The scene at the resident teaching session was all too familiar: Awkward silence with either blank stares or brows furrowed in deep valleys of confusion. As I scanned the room, I recognized the moment many lecturers experience: I had completely lost my audience. And, whatever I had planned for the next 10 minutes, would now be spent “taking a step back.” We weren’t talking about a crazy exam finding or an obscure disease. We were talking about a credit score.
It’s well documented that physicians routinely enter and leave training with little financial literacy. During one of the most critical times to start bringing together the building blocks of lifetime financial success, residents endure up to 80 hours (wink, wink) per week of grueling work that makes devoting time to even basic life tasks — sleep, exercise and eating healthy — a challenge.
Learning personal finance requires a significant amount of research, and for physician trainees there simply isn’t enough free time to squeeze in the effort required to master it. So, often trainees struggle through, looking forward to the day when they start getting their “real” paychecks and hoping that the added income will somehow fix everything.
However, after taxes, student loan payments, a mortgage, cars, and childcare, post-trainee paychecks can be spread very thin. Add to that the opportunity cost from a late start to saving and you have even less margin for error. Add further a poor understanding of how to build financial success, and you have the potential for disaster. Thus, it’s no surprise that, despite earning more over a lifetime, the return on investment of a medical degree is only mid-range compared to many other professions.
Thomas Stanley, in Millionaire Next Door, refers to physicians as “under accumulators of wealth” for this reason. Our financial success depends on good financial literacy and, not only do we lack it, we’re often targeted by the finance industry precisely because we’re high earners who lack knowledge. We’re vulnerable cash cows to the financial industry, and those looking to sell questionable investment opportunities smell blood in the water when dealing with physicians.
Though the long-term under-accumulation of wealth is certainly concerning, I think the more consequential effect of poor financial literacy is the pressure put on physicians to earn more to make up for poorly informed financial decisions. Underlying much of the unhappiness I have seen in my profession is rooted in a common thread of feeling forced into practicing in a way to maximize earning potential at the expense of other pursuits or family obligations—such as going into academia, reducing clinical time for a project, starting a small business or working part-time to attend to a sick child or parent.
Rather than allowing this to continue we should begin teaching young physicians early about avoiding the obstacles to achieving financial success. Medical school has been argued as a potential forum for this education though the timing may be hard to do properly. The end of fourth-year of medical school would be ideal in this case, but many fourth year medical students spend time away and/or are not interested in attending anything structured (like I was). Early in residency would be even better since young physicians will begin working through managing a regular income with their financial commitments. Regardless of when to begin, the program should include the following components:
1. Understanding and protecting your credit score. The credit score is made of multiple components and determines the interest rate you will pay to finance big purchases (such as a mortgage, a vehicle, or buying into a practice). A poor credit score can lead to higher interest rates and can make necessary purchases much more expensive over time. Monitoring your credit report (which can be done on a yearly basis for free) is also very important since credit thieves routinely target physicians to open fraudulent accounts.
2. Setting goals. Setting realistic budgets and short-term goals (such as emergency savings or a down payment for a home) along with formulating a retirement strategy.
3. The basics of investing. Learning how to take advantage of tax-deferred savings like a 401k, a 403(b) and IRAs along with the differences/advantages of traditional retirement accounts versus Roth accounts. Also, the differences between various offerings like stocks/bonds, mutual funds, exchange-traded funds (ETFs) and how to put together a diversified portfolio with the appropriate amount of risk for age and retirement goals.
4. Insurance. How to appropriately manage financial risk from unanticipated events, such as death/disability or being sued.
5. Getting good advice. How to choose an expert to provide advice along the way and who has your best interests at heart.
Better money management is the obvious benefit from a structured approach to teaching financial literacy. But the larger benefit to structuring financial education this way is to open a breach into the culture cultivated early in our profession that seems to posit that any serious thought given to money matters mutual excludes the altruism that often leads us into medicine. We are certainly privileged to be able to practice medicine, though we must acknowledge the reality that physicians consistently hover near the top of professions in terms of stress, job dissatisfaction, burnout, depression, and suicide. With increasing workloads, regulation, and liability/patient safety concerns, this only worsens when generating income is used as a strategy to compensate for poor financial literacy. We should set an early example for trainees to become comfortable with talking about money in their lives in order to avoid money dominating it.
Taison Bell is an internal medicine physician.
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