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Four Important Financial Tasks for Post-Residency Doctors


Surviving residency and officially entering the workforce is no easy feat. As you settle into life post residency, your income will increase and so will the complexity of your finances. But as you advance in your medical career, there are some things which require your attention:  

 

Manage Your Cash Flow

The ability to reach your financial goals has less to do with your level of income and more to do with the relationship between your lifestyle and your paycheck. If you don’t save, pay down debt and manage your lifestyle spending, you can find yourself in financial trouble no matter how much you earn.

Managing your cash flow doesn’t have to be overly complicated. You can (and should) create a budget that involves tracking and categorizing your every purchase.  Free platforms and apps such as Mint.com or Mvelopes can be used for personal budgeting, or paid programs such as Quicken can be used, and also track business expenses should they occur.

If you don’t have the time to take this detailed of an approach, start managing your cash flow by automating your everyday life. Determine your financial goals including saving and paying down debt, and set up automatic transfers to your savings accounts and automatic payments to your credit card or loan accounts. Whatever’s left can be used for your lifestyle – but ensure you are not adding to credit card balances to maintain a higher lifestyle than you can afford.

 

Don’t Delay Saving for Retirement

There is a good chance you didn’t escape medical school without student loan debt. According to a 2015 report by the Association of American Medical Colleges, 81% of medical school students graduate with student loan debt, and the average balance a graduate carries is $183,000. This debt isn’t going to be paid off overnight, but it doesn’t mean you should put all your other goals on the backburner until you’re debt free.

Depending on your loan repayment plan, you could be paying off student loans for the next 10 to 25 years. You can’t afford to wait that long to build your retirement savings.

A great place to start is by making sure you take advantage of any employer match you’re offered through your company retirement plan. If you’ve opened your own practice or aren’t offered an employee sponsored retirement plan, you still have several options such as a SEP or Simple IRA, Profit Sharing Plan or Defined Benefit Plan. Which of those is best for you will be covered in future posts.

By taking part in the compounding effect of your investments, even a small amount of money invested early in your career can make a significant different to your overall retirement scenario in later years.

 

Make Sure You Are Properly Insured

Given the litigious nature of the healthcare industry, most physicians are all too familiar with the need for good malpractice insurance. It’s also likely that you have medical and life insurance. There is, however, another crucial type of insurance you should consider: disability insurance.

According to a 2010 report by the Social Security Administration, about 1 out of every 4 adults in their 20’s will suffer a disability before they reach age 67.

What would happen to your family if you were unable to work? Even if you are not totally disabled, a hand injury or loss of eyesight could be detrimental to the career of a doctor. Private disability insurance can help to cover lost income. If your employer offers disability insurance, make sure you are signed up for the maximum coverage, which is typically around 60% of your salary.

If you are not provided disability insurance through your employer, you can purchase your own policy. You’ll want to make sure the policy is considered “own-occupation” which covers disabled individuals who can no longer perform the majority of duties in their own occupation.

  

Work With a Financial Planner

A financial planner can help you with everything from making sure you are properly insured to helping you with retirement and investment planning. While the financial advisory industry is going through considerable changes, you should still consider hiring a fee-only financial planner who doesn’t earn a commission for the sale of financial products. 

You may also want to look for a financial professional with the Certified Financial Planner (CFP®) designation. This designation requires 18-months of classes, a comprehensive exam, and a 3-year minimum experience requirement in being an advisor.

 

While this is no doubt an exciting time in your career, these years are also crucial in terms of your finances. Take the necessary steps today to ensure your long-term financial health.