In a recent survey from Capital One CreditWise, finances were listed as the number one source of stress by more than 70% of Americans.
Despite sky-high income potential and rock-solid job stability, doctors are not immune to financial stress. There are, however, ways you can work to alleviate this stress in your life to help you become a more happy, healthy individual.
Here are 8 actionable personal finance tips for doctors in 2021.
One of the best pieces of financial advice any young professional can get is to take the time to learn about their own finances. With credit cards, debt, and the easy accessibility of online shopping, it can be difficult to track where your money is going. And if you don’t know where you’re spending your money, it’s a lot more difficult to even consider proceeding with any other financial pursuits.
The key is to be intentional. Block out time on your schedule once or twice a week to sit down, uninterrupted, and digest your financial situation. Get familiar with:
- How much money you actually net per month after taxes
- Monthly expenses like mortgage or student loan payments
- How much extra you have leftover
Once you have those numbers together, it’s time to take the next step and establish a workable budget.
"Make a budget." Chances are you've heard this one before. While it may be the oldest piece of financial advice in the book, it’s also one of the best.
When you set a sound budget that works for your finances and lifestyle, financial anxiety melts away. Having prioritized vital expenses, savings, and room for fun in the process, you'll always know exactly where your money is going each month.
But the biggest problem with budgeting is that it's easy to create one that isn't realistic. So, when you sit down to make yours, make sure you build one that is holistic and representative of how you live today — not how to aspire to live tomorrow. Leave room in your budget for things that may not be essential, but keep you sane: morning coffee runs, happy hours, date nights, and weekend getaways.
Fortunately, there are many great personal finance apps, websites, and tools that can help you account for, and allocate, all of the money you spend each month.
In addition to budgeting all of your finances each month, make sure you take the time to develop a loan repayment plan. Whether you have student loans, mortgage loans, or any other kind of loan, it’s always a good idea to chart out exactly what you need to repay and set both long and short-term goals to help you repay it as quickly as possible.
For doctors, pay down student loan debt is typically a major concern. In fact, Credible found "8 out of 10 medical school graduates borrow to earn their degree, taking on an average of $251,600 in student loan debt."
One way to tackle this mountain of debt? Refinancing your student loans to a lower interest rate. When done right, this can save you tens of thousands of dollars on interest over the life of your loan. Our trusted partner, Credible, makes it easy to compare personalized student loan refinance rates from multiple lenders without affecting your credit score.
Get Started: See Your Student Loan Refinances Rates In 2 Minutes!
Of all the various kinds of insurance available to doctors, physician disability insurance may be the most important. It also may be the most overlooked.
Doctors need to make sure that they are protected in case a serious injury or illness prevents them from being able to work for any amount of time in the future. After all, if you can’t work, you can’t pay your bills, provide for your family, save for retirement — anything, really.
Purchasing an own-occupation disability insurance policy early on in your career is among the best ways to future-proof yourself against potential financial struggles.
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One of the biggest traps that physicians repeatedly fall into is that of lifestyle inflation. Physicians spend the first few years of their careers burdened by heavy student loan debt while watching their debt-free friends enjoy homes, cars, and vacations they can afford.
It’s no surprise, then, that once these young professionals finally begin making real money they want nothing more than to spend it and catch up — or even pass — their peers in terms of lifestyle. This race to keep up with the Joneses only leads to more debt.
To avoid this lifestyle inflation trap, keep track of your finances throughout the beginning of your career, and don’t increase your spending by more than 20% in those first few years after your residency is over. That way, you can begin to steadily grow into your new life without breaking your future bank account in the process.
Physicians, more than most young professionals, are very familiar with the benefits of setting, and sticking to, long-term goals. After all, you’ve had to carefully plan every step of your academic career from high school to college, then medical school to residency, and maybe even a fellowship, too.
Unfortunately, when it comes to setting long-term financial goals, many doctors fall short. This can happen for a variety of reasons, but most commonly it’s because, in the face of such overwhelming debt, it can be difficult to see whether you’ll ever be out from under it. But doctors still need to make sure that you’re planning for the future, even if your goals end up changing as the years go by. Always give yourself something to work toward, and look forward to, with your finances.
Investing may seem overwhelming at first. Especially if you're just getting started tackling your personal finances.
But nowadays, getting started is easier and more accessible than ever, even for beginners. There is a ton of vetted research and advice available from reputable financial sites and resources.
By investing, you are able to make your money work for you, especially in the long run. Investment apps like TD Ameritrade, SoFi, and Stash make investing in stocks as easy as buying a new pair of headphones off of Amazon.
Even if don’t want to invest in the stock market, make sure you take the time to invest in an IRA and 401k, which brings us to our final tip.
It's well documented that doctors face unique financial challenges throughout their careers. From mountains of debt to extra insurance needs, the weight of it all is never more strongly felt than it is in residency and the first few years after.
Due to the extensive schooling that is required and the financial demands that come with it, doctors typically start saving for retirement much later than their peers in other careers do. While this is entirely understandable, it takes a toll in the long run.
Recent surveys from retired physicians have revealed that those who started saving for their retirement early on in their careers were much happier and satisfied in their retirements than those who waited until they were in the mid- or late stage of their career to begin contributing.
Working with finances can be tricky and stressful. But if you take the time to understand your money and work toward goals you’ve set for yourself with debt repayment, investments, retirement, or whatever else, you’ll soon find a sustainable that works for your future.
Jack is the Head of Content Marketing at LeverageRx, the 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.