Congratulations to all the new doctors! You are all going to save a lot of lives! You may earn fame and money throughout a successful career in medicine but prioritizing financial management from the beginning is essential. New doctors may have many financial liabilities, such as massive student loan debts to repay. Doctors also must organize unsecured debts, utility bills, new rent, and insurance premiums. It is essential to manage your income and medicine-related work, as finances are just as essential as your profession.
Doctors have the potential to have an excellent income structure, and this is an asset to manage their finances. Personal finances have not yet become a significant subject in many high schools or college curriculums, with many students being unaware of financial management when they step into the real world. This newfound freedom coupled with a lack of knowledge can have negative consequences in their life
However, there is always a solution. I would like to share a financial checklist to help new doctors manage money wisely and plan their future well.
A full-time medical practitioner has the potential to be a high earner, but a lack of a proper budget can not only increase your daily expenses but also can cause financial stress. If you learn how to budget from the beginning of your career and consistently do so, then you will decrease your daily expenses and be able to save money and invest. This also reduces your financial stress and promotes good financial management. To budget, you need to create a complete list of your income sources and expenses. You can use a budgeting calculator online for accuracy and guidance.
Set Financial Goals
It is important to set financial priorities once you start your journey as a doctor. One of your priorities should be saving money. To do so, make a solid plan for the amount that you want to save and for which purposes, such as paying off student loans, saving for a down payment on a house, and etc. With a plan in place, you will then have the motivation to achieve it and a vision. Having a clear idea of the target can make the journey easy. For example, after you become a doctor, your first concern can be the student loan debt that you have accumulated. Starting a family, planning a vacation, and saving money for retirement are other financial goals that you may consider setting.
Record all of your Expenses
In order to meet your financial goals and know where your money goes each month, it is important to record all of your expenses, from small expenses such as coffee runs and eating out to larger purchases such as buying a car. At the beginning of the month, make a list of your actual expenses and set aside a sufficient amount of money to fulfill your basic needs, and it is a good idea to set aside money for emergency situations, like your pet getting sick, car issues, or unexpected health problems. Throughout the month, you should update the list of your actual expenses to more accurately determine how you spend your money. This will help you know where you are spending money unnecessarily and where you can tighten your budget. Try to set your financial goals and stick to the budget that you have planned, as financial management is as important as managing your career responsibilities.
It may be tempting to spend extravagantly as a new doctor, such as on a luxury car, and a busy schedule may result in less time to not only contemplate purchases but also keep track of bills. This can be the recipe for debt. It is a better idea for your financial health to prioritize meeting your basic needs, such as rent, food, and transportation. Once you have enough money set aside to fulfill all of your necessary expenses and for emergency situations, then it frees up the rest of your money towards other goals, such as saving and investing. Before spending a significant amount of money, analyze your financial position, determine whether it is a necessary or unnecessary expense and if now is the time to make this purchase. It is a good idea to set a time frame to analyze purchases, such as 24 hours, and make sure that it works for you. Remember to have patience and practice self-control when making purchasing decisions. It will help you take care of your needs, and you’ll be able to enjoy your money with less financial stress.
Everyone’s financial management strategy should include saving money, irrespective of their profession. One way to save money is to save a certain percentage of your monthly income(s) so that you have a lump sum of cash ready to use if you face any sudden emergencies. If you tend to spend easily, open a savings account and link it to your checking account, if you already haven’t done so. Then set an automatic monthly transfer of a fixed amount of money from your checking to your savings on the day you receive your paycheck. You will automatically start building savings in case of emergencies.
Eliminate High-Interest Credit Card Debt
It is harder to meet your other financial goals and to concentrate on your career if you owe debts, especially high-interest credit card debt. Unsecured credit card debts are dangerous and can jeopardize your financial prospects. It would be helpful if you put in efforts to eliminate these debts, as soon as possible. While eliminating debts, you need to target the high-interest credit card debts first. Rank all of your cards in terms of credit card balances and interest rates, and start with the card with the highest balance and interest rates. It helps to ease the pressure of the burden of mounting debt. Once you repay the highest-interest debt, then pay off the next card in the list, and continue the process until you’ve paid back all your outstanding debts.
Be Aware of Extravagant Friends
If you do have extravagant friends, it may encourage you to spend beyond your means and to spend impulsively. Living an extravagant life can likely hurt your financial future in the long run and makes it harder to meet your financial goals, especially as a new doctor. It is important to stick to your financial goals, stay strong, and exercise self-control, even if your friends may be leading extravagant lives and spending more money. You have a bright future to protect, and it helps to find strategies to enjoy the company of these friends while spending within your means. This helps you to stay on the right financial track and have fun in your social life.
Buy Disability Insurance
Life is uncertain, and there can be situations in life when you find yourself unable to continue working due to physical or mental disability. Disability insurance protects your hard-earned money. It is a wise decision to buy disability insurance to avoid any risk if you become disabled.
Create an Emergency Fund
As mentioned multiple times above, it is important for new doctors to be prepared for rainy days. Being consistent with savings is critical. As every drop of water makes the ocean, every penny you save can add up to a considerable amount of savings. The more you save, the brighter your financial future will be, and you will be better prepared in the case of emergencies or unexpected expenses. Try to keep at least six to nine months of your earned income towards savings in an emergency fund to fight uncertainties. You should follow a disciplined and long-standing approach to save money, and with dedication, you can secure your financial future.
Invest your Money
Investing is a virtue. Start investing as early as possible. While investing money, keep in mind the basic investment philosophy—don’t keep all your eggs in one basket. In other words, diversify your investments to minimize risks. This is a great strategy to help you accumulate wealth. Instead of investing directly in the stock market, invest your hard-earned money in low-cost mutual funds. By working with expert fund managers, you can feel confident that they are constantly trying to get the maximum returns for you.
Consult with a Certified Financial Planner (CFP)
If you need help managing your income, then it is a good idea to consult with a certified financial planner (CFP). You can consult with a CFP about insurance and retirement planning, and they can help you achieve your financial goals.
Conquer Student Debt
According to the report, eight out of ten medical school students borrow student loans to complete their studies. Once they get their degree, they have an average of $251,600 in student loan debt to pay off, and paying off student loans can seem daunting. But there are several ways doctors can conquer their student loan debt.
- You can refinance federal or private loans with a new loan.
- Get a consolidation loan to repay your private student loans.
- To repay federal student loans, use an income-driven repayment plan.
- Check out the student loan forgiveness program.
Lastly, remember that financial management is one of the most important things new doctors should know. Procrastinating may cost you dearly in the long run, and you don’t know what lies ahead of you. Being careful with your money is critical to prevent ending up in financial trouble or at the very least minimizing the amount of trouble.