While earning a high income certainly benefits physicians, it is also accompanied by the increased possibility of financial errors.
According to medical writer Jonathan Ford Hughes, physicians must learn how to both keep more of what they earn and build upon what they have. One huge mistake that physicians often make is not saving for the future at the start of their careers. One day, they find themselves at midlife without a nest egg in place. Waiting until that point to initiate meeting with a financial advisor regarding savings is detrimental to any physician’s financial health.
Another key piece to saving is making sure to establish an emergency fund for unforeseen occurrences, like a pandemic. Hughes suggests trying to gain 3 to 6 months’ worth of expenses in cash to be prepared for an emergency that might halt steady income. This is where budgeting can be quite helpful.
Keep Track of How Much You Are Spending
Hughes notes that physicians tend to be proactive about budgeting at the start of their careers, but as they begin to earn more, budgeting falls to the wayside. Doctors must bear in mind that, while they may not need to account for every minor food expenditure once they have reached a certain income bracket, they do still need to have a general understanding of how much they are spending and how they are spending it. For instance, physicians should know if they’re overspending on non-necessities that add up, like unused subscription services or restaurant meals.
How physicians choose to manage student loan debt is crucial to their financial health. Hughes suggests that many doctors needlessly pay back thousands of dollars, as healthcare organizations have non-profit status, which makes their physicians eligible for Public Service Loan Forgiveness (PSLF).
Don’t Overlook Managing for Retirement
Retirement savings is another area in which, according to Hughes, physicians often fail to optimize their potential for financial health. He notes that, while many physicians participate in company initiated 401(k) investments, most of them don’t make the effort to further explore additional investment options, like a 529 account to assistance with children’s college tuition.
Other financial healthcare mistakes made by physicians include overlooking the importance of paying for disability insurance and for quality malpractice insurance. Hughes notes that physicians must consider not only their existing reality but also the what ifs that could potentially crop up unexpectedly. For example, if for some terrible reason a physician could no longer practice medicine, having disability insurance would prove indispensable.