Everyone has their own challenges in managing their finances. However, those in certain careers can find that they have unique challenges to face. Doctors face some interesting issues in that they start their careers later than many others and usually have a mountain of debt to contend with. Doctors aren't immediately rich as soon as they begin earning a salary, and many of them can develop poor financial management skills. If you're a doctor who needs help managing your money or you're just about to qualify and earn a full-time wage for the first time, you could look after your finances much better with just a few useful tips.
Check Your Ego
If you've qualified as a doctor, you're no doubt a smart and hardworking person. It takes a lot to get there, and you need to have great determination. You also need to have the funding to back up your education. However, it's important that you don't let your pride and your ego get in the way of managing your money effectively. As a doctor, you can get used to being the one in charge and making all the decisions. Asking someone else for help, even if it's in a completely different area of your life, can stick in your throat. But it's important to recognize that just because you're an expert in one area, it doesn't mean you know everything.
Live Within Your Means
One of the first things to remember is that you shouldn't immediately start spending more when you begin earning more. It's understandable that you would want to. After all, your non-doctor friends (if you have any left), finished school years ago and started earning long before you. You've been living on a student budget while they've had a head start on everything. When you finally start making money, and a lot of it, it's tempting to start splashing out on whatever you want. While a few treats to reward yourself might not be a bad idea, living within your means needs to be the ultimate goal.
You still have debts to pay off, and you now need to start thinking about the future. It's best to think about long-term goals, and not just a few things that you want to buy right now. Perhaps you're evening thinking of starting a family, which is going to require some sensible budgeting.
Make a Plan for Paying Off Student Debt
According to the Association of American Medical Colleges, the average medical school debt for newly-qualified physicians was $183,000 in 2015. The amount had been climbing before that, so it is no doubt even higher now. With an average undergraduate debt of around $24,000, the average graduating physician will have over $200,000 in student debt. Many will have more, depending on the school they attended. Residents start off on a fairly low wage, but once you're earning a full physician's salary, you can expect to be earning well into six figures on average. But with all that debt still to take care of, it would be unwise to start living the high life.
When it comes to paying off your debt, you might want to try and make the smallest payments possible. Trying to pay your debt off faster can sometimes mean that you have to pay penalties, which can be a deterrent. However, you should also think about your debt in terms of the total amount you will eventually pay. Aiming to pay off your student debt sooner could mean you pay less. Prioritizing your debt could help you to deal with it faster.
Protect Your Income
Suddenly being without your income certainly isn't something you want to face. Doctors can benefit from several different types of insurance, including malpractice insurance which can help to protect them from lawsuits. However, one of the things that can stop anyone working is being ill or injured. Sometimes you might need to take a short time off work, but other disabling conditions could mean you are unable to continue working for a long time or might be unable to return to work at all. You need physicians insurance if you want to make sure that your income is protected. Disability insurance will generally protect around 60% of your income and can pay out monthly benefits until retirement age. Any doctor needs to make sure they are insured adequately to protect them in various ways if they want to avoid huge financial issues in the future.
Get Professional Advice on Your Finances
A lot of doctors might feel that they don't need financial advice. After all, if you're smart enough to become a qualified doctor, you would think that you can manage your money without help. However, knowing a lot about one subject doesn't mean that you're able to put your mind to anything. Finance is a completely different field and being good at math isn't all you need to make smart financial decisions. When you have a high income but you also have large amounts of debt, and you want to start preparing for the future, balancing all of your priorities can seem tricky. Getting professional help from a financial advisor is a smart thing to do. They can discuss your goals and help you to make sensible decisions. However, you will only get the best out of their services if you're willing to listen to them and consider their recommendations.
Save on Taxes
Making savings on your taxes is an important way to manage your money as a doctor. It's important to know your tax bracket and understand how that's going to affect your take-home pay, so start by getting familiar with how much tax you could potentially owe. There are always ways to reduce your tax bill, though. You can start by making maximum contributions to your retirement accounts and health savings account. Look for any areas where you might be able to secure a tax deduction, whether it's on charitable donations or saving for your child to go to college. A financial advisor or accountant can help you out so that you can make the most of your money.
Save for the Future
Having some actual money to spend after being a cash-strapped student can make you want to start spending, but it's important not to overspend. You might be able to afford to live more than comfortably now, but you don't want to find that you have nothing to show for your hard work in the future. Saving some of your money is essential, and there are various things you might want to save for. You can create both long and short-term saving goals to help you decide what to do with your money. In the near future, things like buying a home are likely to be a priority. However, there are also things like saving for your children to go to college or making sure you're saving for retirement.
Create an Investment Plan
Putting away savings is useful, but growing your money is also a good idea. Instead of letting your savings just sit there, possibly collecting a small amount of interest, choosing some smart investments can help you to make the most of your money. A diverse investment portfolio can allow you to grow your money and invest in your future without taking too much risk. There are many different ways to invest, whether you want to look into the stock market, precious metals or real estate. Before you start investing, it's smart to get professional investment advice and to continue researching and receiving advice from experts. Don't assume that because you have excellent medical knowledge, your skills and intelligence will automatically translate into something like investing.
Avoid Too Many Toys
When you first start earning a substantial wage, you naturally want to spend some money on yourself. While getting some new clothes or a brand new TV might good things to treat yourself with, you need to be careful about buying toys that will quickly depreciate in value. A shiny sports car or a boat certainly aren't essential purchases, even if they are fun. You need to think about where these things fit into your long-term goals and how they're ultimately going to benefit you.
Manage Finances as a Family
If you get married or start a family, managing your finances isn't something to do on your own. If you have two incomes, you need to manage them together to get the most out of your money. While completing your residency, it could be that your partner is helping to carry you financially, although things might balance out or even flip once you're earning a higher wage. You need to budget together, as well as plan your financial future together. Major financial decisions need to be made as a couple, from spending to saving and investments.
Don't make the same financial mistakes that many other physicians have made. Make a plan to manage your money smartly so that you can create long-term financial stability.