The Physician Philosopher Podcast
TPP 91: The Top 5 Financial Tasks for Physicians
Summer is a time of transition in medicine: maybe you’re starting your first job, or perhaps a new residency or fellowship. It’s a great opportunity to give some thought to your financial status – where it is currently, where you want it to go, and how you can bridge the gap between the two.
Keep reading, because today we’re covering the 5 most important financial tasks physicians must manage in order to be financially secure.
Invest Enough to Retire By the Age You Want
Studies have shown that although most physicians want to retire by age 60, most don’t actually retire until age 69. And it’s not just for love of the work – 50% of doctors practicing past the age of 65 are actually doing so because they want to maintain their current lifestyle, which wouldn’t be possible if they retired.
The problem is that many physicians have no idea how much they need to save to retire by the age they want. Even if you don’t plan to retire anytime soon, financial independence as a doctor means building wealth early on so you can practice medicine on your own terms. Working part-time, taking a sabbatical, or having a longer maternity leave are just a few options that become possible when you’re a financially secure physician.
As a rule of thumb (and as we detail in MDFU), 30% of your gross income is a great place to start saving money, particularly for attending physicians.
Make a Student Loan Plan
In episode 89, “How My Friend Had $100,00 in Student Loans Forgiven,” we talked about changes to the student loan landscape and the potential for you to save hundreds of thousands of dollars on your student loans. If you haven’t already, be sure to listen to that episode. Despite the disdain you might feel for that looming student debt, making a student loan plan is one of the essential financial tasks you don’t want to sleep on.
One physician I knew who read my first book realized he was in the wrong loan repayment plan – which ended up being a $50,000 mistake.
The best part about making a student loan plan is that once it’s established, you can put it on autopilot knowing that you’re getting closer to being financially secure while focusing on other aspects of your life. It’s not a one-size-fits-all approach, but it’s not as complicated as it may seem.
Asset Protection (Disability and Life Insurance)
If you hear nothing else from me, if you’re a resident or fellow or you’re six months out from training, you have to get own-occupation, specialty-specific disability insurance. Imagine getting into a car accident and not being able to practice medicine. All of the income potential you built is now gone.
Your employer’s disability insurance policy alone will not be sufficient to cover your needs. And if the policy you buy separately doesn’t have an own-occupation, specialty-specific definition, it won’t actually protect you from the job that you were doing. For example, if you’re a surgeon, the insurance company will try to claim that you can still perform clinic duties, so they don’t have to pay your full disability benefit.
Term life insurance is another non-negotiable financial task that physicians need to check off the list. Particularly when you have loved ones who are dependent on your income. But even if you’re in the early days, single with no dependents, go ahead and set up coverage. It’s a worthy investment, and when life happens, it happens fast – you want to have that protection in place before you get engaged, married, and/or start a family.
Create a Budget or Cash Flow Plan
Because of our first point about investing enough and encouraging you to pay yourself first, you also have to know how much money is coming in and where that money is going before you start living on it. We deep-dive into this topic in episode 83, “Do Doctors Need Budgets?” and it’s making this list because if you’re not intentional about managing your money, you can’t be a financially secure physician.
It’s time to create a plan for every paycheck. Investing for retirement, setting aside money for an emergency fund, putting your financial priorities first has to start with being intentional about your income and staying aware of where your money goes each month. Whether you’re detail-oriented or not, there are budgeting techniques that will fit your personality and lifestyle. It’s time to figure out the best system that works for you.
General life plan, AKA vision of what you want your life to look life (money goals, career goals)
Exploring the vision you have for your life may not seem like a financial task, but it is when you see finances as part of the integrated whole of your life. There’s a set of questions we recommend for this step that can be a really helpful tool. Ask them of yourself as an individual, and ask them of you and your partner. George Kinder came up with them, and they’re called the Kinder questions (I wrote about them all in detail here). Question one helps you design your dream life. Question two asks, what if your time was limited? And the final question has you imagine your last day on earth.
These 5 tasks will really help put a new perspective on what’s important in life and what you may want to prioritize moving forward. Remember, you get to decide what your own success looks like. As a financially secure physician, you’ll have more options available to build that vision you have for your life.
Today’s thought is this: Not all financial tasks are created the same. Some are more important than others.
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