Financial management is an important subject for everyone because it concerns the safety of your future. For physicians, there couldn’t be anything more crucial than knowing how to manage finances.
Physicians go through a lot to earn the education and experience required in their field. That journey requires considerable funding, with many individuals sustaining high student loans, among other debts.
Considering all these challenges, physicians should have a clear understanding of 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 financial health. This post explores key financial management considerations for physicians.
1. Be Conscious of Your Income
Knowing how much you earn early on is important because you can use that knowledge to plan your finances. Understanding your income goes beyond knowing your base salary, as you may have bonuses and other benefits at various points during the year.
Besides what you bring in, understanding your income also involves tracking expenses, including deductions like taxes. Consider these three points when figuring out your income, and you will have a better picture of your financial state.
- How much you earn (salary, bonuses, other income streams)
- How much you spend
- How much you have left
Being conscious of your income will also streamline crucial aspects of planning, like budgeting. You will be aware of different factors like fluctuations in income and expenses, which will help you budget wisely.
2. Have a Debt Repayment Plan
Can you graduate from medical school debt-free?
Sure. If you had a scholarship, financial aid, or your family saved for your education. Otherwise, since studying medicine is expensive, you may be forced to take government or private loans to fund your education.
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.
That is a heavy debt for a physician at the beginning of their career. But these early years, when other responsibilities haven’t crept in, are the best for tackling that debt.
As a fresh graduate, you’re perhaps still accustomed to the cost-effective student lifestyle. Take advantage of the first couple of years to repay your debt aggressively.
It would be best to get rid of high-interest debt first, as it can quickly turn into a bottomless pit. In addition, try exploring loan forgiveness programs for medical professionals that you may qualify for.
3. Get Insured
One of the best ways to get financially secure down the line is to get insured. Physicians can buy various insurance policies to protect their income and assets.
Disability insurance, for example, is worth considering. In case you are ever unable to work due to an illness or injury, the cover steps in to compensate for a portion of your original income.
Another important coverage for physicians is life insurance. It’s a worthwhile investment if you have dependents, as it offers financial safety in the event of your demise.
Also, since healthcare professionals are at high risk of getting sued due to the nature of their work, you may consider malpractice insurance if your employer doesn’t provide it.
While getting insured should be a vital part of your financial plan, it’s also an area where many make mistakes that harm their finances.
If you are not sure how to proceed with such investments, consider working with a financial management expert. Firms like OJM Group specializing in wealth management for physicians are worth looking into.
4. Invest Wisely
Physicians are generally high-networth individuals, and that offers them a unique opportunity to set aside a portion of their earnings for the future.
Considering most doctors rarely start working as licensed physicians until their 30s and retire in their 60s, it makes sense to have an investment plan early on.
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
Physicians face unique challenges that may impact their financial health. For instance, unforeseen factors like legal action can be a serious problem. However, successful wealth management is not out of reach for physicians. With proper financial planning aligned with your needs, working towards a more secure future becomes easier.