Doctors are one of the hardest working professionals in the world. Long hours, hectic schedules, emergency consultations, and surgeries sum up the life of a physician. Considering the extreme amount of time and dedication that doctors put in their work every day, they are naturally also among the highest-paid professionals in the workforce. This is why financial planning for physicians is essential.

A lot of people believe that doctors lack the foresight for adequate financial planning. This could be due to factors like low interest in financial planning, a lack of time, etc. However, regardless of these reasons, financial planning for doctors is a necessity and something that these professionals must take up as soon as they start their internships. Seeking help from a financial advisor would be a good place to start.

If you are a doctor or physician and do not know where you begin financial planning, here are some tips for financial management for doctors that can help secure your present and future financially:

1. Ensure that you clear your debt from medical school as early as possible:

Becoming a doctor in America can not only be tough but also expensive. Medical school can cost a lot of money and leave you in debt for many years in the future. In-state public schools cost approximately $39,150 and in-state private schools can cost up to $64,053. The average tuition fee in an out-of-state public school is estimated at around $63,546, while out-of-state private schools can cost $64,494. Covering these costs can be hard for most people, especially if your parents or legal guardians are unable to save up for your higher education expenses. Hence, the last resort for most people is always a student loan. Working alongside studying medicine can be quite strenuous because of the packed schedules. Moreover, the loan amount for medical school is so high that even with working odd jobs during your student days, paying the loan back can be a big hassle. As a result, the moment you land up in the workforce, you find yourself in heavy student debt. This is why it is important to take charge of your finances at an early stage in life and start prioritizing your savings and expenses from your internship. Making a budget and clearing your student loan first is essential. The sooner you become debt-free, the sooner you can start focusing on your future needs. So, use your money wisely and find a way to clear your student loan. You can work with a financial advisor for doctors and create a strategy that helps you become debt-free without burdening you with any unwanted pressure.

2. Take help from a financial professional for doctors to manage your finances:

It can be hard to plan your finances, spend time with your friends and family, and concentrate on your personal and professional growth at the same time. Doctors work an average of 40 to 60 hours per week. During the Covid-19 pandemic, some medical professionals have spent even longer hours in hospitals on duty. Such grueling hours take away the time and energy to plan or strategize how to invest or save your money. A financial advisor for physicians can help you make the process easier. These professionals are qualified to handle the unique requirements of doctors and physicians and can help you pick the right financial instruments that deliver the kind of returns you hope to earn.

Taking help and sharing a part of the responsibility with an experienced professional will also help you live a stress-free life. This way you can be more certain about your future financial security. Moreover, when you have peace of mind, you can concentrate on your work and family better.

3. Start planning your finances early, preferably at the time of your internship:

The professional life of a doctor starts at the time of the internship. After the internship, the professional is promoted to a resident, and from there, a senior surgeon or physician. While the initial days of your career, i.e. when you are an intern, may not pay you as well; however, the salary graph is bound to go up as you gain more experience in your field. A lot of doctors wait till they reach the summit of their careers to start financial planning. However, this can be a grave mistake. Investing largely works on the power of compounding. This means that the interest that you earn on your investment is invested back into the market to earn more interest. Over a period of time, this helps you grow your wealth and ultimately beat inflation to live a comfortable life without any inadequacies. The power of compounding delivers results over a long period. The longer the investment term, the more chances you have of earning better returns. Hence, it is ideally advised to start investing from the day you receive your first paycheck. Waiting for the right moment to come is only a waste of precious time. In this time, your money sits idle or gets spent on your present needs. Meanwhile, your future financial security is completely neglected. However, if you choose to invest from an early age, you can see substantial growth in due time, even if you are investing small amounts of money.

4. Budget your finances well and do not live under a false sense of security:

Since doctors are well-paid individuals, a lot of them are prone to being frivolous with their money. High salaries can lead to impulse shopping, a luxurious lifestyle, and a fluid budget. While there is no harm in enjoying your life and living as per your whims, not keeping up with reality can go against you. It is easy to lose track of the future and get lost in the present. But no matter how much you earn, you need to save and invest for the future. Remember that you cannot keep working forever, so having retirement goals and suitable investments is a must. You can consider options like the 401(k), an IRA (individual retirement account), exchange-traded funds, mutual funds, bonds, stocks, etc., to plan for your retirement. A common rule of saving is the 20-30-50- rule. According to this, you must save at least 20% of your income for the future. 50% can go towards your essential expenses, and 30% can go towards non-essential expenses. Although this is a widely followed rule, you do not have to necessarily copy it. You can do what suits you and is best for your needs. But regardless of the decision you make, always keep an eye on the future.

5. Keep an emergency fund

Doctors handle multiple emergencies in a day. So, you may be aware of the fact that an emergency can come anytime, anywhere. However, while you may be trained to handle medical emergencies, a financial emergency will require a different outlook. Although the fluctuations of the economy will not have the same effect on the medical sector as it could on other sectors like tourism, construction, etc., you could still lose your job due to several reasons. An accident or injury, a family emergency, etc., can affect your ability to work. Therefore, having an emergency fund becomes crucial at every age and stage of your life. Try to save enough to cover up to 3 to 6 months worth of your living expenses. This will keep you covered until you can get back on your feet and start working.

Having an emergency fund is particularly important for interns and young doctors as you are still growing in your career and may or may not have a secure job yet.

6. Consider estate planning as an investment option

Estate planning is an uncomfortable task to undertake. No one likes to plan for what happens after they are gone. But planning for it is vital nevertheless. While estate planning may not be a priority for young interns and residents, doctors who are older, married, and have children should not neglect it for too long. Estate planning will ensure that your physical assets, investments, cash, etc. are transferred to your beneficiaries with minimal legal and tax complications. A financial advisor for doctors and physicians can help you devise a suitable plan that ensures that your estate does not go through probate. This will require you to create a will, prepare health and financial directives, and consider the option of using a trust. You can discuss these options in detail with the advisor and go for the best-suited option for you and your family. Estate planning is also essential to protect your estate from creditors and unnecessary family feuds.

7. Understand and consider different retirement planning options at an early stage:

Physicians and doctors can either be employed at a hospital or be self-employed. Depending on the type of employment, you can invest in different retirement plans. Here are some options:

• Employed doctors: 401(k) plans, 403(b) plans, government-sponsored 457(b) plans, non-government organization 457(b) plans, NGO 457 plans, 401(a) plans, etc.
• Self-employed doctors: SEP-IRA, solo 401(k) plan.

To conclude

Life as a doctor can be challenging and overwhelming. Saving people’s lives, juggling multiple roles, and making life and death decisions can be overwhelming at times. If you do not pay attention to your finances, you can face similar stress and worries in your personal lives as well. So, make sure to appoint a suitable physician financial advisor to help secure your financial future with sound investment decisions.