As a doctor, was the desire to help people a primary motivating factor in your choice of careers? How about money? There is no escaping the fact that doctors make six figures and, as such, are among the highest paid professionals in America. With the higher pay comes a greater need for solid financial planning.
Unfortunately, financial planning is a rare skill in our modern society. It is rare even among doctors who have all the motivation in the world to make sure their six-figure incomes prepare them for an eventual retirement that doesn’t rely on Social Security and other backstop programs. Doctors owe it to themselves and their families to begin developing and implementing solid financial strategies right out of medical school.
Some of the things that prevent doctors from practicing sound financial management are pretty common across all employment sectors. But there are three things – three big things – that are especially challenging for doctors. These are:
The average doctor emerges from residency with hundreds of thousands of dollars in student debt. It goes without saying that becoming a doctor is not cheap. The result of all this debt is a financial obligation that immediately puts a strain on a doctor’s earnings from the first day of practice.
Unfortunately, stringing student debt out to its fullest extent only hinders a doctor’s ability to plan for the future. So it’s incumbent upon doctors to get that debt paid off as quickly as possible. One way to do it is to spend the first few years working as a locum. Locum tenens pays more and, because housing, travel, and medical malpractice are usually covered by staffing agencies, the doctor can put more money toward debt retirement.
The second challenge is the career-building process. After so many years in school and residency, doctors enter the real world and immediately start looking toward building their careers. There is nothing wrong with that. However, it is easy to get so bogged down in building a career that a doctor has little time, attention, or energy to put into financial planning. It is easy to put off financial planning for another day.
You are familiar with the concept of having eyes too big for your stomach at the dinner table. A similar principle holds true for doctors and financial planning. Let’s face it, a six-figure income invites a lot of unnecessary spending in the early years of a doctor’s career.
Big eyes can lead a doctor to spend what he or she should be saving for the future. It can cause doctors to find themselves living well beyond their means within just a few years of starting to practice.
Whether working as a locum, an employed doctor or a private practice owner, the smart physician will wisely put his/her six figures to work for both the present and future. The smart physician understands that earning six figures does not negate the need for sound financial planning.
All the rules that apply to five-figure earners also apply to their six-figure counterparts. The doctor should be living by a budget. He/she should be saving for emergencies. He/she should be putting money into a variety of vehicles designed to support him/her in retirement.
It is unfortunate but true: financial planning is a rare skill in modern America. It’s a skill that really needs to be regained by workers in every field. That includes doctors. Solid financial planning is key to keeping us all out of the poor house.