Financial Challenges Facing Physicians

There are unique financial challenges facing physicians. We earn more than the average person but we have some problems that our contemporaries do not.

Student Loan Debt

The average student loan debt for recent medical school graduates is nearly a staggering $200,000.  The average salary for a primary care physician is $195,000 per year, the average for a specialist is $284,000, the average for an “alternative care provider” can be anywhere from $30,000 to $150,000. Add on another $8,000 in non-education related debt (most likely due to credit cards) and perhaps a mortgage. Being a resident or new in practice may not pay well, and there isn’t time for a second job, so a lot of life’s expenses get charged.

You Have a Late Start: Part One

Doctors start their careers full time much later than their contemporaries. Most people who attend college will start working full time in their early to mid-twenties. A doctor may not start earning full-time money until their early thirties. That also means they get a later start on paying back student loans.

You Live the “Doctor Lifestyle”

You worked hard to become a doctor, and you want to reap the benefits of that hard work. For many doctors, that means living the “doctor lifestyle” complete with big house, fancy car, expensive watches, vacation home; you get the idea. All of that not only adds up, but it might also be distracting you from paying off your student loans and investing.

You Have a Late Start: Part Two

Because doctors spend so many years pursuing education, they get a later start at other important things too; namely starting a family and investing. Delaying parenthood means you have less time to save for college if you want to help fund your children’s education. Currently, the average cost of one year of college ranges from $9,410-$32,405 depending on whether the college is public or private. By the time a newly minted doctor’s kids are ready for college, we can only shudder at how much higher those numbers will be.

The most important way to grow your money through investing isn’t how much you invest but how long you invest. Here’s an example of the power of time when it comes to investing:

Person A invests $10,000, and because they started young, that money is invested for 40 years. Person B, a doctor, gets a later start and invests $50,000 for 20 years. Both get a rate of return of 7%, which is average over a long period of time. Neither person invests any more money, just those initial amounts.

At the end of 40 years, Person A’s $10,000 has turned into $149,744.58. The doctor’s $50,000 has turned into $193,484.22. The doctor only made $43,739.64 more even though they invested five times more than what Person A invested. That is the power of time when it comes to investing your money.

What Can You Do?

The first thing to focus on is debt repayment, especially credit card debt which can have interest rates well into the 20% range. Student loan debt usually has a lower interest rate, so that can be secondary to credit card debt. You need a plan to pay off debt, just throwing whatever is left over at the end of the month isn’t good enough. It’ll take longer and cost you more. Follow either the stack or snowball method of debt repayment. Both have their pros and cons, but both are effective methods of debt repayment. 

Once you have all, or at least a big chunk, of your debt out of the way, you can focus on investing. Don’t let the fact that you’re late to the party make you ignore one of the most important tenets of investing; limiting risk. The same rules apply to you that apply to any other investors, ignore them at your (portfolio’s) peril.

Another big factor is avoiding “the doctor lifestyle” and lifestyle inflation, which can happen to anyone. Lifestyle inflation means that every bump in income means a big upgrade in lifestyle, a bigger house, a newer car, first-class flights and five-star resorts instead of flying coach and booking an AirBnB. Invest those income bumps rather than upgrading every facet of your life.

If the thought of managing your money is just too much to deal with when you’re busy with your career and family, there’s nothing wrong with getting some help and advice. There are a lot of generic financial advisors out there, but because of the unique situations doctors find themselves in, look for one who specializes in helping doctors manage their finances. One size does not fit all when it comes to financial advice.

You Still Have an Advantage

Don’t let all this get you down. As a physician, you have a great deal of earning power and, unlike some jobs where you’ll be pushed out upon reaching a certain age or physically unable to do a job anymore, you have many years ahead of you to earn money.

For more information on building community connections, I encourage you to read my new book Community Connections! Relationship Marketing for Healthcare Professionals. If you want more valuable information about how to Connect with YOUR Community, you can find FREE healthcare practice marketing content, PowerPoint Presentation Jumpstart Kits, workbooks, blog articles, and my FREE “Practice Marketing Planner” Now!