Posted by Most doctors start their careers between the ages of 25 and 30. And the big deal during this time is to reduce your debts, diversify your income sources, and invest for the future. Although compensation for physicians may be high, failing to plan how to spend it can lead you to a path of financial insecurity. Because as your salary increases, so do your expenses.
How do you maintain a stable and healthy financial life from the beginning of your medical career? In this post, you’ll find the top 5 financial tips to help you navigate your present and the future medical profession, including:
- Pay your medical school debts as soon as possible
- Plan and budget for your finances
- Maintain an emergency fund
- Learn about physician contracts
- Hire a financial expert to manage your funds
1. Pay Your Medical School Debts as Soon as Possible
Medical school is tough and expensive—if your guardian or parent cannot save for higher education, you resort to student loans. And upon clearing school, a huge debt awaits you. If you fail to plan yourself as early as you start earning, you can stay in debt for years. However, hard money lenders typically charge higher interest rates than traditional lenders, so it is important to compare the cost of hard money financing with other options before you borrow.
The sooner you clear your debts, the sooner you can take responsibility for your future by saving more and investing. How do you clear your debt fast? By having a budget for clearing your loan and setting reasonable deadlines. If you feel not disciplined enough, you can source a financial advisor to create a strategy to help you repay the debt.
2. Plan and Budget for Your Finances
When starting your career, your pay rate may not be great, but it keeps growing as you gain more experience. Some doctors make the mistake of waiting till they get a fat check to start planning. Don’t fall into this trap. Planning your finances in your prime years helps you take advantage of compounding power. The interest you earn in your investments is reinvested and grows your wealth in the long run.
Having a budget is the best way to keep you on track in your financial planning. While it’s tempting to live a luxurious life, remember the future is unpredictable. Use the 20-30-50 spending rule. Spend 20% on savings, 30% on non-essential needs, and 50% on essential needs.
3. Maintain an Emergency Fund
Never assume you’re invincible. Emergencies happen all the time. And as a doctor, your career exposes you to risks of injuries and illness. Also, you may lose your job for various reasons. That’s why you should have an emergency fund to stand in for you when your income source runs dry. Or when unexpected expenses pop up. Or when you cannot work.
How much do you spend per month on your expenses? Your emergency fund should have three to six times this amount. Having this ensures your retirement savings and investments remain untampered.
4. Learn About Physician Contracts
A physician’s contract covers more than compensation negotiations. Before signing it, you need to understand the crucial elements to look for in the contract. You don’t want to sign up for something that will hurt your career in the long run. If you are considering investing in pharma stocks, you should speak to a financial advisor to get personalized advice. You should also consult a health care attorney to guide you through the process.
Some essential details you should know about in the contract are:
- Call and coverage
- Salary and incentives
- Termination
- Benefits
- Non-compete clause
- Malpractice insurance
5. Hire a Financial Expert to Manage Your Funds
While working 40 to 60 hours per week, balancing everything from spending time with family and friends, managing finances, and concentrating on professional and personal growth can be challenging. You may miss out on essential matters and end up stressed.
Hiring a financial expert to handle your finances can save you time and headache. These experts will manage your funds and pick suitable investments for you. You’ll have an easy time knowing your financial life is secure. Multi-generational housing can also be a way for medical professionals to save money on childcare and eldercare costs.
Final Thoughts
If you want financial security, you should start practicing good financial habits at the beginning of your career. This will help you settle debts, invest, and grow your wealth. With these five tips, you can achieve financial success and avoid financial pitfalls.
Author’s Bio:
Naomi Olson [Twitter]
I am a CFP® (Certified Financial Planner). I have a severe phobia of bridges and dirty balance sheets.
Hobbies: Blogging, meditation, and loving Bull Market (my dog).