The stereotypical physician has plenty of money, but that’s not always the case, especially early in your career. Med school is expensive, and it’s nearly impossible to hold a job while in training. Because of that issue, over 71% of medical school students have six-figure debt when they graduate.
If that’s the boat you find yourself in, you’re not alone. But to reach that coveted stereotype of the rich doctor, you must take control of your finances now.
Whether you’re working for someone else or running your own office, these essential practices can guide you as you manage your money and watch it flourish.
1. Give Yourself a Salary Outside of Bills
You’ve worked hard for your paycheck. You deserve to spend some of that money on yourself. Pay yourself first, then take some of those funds and put them into savings.
How much should you set aside for your “fun” money? This depends on your salary and debt levels. Experts suggest that small business owners give themselves 10-15% of their income towards disposable items, like clothing, going out to eat, entertainment, and savings. Even as an employee, you can use this rule of thumb to guide your spending.
But if you have hefty debt that you want to get rid of, consider taking a little of that money and skipping a night out on the town in favor of paying down bills. Just make sure you aren’t burning yourself out by being “all work and no play.”
2. Design a Forward-Thinking Budget
Living on a budget is an essential way to gain control of not just your money but your spending habits, too.
As you set up your bill payment strategy, don’t just look at the amount due. Look at factors like interest rates, total balances, and late fees. Getting to know the reality behind the minimum monthly payment due makes you smarter about how to pay off your debt.
For example, say you have five credit cards you used to get through the last few years. You might think you’re doing the right thing by paying ten dollars extra toward all of those cards. But you realize that you have one with a low balance of $200.
You could take the “extra” payment from the other cards, apply it to that balance, and have that card paid off within a few months. Then, use the monthly payment from that card to do the same thing to another debt.
This forward-thinking budget allows you to spend the same amount of money each month while paying your debt off faster.
3. Expand Your Skills
The more you can offer an employer or your patients, the more valuable you become. You may have graduated from medical school, but that doesn’t mean your learning days have to be over!
Expanding your skills depends on your field of medicine. You may be a cardiovascular surgeon, but you see that a trauma surgeon makes more money. It’s a simple, although time-consuming, segue to move from an in-office physician to an emergency room doctor once you find out which skills you’ll need and seek them out.
The same idea applies to any position as a doctor, even if you’re an employee. When you gain a new certification or the ability to add a modality to the office, your employer can bill more codes, which opens you up to ask for more money.
4. Invest in Insurance
Having savings is great, but how will you protect those assets and continue to add to them? That’s where insurance comes into the picture.
There are three main kinds of insurance to ensure you have as a doctor, not including malpractice and auto, which are mandatory:
- Health insurance so that you can take care of yourself and your family before small problems become big medical issues;
- Disability insurance to ensure you have an income coming in to cover your basic bills in the event of an accident or long-term illness; and
- Life insurance, either term or whole, to protect your family in the event of your death.
Each of these is important in its own way. You may be affiliated with an organization or employer that provides coverage for you. Check your policy limits and verify that the amount of insurance you have is enough to protect your assets.
Financial literacy isn’t one of the main courses taught in medical school, but it’s just as essential as the other skills you’ll learn. To be successful in your future, managing your money is a must. Follow these four practices, and you’ll be out of debt and ready for retirement soon.