After years of medical school, training and a lower salary, it can be jarring to finally get settled into a position (and a higher income.) As a new physician, you’ll have to adjust your mindset and your habits to manage your money effectively.
Here are some tips for successful money management when you graduate from a resident or a fellow to a practicing physician:
New Physician Financial Success: Avoid Lifestyle Creep
For many new physicians, years of feeling deprived leads to splurging when the bigger paychecks start coming in. Or, they get caught up in what being a doctor is “supposed” to look like, and they spend more to keep up with those ideas.
The truth is, no matter how much money you have, it needs to be managed. If you don’t move forward with a plan, you might find your money disappearing much faster than you expected. Too many new physicians end up buying a house or a car immediately, before getting a handle on loans and retirement savings.
I have a full blog post about how physicians can avoid lifestyle inflation, but here are some highlights:
- Know what your debts are, and make sure you have a plan for how to pay them off.
- Make sure you’ve started your retirement savings.
- Don’t try to keep up with other doctors or feel pressured to live more extravagantly.
- Be patient and make saving a priority.
- Enjoy yourself – mindfully.
New Physician Financial Success: Create a Loan Repayment Plan
Most new physicians still have student loans to pay off, so make sure you know exactly what you owe and how you plan to pay it off.
From there, focus on one loan at a time, and make sure you’re aware of any repayment plans or forgiveness you may be eligible for.
I talk more about paying off student loans in my “Tackling Student Loan Debt of $100,000 or More” post.
Know Your Money Pitfalls
Having more money doesn’t necessarily eradicate previous money struggles you’ve had. In fact, sometimes more money can amplify those struggles.
If you’ve never been a consistent budgeter, you might fall into the same old habits – just with more money.
Or, if you’ve always been a saver, you might feel nervous investing in higher amounts or paying for someone to help you manage your money.
Understand where you struggle so that you can make a plan for managing your new income responsibly.
New Physician Financial Success: Set Goals and Automate
Many physicians have jam-packed schedules, which might not leave a lot of extra time for hands-on money management. This is where it helps to know your bigger picture.
Take some time to sit down and really consider your short and long term goals. If you have a partner, find time for both of you to talk and get on the same page for what you want.
Break those goals down into monthly or weekly mini goals, and set up automatic ways to make that happen. Maybe that means a part of your paycheck is immediately put into an account for paying down loans, saving for a house, taking an anniversary trip or saving for your child’s education.
Whatever you’re working towards, make it as easy and automatic as possible to achieve it.
Enlist Help and Guard Your Money
There is a lot of noise out there about managing your money as a physician. You’ll encounter plenty of financial DIYers working toward early retirement, unsolicited advice from well meaning family and friends, suggestions from coworkers and even professionals offering their products or services for financial planning and insurance policies.
The truth is, you need to know your own limitations. Some people love to be super hands on with their money, and prefer to go more of a DIY route. But others will turn to a financial planner to help get their finances on track.
Whichever route you choose, make sure you’re getting advice from reliable sources, and choose a financial planner who’s right for you.
About Your Richest Life
At Your Richest Life, physician-focused financial planner Katie Brewer, CFP®, wants to help you build a successful financial future. For more information on the services offered, contact Katie today.