The average doctor begins his or her career with about $200,000 in debt.
Creating a financial plan that addresses the debt and establishes a firm financial foundation is critical.
Physicians may want to establish plans to save, tackle student loan debt, and protect their ability to earn money sooner rather than later. Strategies can always be modified following life changes.
Fellows have a nearly unparalleled depth of medical knowledge. While they are busy learning all the complexities of the medical profession, financial literacy can often fall by the wayside. This presents a problem, considering that in 2019 medical school graduates had a median debt of $200,000, and 73% of all graduates graduated with education debt.
Advice from finance professionals
These two financial experts offered proven tactics and advice for doctors entering fellowship, with a focus on eliminating debt, accumulating savings, and estate planning, among other strategies.
Unfortunately, medical school and fellowship do not leave much time for learning about personal finance.Related: Expert advice for fellows on choosing the right insurance coverage
"With the heavy academic workload, it is difficult to wrap your arms around the notion of saving any money."
— Mark Milbrod, vice president at ASGLife
Hartmann and Milbrod suggested several points to consider while in fellowship.
Build an emergency fund: Physicians understand emergencies well. These are life’s unexpected moments (and expenses), such as an unforeseen medical bill, car repair, or job loss. When any of these situations arise, they’re often best addressed in cash.
“A good rule of thumb is to strive for a minimum of 6 months of income set aside,” Milbrod said.
Start saving for retirement: Chances are, the organization where you’re doing your fellowship offers some sort of retirement plan, probably a 401(k) or 403(b). “When possible … try to be disciplined enough to systematically put some money into some form of savings every month,” Milbrod said.
This is especially critical if your employer offers a contribution match. Otherwise, you’re leaving free money on the table.
"Saving early will be important for your long-term success, even if you are only able to save a small amount at first."
— Brian Hartmann, CFP of Granite Bridge Wealth Management
Establish credit: “Establish credit by opening a credit card,” Milbrod advised, noting that small credit lines build credit history. “Make small purchases and pay them off when due.”
Repaying student loans
Fellows also need to consider how they’re going to tackle undergraduate and medical school loans.
There are several programs that may reduce or eliminate your student loan debt. The Public Service Loan Forgiveness (PSLF) program can reduce the balance of your qualifying loans after 10 years of payment (120 payments). The National Health Service Corps offers several programs that could pay between $25,000 to $120,000 toward loan debt.
Lastly, 33 states in the US and Washington, DC, have some type of repayment program specifically for medical professionals.
Each program has its own eligibility requirements. Hartmann and Milbrod pointed out that individual needs vary. Exploring these options in detail with the help of a financial planner or attorney could be extremely beneficial.
Estate planning and insurance
Milbrod and Hartmann expressed slightly different views on the timing of estate planning.
Estate planning includes organizing a living will, guardianship designations, your proxies for healthcare, beneficiary designations, and durable power of attorney.
Milbrod advised creating estate plans early. These basic legal documents are key should something happen to you while in fellowship—offering guidance for family (or caretakers) of your medical wishes that otherwise would not exist.Related: Doctor's perspective: Juggling parenthood and fellowship
Hartmann said, “For many people, it makes sense to create the first rendition of their estate planning documents when they begin their careers.”
One point on which Hartmann and Milbrod agree is that these documents can evolve as your circumstances change.
Hartmann said it’s critical to be mindful of risk. As a physician, your body is critical to your work. Take care of yourself, mentally and physically, and own the proper types and amounts of insurance, such as life and disability insurance. Both experts noted that life insurance is easier to obtain and more affordable when you are young and healthy.
Keep things in perspective
Once you have a sound plan in place, you can take a step back and focus on the more significant financial journey ahead. Think long-term in your financial planning, Hartmann advised.
While you may have earned about $60,000 in your first year as a resident, better paydays likely await. Living simply—below your means, in fact—as a fellow, such as renting over buying a home, sticking with your reliable car over buying a new one, and minimizing unnecessary purchases, will go a long way to building a solid foundation, according to Hartmann.
Instead of dwelling too much on money, Hartmann suggested using this time to become the best physician possible. That will lead to greater financial rewards later in your career.
Milbrod agreed, advising fellows not to compare themselves to their peers.
“There is no need to play catch-up with them, as this may lead to poor decisions. They have had more time to ‘establish’ their lives,” he said.
What this means for you
As a fellow, your peak earnings may seem eons away. Fortunately, the years pass more quickly than you think. Apply some effort now to build a sound foundation for future financial freedom—this includes strategies for saving, asset protection, and estate planning. Proactivity will pay dividends later in your career.