Be frugal: The key to physician financial fitness

Becoming a physician requires a great amount of financial patience. Living on the meager remains of your student loans for four years and then transitioning into a position where the pay is not commensurate with your debt obligations can be challenging. Especially when your student loan debt is growing exponentially throughout your schooling and then growing with interest throughout your graduate training. After this kind of sacrifice, it can be tempting to spend heavily when you finally start earning the salary of a full-time physician. The pressure to spend this way can be both internal and external, but before you buy that new car or house, consider how frugality can increase your financial freedom both now and in the future.


Unfortunately, society expects that doctors should outwardly display wealth, whether or not they actually possess it. Articles warning physicians about the dangers of the “keeping up with the Joneses” mentality come up time and time again.

However, it still seems that physicians find themselves in financial predicaments even though they average the highest salaries in the country. It is a situation where limiting your financial expenditures is much easier said than done, and when someone asks you, “Why are you still driving that car?” or “Why are you still renting this apartment?” you may begin to question those decisions yourself. Steeling yourself against these external expectations of your financial situation is important, but it is equally important to be able to say no to your own desires when they do not meet your financial goals. This requires developing the right frame of mind when it comes to your finances.


Before you set the specific goals for what you actually want out of your finances, consider what it really means to be frugal. Being frugal does not make you stingy or cheap, and is something that can become habitual over time. It is a key step to ensuring your financial freedom. For some physicians, this may be very difficult, as they derive pleasure from spending, and showing the world that they have spent. Expensive goods and services are indicative of status, and status can be a powerful temptation. This is especially true for physicians recently out of training, who are eager to match the perceived social position of their friends and colleagues in other fields who have been earning salaries for five to ten more years than them.  Creating a frugal mindset will help you weather the temptations of spending just to spend.

Uncertain future

Downward pressure on physicians’ salaries is an unfortunate reality of modern medicine. Toting around over $200,000 in educational loans with just the cost of living is difficult, even on a physician’s salary. As reimbursements are continually slashed, there seems to be no clear indication of how much physician’s salaries might take a hit. Fortunately, recent numbers suggest only a few specialties are seeing decreases, while most saw an upward trend. While these decreases can be highly dependent on specialty, there is no guarantee your specialty will be immune to negative changes. This is another reason why spending and saving well is so vital to securing your financial future.

Retirement Goals

A goal for many physicians is to secure at least 20 to 40 percent of their pre-retirement income for each year of their retirement. This may seem miniscule when you compare this to what it takes to support yourself financially before retirement, but after you retire, many of your expenses will be minimized, such as mortgages or vehicles paid off. If you begin looking at each dollar you earn as a measure of how much time you can spend not working, then it becomes clear how important saving is for financial freedom later in life.

For a very general example, imagine you implement a budget where you are putting away 25 percent of your income each year. After negotiating your salary properly, you should be looking at a salary anywhere from $195,000 to $285,000. Even on the low end of salaries, if you assume you will see gains of 4 to 7 percent per year on these savings over a 25-year career, then you will be looking at over $3.5 million saved. This secures you an annual retirement budget well over the typical 20 to 40 percent of pre-retirement income most physicians try to achieve.

Limit the big expenses

Houses, cars, loans, and schools for your children are expenses that are going to comprise the largest costs within your budget. These expenses are also most likely going to be fixed in some sort of recurring payment plan. On top of these fixed expenses will be variable costs for things like vacations, food, and entertainment. Minimizing these fixed costs from the beginning, which are considerably harder to decrease later on in comparison to your variable costs, is crucial to increasing your financial flexibility. One key takeaway is that it is much easier to never increase spending rather than cut back.

Being frugal is a choice you can make, albeit not always the easiest one. Especially when you have most likely been forced to practice extreme financial discipline throughout your training and are expected to maintain a certain level of perceived status when you finally start earning. If you can cultivate a mindset that frugality is good in the face of this pressure, then you will set yourself up for a financial freedom that is enjoyed by very few in society.

Sidney Christiansen is an otolaryngologist and founder, Resolve Physician Agency.

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