Anyone working in healthcare faces many challenges that most of the general population will never encounter.
From working through years of mandatory extra schooling to literally holding patients’ lives in their hands, a doctor’s life is never dull. But separate from the day-to-day demands of their job arises an aspect of the career that most people unintentionally gloss over: the unique financial challenges of working as a doctor.
When thinking about a career in medicine, most people picture life-saving procedures, hospital romances, and hefty paychecks. Few realize how taxing the financial demands of the career can be.
The student loan debt crisis affects millions of people, but doctors and other medical professionals deal with more debt than most. The average student loan debt for non-medical students in America is approximately $32,731. Meanwhile, doctors face approximately $215,900 in medical school debt, with an additional $30,000 average debt from their undergraduate programs.
Physicians and other medical professionals usually don’t start making any “real” money until they’re in their mid-thirties, and still face, on average, $300,000 by the time they enter the workforce, so they face a massive deficit before they’ve even begun.
Young doctors typically have a hard time qualifying for traditional home loan programs. When they need the extra money the most, doctors who are just starting out have little to no savings to their name, barely any income or credit history, and a seemingly insurmountable mountain of debt. Each of these factors alone is enough to make a lender wary of loaning money. Having each of these issues layered one on top of the other makes it nearly impossible for a doctor to qualify for a conventional mortgage.
Fortunately, physician mortgage loans are built for doctors and other high-earning medical professionals in this situation. Physician mortgage loans allow them to take out large loans early in their careers so that they can become homeowners while also refinancing and paying down the student debt they’ve accumulated. These loans have little to no down payment requirements, they don’t require private mortgage insurance (PMI), and they have relaxed debt-to-income (DTI) ratios, making them excellent options for the young physicians early on in their careers.
Medical malpractice insurance
Upwards of 60% of all doctors over the age of 55 have been sued for malpractice, according to the American Medical Association, so it’s more likely than not that a doctor will face a suit during their career. And even if a case is eventually dropped, the bills can still be quite expensive. That's why it's important to put a reliable medical malpractice insurance policy in place.
Physician disability insurance
According to the Social Security Administration, twenty-five to thirty percent of American workers will suffer a disabling injury or illness at some point during their careers that prevents them from earning an income. As a doctor or medical professional with a huge amount of student debt, this can be a very sobering reality. Missing out on work for any large amount of time can significantly impact a doctor’s lifestyle. Between potential missed loan repayments, lifestyle maintenance, and staying up-to-date in your field, a lot can be lost if you’re out of work due to a disability. This makes long term disability insurance a no-brainer.
Term life insurance
Term life insurance is another necessity for doctors. While it doesn’t put as much financial strain on a medical professional as whole life insurance would, it still adds another financial burden. Term life insurance allows doctors and other professionals to insure their lives for a set period of time, which is why it is so much cheaper than the whole-life alternative. Average payments for a 20-year term life policy at $500,000 still run around $200 per month.
After graduating college, doctors have to spend three to four years in medical school, and another two to three in residencies before finally beginning work in their chosen specialty.
Generally, by this time, most doctors will be in their late twenties and early thirties. That means watching their college friends get married, become homeowners, start families, and take vacations. While future doctors are in school and working through their residencies on whatever small income they earn throughout those years, their friends have jumped straight into the workforce and built up savings to be able to afford all the nice, new things they’re buying.
Once doctors complete their programs and begin making substantially more money than they used to, it can be easy to fall into the trap of lifestyle inflation — purchasing expensive items that bring short-term satisfaction, but aren’t sustainable long-term. They may want to experience all the benefits of life that their friends have been enjoying for years, but usually they don’t get that chance until they’re in their thirties. By then, it’s all about playing catch-up.
That can be a really hard lifestyle to counteract down the road, and it can lead to some pretty serious financial pitfalls.
Because of how long it takes doctors to begin seeing profits from their work, it also takes them much longer to begin planning their estates or saving for retirement than it does the rest of the population.
Most people don’t begin thinking about saving for retirement or planning their estates until they’ve started a family and are earning a higher salary. But because of how late in the game doctors reap the rewards of their schooling and debt, most have begun building their lives around their families and don’t begin investing in their retirements or estate until later.
Instead, they spend their money on weddings, their kids’ school, new cars, and countless other necessities that just put off their retirement savings and estate planning longer and longer, often resulting in doctors having to work past the average retirement age to make up for the lost savings.
The benefits to becoming a doctor still far outweigh the financial challenges that you may face, but if you’re careful with your money, saving and investing in your future where you can, it’ll be all the more rewarding.
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Jack is the Head of Content Marketing at LeverageRx, a personal finance company that simplifies how healthcare professionals shop for financial products and services. A Creighton University graduate and former advertising creative, he has written extensively about topics in personal finance, work-life, employee benefits, and technology. His work has been featured in MSN, Benzinga, TMCNet, StartupNation, Council for Disability Awareness, and more.