Financial management is an essential subject for everyone because it concerns the safety of one’s future. Knowing how to manage finances is crucial for physicians.
Physicians endure a lot to earn the education and experience required in their field. That journey requires considerable funding, and many individuals sustain high student loans, among other debts.
Considering all these challenges, physicians should clearly understand financial management and plan for the future accordingly.
That said, many medical professionals enter the workforce with little to no financial management knowledge, which can be disastrous to their overall economic health. This post explores critical financial management considerations for physicians.
In this post, we explore four essential financial considerations tailored to physicians. From understanding income and managing debt to getting insured and investing wisely.
Why is financial management important for physicians?
Financial management is important to physicians for several reasons:
- High educational costs: Doctors study for a long time. They usually have a lot of student loans and debts.
- Complex income structure: Doctors earn different amounts of money. They receive a basic salary, a bonus, and other benefits. Planning and action are important to managing these earnings well.
- Debt Repayment: Many doctors finish school owing a lot of money. They need a solid plan to pay it back so they don’t worry about money for long.
- Income Protection is the inability to protect against loss of income due to illness, injury, or legal action. Insurance policies like malpractice insurance are essential.
- Investment Opportunities: Physicians generally have high earning potential, making investment decisions necessary for long-term financial security.
1. Be Conscious of Your Income
It’s important to know how much money you make early on because then you can plan how to use it. Understanding your income isn’t about knowing your basic pay. You might get extra money like bonuses or benefits at different times during the year.
Besides what you earn, understanding your income means keeping track of what you spend, including things like taxes. If you think about these three things when you’re working out your income, you’ll have a clearer idea of your financial situation.
- How much you earn (salary, bonuses, other income streams)
- How much you spend
- How much you have left
Knowing how much money you make will make planning and budgeting easier. You’ll know when your money goes up or down, which helps you budget better.
2. Have a Debt Repayment Plan
Can you finish medical school without owing money?
Yes, if you get a scholarship, financial help, or your family saved for school. Otherwise, since medical school costs a lot, you might need to borrow from the government or a private lender to pay for it.
As of 2023, 73% of med school graduates owed an education debt, with the average graduate carrying a debt burden of about a quarter of a million.
A new doctor has a lot of debt when they start working. But dealing with it early is good when you don’t have many other bills.
When you just finished school, you’re used to spending less money. So, use the first few years to pay back your debt as much as you can.
1. Assess Your Debt
- First, get all the details about the money you owe, such as student loans, credit card debt, and any other loans. Then, sort them out based on how much interest you’re paying, how much you still owe, and the smallest amount you need to pay each month.
2. Establish Goals
- Figure out what you want to do with your money. Do you want to pay off debt quickly, save up to buy a house, invest for when you’re older, or do all three? Knowing what matters most to you will guide how you pay back what you owe.
3. Budgeting
- Make a list of all the money you get and spend each month. Find places where you can spend less to have more money to pay off your debts. Try using apps or spreadsheets to watch your spending and see how you’re doing.
4. Emergency Fund
- First, ensure you have some money saved up for emergencies before paying off debt quickly. Save enough to cover your living costs for 3 to 6 months. Keep this money in an easy-to-access account like a high-interest savings account.
3. Get Insured
Getting insured is one of the best ways to stay financially secure in the future. Doctors can buy different types of insurance to protect their money and the things they own.
One important type is disability insurance. If you get sick or hurt and can’t work, this insurance pays you some of the money you would have earned.
Life insurance is also important for doctors, significantly if your family depends on you. If something happens to you, this insurance gives your family money to help them.
Doctors might also want malpractice insurance because their jobs put them at risk of being sued. If your employer doesn’t give you this insurance, it’s something to consider.
Getting insured is important for your money, but it’s easy to make mistakes.
If you are unsure how to proceed with such investments, consider working with a financial management expert. Firms like OJM Group, which specializes in wealth management for physicians, are worth investigating.
4. Invest Wisely
Doctors usually earn a lot of money. This gives them an excellent chance to save some money for later. Since doctors generally start working when they’re about 30 years old and stop when they’re about 60, it’s a good idea for them to start saving money early.
Work with an expert to set up a low-risk long-term portfolio in addition to retirement savings accounts such as the 403(b) and 401(k).
Read more: Ellinghams Tokyo Japan Money Management for Small Businesses
Final Thoughts
Doctors face unique challenges that can affect their income. Unexpected issues, such as being sued, can be a big issue.
But doctors can still manage their money well. If they plan their finances carefully to fit their needs, building a stable future is easier.