Financial planning strategies for young physicians
Feeling financially secure as a physician is not something that just happens once you start earning more money. It is challenging to balance how you spend and save your finances with the massive amount of student loans you have to pay, your malpractice insurance, living expenses and your other day-to-day expenses.
You do not have time to become an expert in the field of finances when you are busy becoming an expert in the field of medicine. That is why we have compiled some strategies that can help you feel better about your money, allowing you to focus more on your career and enjoying your free time when you have it.
Start saving now
Doctors can start earning a higher-than-average salary after completing their residencies, but you should be saving long before this. Many young physicians make the mistake of waiting to save until they start earning more. However, you should start saving as soon as possible, whether you have just started your medical career or have a few years under your belt.
Investing into a 401(k) as early as possible, even if it is not a very high amount, can help you build up your nest egg for a more comfortable retirement. You should try to contribute at least 10% of your monthly salary into your 401(k) plan, but if this is too much for you depending on your individual circumstances, you should talk to a financial advisor for guidance.
After accumulating interest over time — and with the boost of greater contributions once you start earning more — your small contributions can grow into large returns.
Re-evaluate your loans
Becoming a physician is a noble career choice, but it is also an expensive one. Average medical school debt is just over $200,000. That is a lot to pay back, especially if you already have undergraduate debt to pay off as well.
The good news is that you have the opportunity to earn a high annual salary as you advance in your career. As you start to earn more money, you should re-evaluate your student loans.
You may be able to refinance your loans to reduce your interest rate. Or, if you are struggling financially, you can check to see if you qualify for loan forbearance or deferment to give you time to become more financially secure before resuming payments.
You need to be careful with how you spend your money when you are trying to save for your future and pay off student loans. One of the most common mistakes physicians can make is increasing their spending as they earn more income. Of course, you should be able to live more comfortably once you start earning more, but you need to keep your priorities straight if you ever want to escape debt and build a financial future.
Once you have completed your residency, you should save at least three to six months of income for emergency purposes and contribute 10 to 20% of your annual income for retirement savings.
Build a long-term financial plan
Student loans, medical school loans, malpractice insurance and other living expenses can all feel overwhelming. Making a long-term financial plan can help you maintain a strategy for how you handle your financial responsibilities, how you save for the future, and how you live as comfortably as possible now.
When you have a busy schedule taking care of countless patients, studying to advance in your field and enjoying some personal time, it is hard to dedicate much time to making a long-term financial plan.
Talk to a ProVise CFP® professional about financial planning
Managing your finances as a physician without a financial plan is like trying to walk around a cave without a flashlight. You need a light to guide you in the right direction so you can reach the exit safely. When it comes to financial planning, a CERTIFIED FINANCIAL PLANNER™ can be your light.
Our CFP® professionals at ProVise Management Group understand the unique challenges physicians face when it comes to financial planning. We take the time to understand your financial circumstances, goals, risk tolerance and personal values to help you develop and maintain a financial strategy that works for you.
We can create a written plan for you at a fiduciary standard of care. All of our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about your financial planning for a physician? Contact ProVise today to schedule a complimentary consultation.