Many physicians carry student loans for decades after graduating medical school. As additional payments, like mortgages and car loans, get tacked on, doctors may find themselves in a stressful financial situation. COVID-19 also decreased revenues and raised medical supply expenditures.
According to Kristen Fuller, MD, although physicians typically earn a significantly higher salary than the general population, accrued debt at the outset of their careers can set some on the path to financial failure. This may potentially lead to bankruptcy.
Protection Against Financial Ruin
Physicians may find their finances and time affected by insurance reimbursement, which cause headaches for both doctors and their patients. It is not unusual for physicians to go weeks, or even months, before they get reimbursed. As a result, doctors may find themselves lagging on payments. What’s more, insurers like Medicaid or Medicare yield lower reimbursement, leaving physicians who frequently treat elderly or underserved patients at even greater risk for financial problems.
This does not mean, however, that physicians must adopt a fatalistic view of their finances as soon as they commit to medical school. With thoughtful planning and preparation, doctors can protect themselves.
20% Should Be Earmarked for Savings
Dr. Fuller suggests that physicians place 20% or more of their salary into a savings account. She also suggests putting an additional 20% or more into savvy investments, with the help of an investment banker. Physicians should check in with an investment banker a few times per year as well, making sure that they have a solid, effective investment strategy. Hiring a qualified tax professional will help physicians to alleviate undue stress when it comes to filing taxes.
Dr. Fuller also recommends shopping when there’s a sale and purchasing second-hand clothes. Luxuries like vacations and expensive dinners should only be indulged with money that remains after paying off monthly bills. Credit card points offer an excellent option when paying for travel plans.
Physicians can still enjoy the finer things in life, but they should simply do so in a responsible, thought-out manner. While it may lack the excitement of impulse, it is an excellent strategy for staving off the slippery slope of financial duress.