20 Point Financial Checklist for Doctors

By Jimmy Turner, MD
The Physician Philosopher

This is a guest post from Donovan Sanchez, a flat fee-only financial planner who owns Skyview Financial Planning. In this post, Donovan spends time telling us 20 items that each new doctor should take care of when they start their career.  It is helpful to have a mental model for where you are going.  Otherwise, how else where you get to where you want to be?  This financial checklist for doctors should help.  

Disclaimer: Mr. Sanchez and The Physician Philosopher do not have a financial relationship at this time. 

The New Attending Financial Planning Checklist

If you graduated from a residency program or fellowship earlier this summer—congratulations! Perhaps you packed up, relocated, and now the dust is beginning to settle as you begin life as an attending physician.

There may be a side of your life that you’ve neglected for some time now. You’ve known that you need to get around to it, but on the rare day that you find yourself with some free time, the energy it takes to put your financial house in order just seems like too much.

One of the reasons for that might be that you don’t feel you have a clear path. “What should I do first?” you wonder. Do I need to make changes to my disability and life insurance that I purchased in residency? Am I on the path to Public Service Loan Forgiveness? Should I be investing or paying down debt? When it comes to investing, how do I actually do that and what are the best investments to use? Should I keep meeting with that advisor who’s telling me I should buy whole life insurance [TPP: The answer to that one is no!]? Should I buy a home?

Because it can be hard to know where to start, I want to share a simple financial planning checklist that should get you going in the right direction. This isn’t a comprehensive list of everything that you need to do, or necessarily an exact ordering of priorities based on your situation.

The Physician Philosopher believes that having your financial life in order can help prevent burnout—I think he’s right. Hopefully this checklist gives you the little push that you need to begin setting this part of your life in order.

I’ll list out the checklist items, and then include a few thoughts on their importance.

1. Dream.

Create a vision for your life and what you want it to be like. Yes, include goals, but get to the heart of what you really value. How are you going to live a full life? Will you do things differently than others before you? How will your values translate into daily life?

If you’re married, be sure to make this something you and your spouse do together.

2. Tell your money where to go.

In Dave Ramsey’s book The Total Money Makeover, Dave describes a budget as a tool to tell your money where to go, instead of wondering where it went. Anyone who’s making an income knows that when you get to the end of the month, it’s remarkable how fast the money evaporates.

Where does it go? Without a good budget, it’s hard to say.

Building the budgeting skill from the very beginning is key to your long term financial success. It may seem absurd, but many a high income earner has struggled with allowing their spending to keep pace, or outpace, their income. There’s plenty of poor high income earners out there—at least in terms of overall net worth.

This doesn’t have to be a complicated process. And it can actually be fun. My wife and I used to go on lunch dates on Friday once a month to get us in the habit of budgeting. I love eating out with my wife, so there was no way I was going to miss my budgeting commitment.

Even a simple strategy such as “paying yourself first” by saving, investing, and paying down debt before spending money on “the fun stuff” can get you going in the right direction. [TPP: I agree, I call it backwards budgeting, which has been a big part of our financial success].

For those interested in a little more hands-on approach, a simple budgeting tool, such as Goodbudget, can be a great way to begin tracking expenses—which is more than half the battle to making sure your money is directed to what matters most.

3. Obtain adequate disability and life insurance.

Protect your income.

No one knows better than you how much you’ve sacrificed or how hard you’ve worked to get to where you are now. Because life is uncertain, the opportunity that you’ve created for yourself can be ripped away in the blink of an eye. You’ll know people in your career who will die too young, or get disabled and not be able to perform their job duties for a certain amount of time, or
indefinitely. So long as you rely on your income for your current and future goals, you need disability insurance. When you become financially independent, you can drop the policy.

You will want to get the right type of disability insurance. You probably have something through your employer, but the definition of disability likely isn’t very favorable. “Own occupation” definitions of disability are optimal and are the ones you want to look for in an individual policy. [TPP: All part of the top ten things doctors should know about disability insurance!]

You should have purchased this in residency, but if you haven’t, get some as soon as possible. You’ll want to get your disability insurance from an independent agent who does not have sales quotas with any particular company. Some advisors can sell you “any company’s product,” but may still have quotas with their parent company, so be careful.

Fee-only financial advisors can also advise you on which products might be suitable, but they won’t sell them to you (due to the conflict of interest from insurance commissions). They’ve often partnered with independent insurance consulting companies to help their clients obtain suitable coverage. [TPP: For those interested, I keep a list of recommended fee-only financial advisors here].

Protect those you love.

None of us know when our time is up. Because of this uncertainty, make sure that you purchase life insurance to protect your loved ones in the event that you die prematurely.

In almost all cases, term life insurance is the type of coverage you should purchase.

Note: Be careful when working with “advisors” who sell life insurance. They may sell you term insurance and then try to groom you for an expensive whole life insurance sale down the road. It’s been my experience that few situations call for a whole life insurance solution. It would certainly be rare in the life of a new attending physician for whole life insurance to be the right

4. Develop a plan for paying off student loans (private refinance v. Public Service Loan Forgiveness)

You probably have a lot of debt. If you don’t, consider yourself fortunate among your MD and DO peers. The good news is that you’re going to be making a great deal of money to wipe out that debt. The other good news is that the government has devised an escape hatch for those with especially burdensome student debt situations.

The problem is that the route to Public Service Loan Forgiveness isn’t particularly intuitive and can sometimes be quite complicated. And perhaps forgiveness isn’t the right path for you anyway. The unique details of your situation will need to be considered as you carefully plan out this part of your financial journey.

5. Build an emergency fund of 3-6 month’s expenses.

Prepare for the flood.

Many of us are familiar with the story of Noah’s ark. While everyone partied, Noah worked hardto build a ship for the “rainy day” that eventually came. Some day you’re going to have a “flood” in your life. It is going to happen. Are you going to prepare for it

An emergency fund is an important step in preparing for unpredictable life events. Keep three to six months of expenses easily accessible in a savings account.

6. Establish a will and other relevant estate planning documents (e.g. powers of attorney, medical directives, trust, etc.)

It’s not exciting to talk about, but make sure that you don’t put your loved ones in a difficult situation if you become incapacitated or die prematurely. Work with a qualified estate planning attorney in order to put in place legal mechanisms to make it as easy as possible on your loved ones in life’s most difficult circumstances.

7. Review home and auto insurance and obtain an umbrella policy.

Work with your property and casualty agent to make sure that you have the right amount of coverage.  [TPP: Good advice. Particularly for someone who just bought a brand new truck].

8. Pay off high interest debt.

Credit card companies are not your friends. If you’ve amassed some credit card debt in medical school, residency, or fellowship this has got to go.

Travel rewards, cash back, and convenience are fine reasons to use a credit card. But these benefits are only nice if the card is responsibly used.

Bottom line: Don’t use credit cards for credit.

9. Obtain any matching retirement plan contributions offered by your employer.

This money, as The White Coat Investor says, is really part of your salary. Don’t leave part of your salary on the table because you didn’t get around to setting up retirement plan contributions. Invest the money in the most favorable funds available (ideally low-cost, broadly diversified mutual funds).

10. Carefully determine when you would like to be financially independent (not reliant on income from work) and how much you need to save per month in order to achieve that goal.

Save so you work because you want to and not because you have to [TPP: This is basically the second motto of The Physician Philosopher – in fact, I’ve thought about changing the motto to this on the site!]

Don’t be surprised if this amount comes to around 20% of your gross income. If you finished training this summer, don’t miss out on this great opportunity to begin saving 20% right off the bat as an attending. A few months ago you were living on little more than a high school teacher’s salary. Your income has increased dramatically, potentially making the transition to saving 20% relatively painless. But if you don’t do this, you might reset your lifestyle to your new high income and have to go through the pain of dialing back expenses in order to save for retirement.

The beauty of saving and investing is that if done right, some day you may be able to work because you want to, and not because you have to. [TPP: Amen!] Your financial independence will give you freedom to say “yes” or “no” to employment-related demands. Talk about a way to avoid burnout!

It’s worth mentioning here that you shouldn’t neglect your most important investment: your family. Especially your spouse if you’re married, but certainly your kids too. What’s all the wealth in the world if you end up having shallow or destroyed relationships? What’s financial independence if you don’t have loved ones by your side to share it with?

Relationships take a lot of time and effort, but many of life’s most enriching experiences come from them, and not from stock appreciation.

11. Begin contributing the required amount to meet your financial independence goal to pre-tax retirement plans such as 401(k), 403(b), and other qualified accounts.

Because you’re in high income tax brackets now, it’s likely that you’ll want to make pre-tax retirement plan contributions in order to lower your taxable income. We don’t know what the future holds for taxes, but the hope is that you can defer taxes now while you’re in a high tax bracket, and withdraw money in retirement that will be taxed in lower tax brackets.

12. Maximize “Back Door” Roth IRA contributions for yourself and your spouse in order to diversify your retirement income from a tax perspective.

In 2019 you (and your spouse, if married) can contribute $6,000 to a nondeductible IRA and subsequently roll over those contributions to a Roth IRA. This is what is commonly known as a “Back Door” Roth IRA. This little maneuvering needs to be done because you make too much money in order to contribute directly to a Roth IRA. This is an important step to increase your retirement savings while also diversifying your retirement income from a tax perspective. Roth contributions get no up-front tax deduction, but the money grows and may be taken out tax and penalty free after 59 ½.

TPP –> Further Reading: Click here if you need a step by step tutorial for their first backdoor roth IRA.

13. If you have a High Deductible Health Plan, contribute to a Health Savings Account and invest the funds as soon as you meet the required threshold.

If a High Deductible Health Plan is right for you, you should explore utilizing a Health Savings Account (HSA). The Health Savings Account is one of the more exciting tools out there. Funds are invested on a pre-tax basis, the money grows tax-free, and if the funds are used for qualifying health expenses they are not taxed. That’s a triple-tax savings!

Another little nicety about the HSA is that after age 65 the funds may be used for any purpose without penalty. The funds would be taxed (if not used for qualifying health expenses), but after age 65 the HSA functions much like a Traditional IRA.

14. Pay off all remaining debt except for your home.

If you already have a home, start crushing your non-mortgage related debt! This step will vary depending on whether or not you are going for Public Service Loan Forgiveness. If you are, you will want to make the lowest payments possible on your student
loans in order to maximize forgiveness.

15. Determine how much you would like to contribute to your children’s education and begin funding 529 plans based on that need.

Not everyone wants to help their children with the cost of education. For those who do, the 529 plan is likely the vehicle of choice. Plans vary by state, and you should consider tax benefits and incentives available for using your state’s plan vs. potentially more favorable investments offered in other states’ plans.

16. Begin saving for a 20% down payment on your dream home.

If you don’t yet have a home, begin saving 20% for a down payment. It’s wise to wait 3-6 months to settle into your job before making a home purchase. Make sure that you like your job and get a feel for the area.

17. Based on your goals and cash flow situation, begin funding taxable accounts and other investments, such as real estate.

As you begin paying off debts, more of your cash flow is freed up for spending and saving. Once all of your tax-favored retirement accounts are fully funded, explore other investment options such as taxable brokerage accounts and real estate.

18. Increase payments on your mortgage.

A paid off home mortgage frees up cash flow, provides security, and is psychologically beneficial.

19. Actively monitor and adjust your plan as needed.

Financial planning and investment management never really end. Like our health, it’s necessary to proactively monitor the status quo so that we don’t get off course. Will you make mistakes?

Sure you will. We all do.

Pick yourself up, dust yourself off, and keep moving forward.

20. Enjoy the journey

I’m excited for the journey that you’re embarking on. Medicine is a noble profession, and many of you are going to make a huge difference in your patients’ lives, and in the lives of those in your community. Don’t forget to enjoy each step of the way, and be sure to make time for the people and experiences that make life wonderful.

I hope that the new attending checklist will help reduce stress in at least one important area of
your life.

The content you just read is for informational purposes only. Yes, I’m a financial advisor, but this article really isn’t intended as advice for you specifically. Your unique situation needs to be taken into account, and the ideas presented here may not apply.

So, please make sure you do your due diligence BEFORE implementing anything. Due diligence includes hiring a qualified professional who understands your situation completely and can offer you personalized advice.

Guest Post

1 Comment

  1. Brent Lacey

    I love the checklist! The bookends of “Dream” and “Enjoy the Journey” really helps keep things in perspective. I think people don’t consider that often enough. It’s especially important to dream so that you have the motivation to keep at it when the going gets tough. Excellent work!


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