Financial advice for brand new doctors

This past July, the newest doctors, interns, have continued their journey in becoming experienced doctors. These newly minted and graduated doctors have excitement, anxiety, and anticipation not unlike the first day of medical school, college, or high school.

But as new doctors begin their next step, we rarely talk about those who also graduated. Specifically, doctors who have completed their residency and in some cases their advanced fellowship training. What about them? Certainly they have similar excitement, anxiety, and anticipation as they move on in their careers now as attending doctors.

Unlike the past, however, this new part of their lives is less structured. There are no SATs, MCATs, or prerequisite classes to take. There are no applications to fill out. There is no checklist of things to do to get to the next part of training.

In many ways, finishing residency or fellowship, aside from having a job, could be the least structured part of a new doctor’s life. What to do now?

With medical school debt, the ability to now generate income that has been delayed for years (college, medical school, residency), the ability to leave formal education, and the freedom to now live life like their peers who started working after college, business school or law school, I have some suggestions on what our newest colleagues should do.

Take care of your most important financial asset. You.

If you get hurt or ill and you cannot work, all of that training and ability to earn a living is delayed. Yes, you are likely young in your late 20s or early 30s. It is likely you have no major medical problems. You might even have good healthy habits with few responsibilities aside from a significant other or a pet. Yet, as part of your training, you know bad things can happen. Unexpected accidents. Unforeseen illnesses.

The first thing you should do is make sure you have health insurance, even if you are between jobs and have no coverage.

Get catastrophic health insurance between jobs. Once you have a job, be sure to have health insurance when you start work and if possible have it active immediately. Currently many non-health care employers do not offer health insurance immediately.

The leading cause of personal bankruptcy in our country is related to medical costs.

Second, purchase disability insurance. Disability insurance provides income if you are disabled for an extended period of time. The amount provided typically has a grace period of anywhere from 3 to 6 months before payments begin. Payments are in the range of 50 percent of your annual salary. Odds of using it? Hopefully low. If it happens to you? Be glad you have it. Your employer may offer coverage.

As a resident, I remember seeing a healthy high school science teacher in the emergency department. I don’t remember what he came in for. What I do remember is that his science career was his second career. His true love was actually general surgery. Unfortunately, shortly after he finished his training, he suffered a significant hand injury which not only decreased his dexterity but resulted in permanent numbness of his fingers. A major problem for a surgeon in the operating room. Fortunately, he had disability insurance and was able to work as a teacher and have some of the income his surgical training would have provided has he had intended, but could not do.

Third, continue delayed gratification. Pay down your debt as quickly as you can. This could be credit card debt. This could be your medical school debt.

You might have thoughts on how this might be an easy task. After all, if you simply continued to “live” the life of a resident or fellow in terms of the car you drive, where you live, how you eat, and other endeavors, the higher income post-training surely would be more than enough to handle this issue. After all, you’ve delayed gratification enough from going to medical school and then an additional 3 to 5 years of residency and possibly another 1 to 3 years of additional fellowship training. It would be ok to splurge a little. You deserve it.

Yes, you do. Just be mindful of it. Paying off high credit card interest rate debt is like getting an investment return of the same percentage. If your credit card debt has an interest rate of 20 percent, if you pay it down, it is like getting a guaranteed return of 20 percent. Instead of getting a 20 percent “return” you are preventing yourself from “losing” at a 20 percent rate!

Fourth, start saving money. Set up an automatic withdrawal where money is automatically deducted from your paycheck either into a retirement plan or savings account outside of your usual checking account for daily or monthly expenses. When out of sight, it is out of mind. There have been recent New York Times pieces on how doctors are not particularly good at managing moneyDon’t be like many of our colleagues.

Start saving money as early as possible. There is the concept of time value of money which all doctors should know about. This basic concept is as important in financial planning as germ theory is for medicine.

Fifth, consider getting personal insurance to cover liability for accidents that might occur in your home or due to a car accident. Known as umbrella insurance, it does not cost much add coverage. Though unlikely that friends, acquaintances, or family might sue you if they fell at your home and hurt themselves, the risk is not zero. People might have other ideas when they discover you are a doctor.

Catastrophic coverage, disability insurance, and umbrella insurance coverage are meant to protect you against highly unlikely but potentially problematic financial issues should they occur. Unlike a true “black swan” theory where risks are truly unpredictable, these risks are small but real. Consider these part of a “checklist” as you move on to the next step of your professional career. Life is unpredictable. Doctors don’t like risk. Think of these tips as a way of mitigating that risk.

Davis Liu is a family physician who blogs at Saving Money and Surviving the Healthcare Crisis and is the author of The Thrifty Patient – Vital Insider Tips for Saving Money and Staying Healthy and Stay Healthy, Live Longer, Spend Wisely.

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  • Guest

    Great article – thank you for posting. Ever more important has new physicians are coming out with more debt and earning less money.

  • AlexMD

    Great article – thank you for posting. Ever more important as new physicians are coming out with more debt and earning less money.

  • Tiredoc

    Those are all excellent ideas. Paying off all our debt has allowed my family the ability to weather the perfect storm that is the ACA.

    The most important piece of advice I can give is to move away from the city that you trained in. No matter what your specialty, you are more needed and better compensated where there aren’t more of you every year. Find a place you’re willing to live that needs doctors of your specialty, and cold-call the practices that are already there. It costs an enormous amount of money to recruit a doctor. If you show up on their doorstep it’s that much more money that can go to you, or time for you to become profitable.

  • Guest

    “Though unlikely that friends, acquaintances, or family might sue you if
    they fell at your home and hurt themselves, the risk is not zero.”


    I had never considered an umbrella policy until some friends were sued by their son’s (casual) girlfriend after she tripped on their front hall carpet. The people who love you will probably never sue you for sitting in a lawn chair that breaks or tripping on your carpet, but not everyone who is going to enter your house for the next XX years is going to be someone who necessarily loves you.

    • Davis Liu, MD

      Sadly agree.

  • Suzi Q 38

    I see this all to often over the years. Buying the big, fancy house is more the norm rather than the exception after residency or fellowship.
    Physicians and others are just so accustomed to having so much debt that they want to rush out and buy that huge house with their first big paycheck.
    Such a sad cliche.
    It would be so much better for the physician and h/her entire family to live frugally just awhile longer. Pay off all of those student loans first, and then be truly free.

    • Davis Liu, MD

      Living within or below your means is always excellent advice. Thanks for sharing!

  • Richard Willner

    There are very significant risks in the non-clinical duties of the Practice of Medicine. Make sure one KNOWS how to bill. NEVER trust a clerk no matter how smart.

    Learn how the DEA, DEA diversion, the Pharmacy Boards,
    and local law enforcement considers meds. No, it is not the same as your Standard of Care. In fact, the DEA laughs at your SOC !!!

    Learn about the RACs, ZPICs, MFCU, MIC, the list is endless. And if you do not know how one is a target, just email us

    Richard Willner
    The Center for Peer Review Justice

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