the Association of American Medical Colleges, loan amounts jumped 2.5% in merely one year, from 2018 to 2019. While physicians may have high salaries, they nonetheless struggle to pay off debts. Solutions include applying for federal loan forgiveness or refinancing student loan debt. However, physicians must comprehend their budgets and secure lower interest rates.
A survey from the Medical Group Management Association found that the pandemic led a whopping 97% of physician practices to lose money and almost 50% to institute furloughs by April 2020. Furthermore, practices saw revenue decrease by 55%, signaling that knowledge of how to save and prepare for the unexpected is lacking amongst physicians.
Financial strains also take a toll on physician wellness, often leading to burnout and working beyond retirement age. Having a reliable savings plan is an excellent way for physicians to limit the financial strains that accompany insufficient compensation, low reimbursement, and burnout. A CompHealth study found that 50% of physicians continued working beyond retirement age, enduring declining career satisfaction and burnout, in an effort to maintain their lifestyles. Furthermore, 37% of physicians who chose to work beyond retirement age expressed concern for their own declining personal health.
An effective savings plan could help to eliminate such situations. While it is never too late to begin planning, the earlier physicians educate themselves on finance management, the more likely they are to achieve financial success, career satisfaction, and timely retirement.