Four ways physicians can become more financially literate
Key Takeaways
Over 90% of physician residents feel unable to effectively manage their finances, leading to greater overall job dissatisfaction.
Physicians who want to build financial literacy must ask themselves questions regarding their current knowledge base, understanding of financial topics, and work-related priorities.
To become more financially literate, physicians can do cash-flow exercises, cut expenses, build healthy savings accounts, and establish a relationship with a trusted advisor.
You may earn a handsome income as a physician, but are you comfortable managing it? As April is Financial Literacy Month, MDLinx wants to ensure that you feel confident in managing your finances to maximize your financial and personal well-being.
If you’re starting your journey to financial literacy, assess what you know so far.[] Once you have a good idea, it’s time to close the gaps between what you know and what you don’t. Here are a few tips.[]
Improve your well-being
If you feel that your financial planning skills may be a bit rusty, you’re not alone.
Over 90% of physicians struggle to manage their money, which leaves them dissatisfied in their work.
A 2022 study published by AJP Reports looks at the correlation between financial literacy and physician wellness.[] In it, 35 OB/GYN residents and fellows participated in a five-part personal financial literacy curriculum.
Topics included the intersections of financial education and well-being, financial terms and principles, debt planning, budgeting, investing, and giving.
Upon completing the program, trainees agreed the curriculum positively affected their sense of well-being. This evidence suggests that greater financial literacy among physicians leads to higher levels of job satisfaction.
Questions to ask yourself
Physicians dedicated to becoming financially literate can start by asking themselves a few important questions.
According to an article published by Harvard.edu, financial literacy among physicians (especially those in leadership positions) starts with a few inquiries, the first being: Where does my knowledge on this topic start? You may know more than you think, even if you feel you lack confidence in grappling with financial matters.
Regarding interactions with financial administrators, another important question is: How much of these conversations do I understand? Assess what clicks, and what doesn’t, and identify the parts you lack experience with in order to close the gaps in your financial knowledge.
This process may feel uncomfortable, but it will ultimately increase your financial competence.
Consider also how better financial understanding can help your business. What’s most important to your organization? What challenges exist within it? Increasing your understanding about how money moves through your practice could empower you as a leader and over the long term.
A final question physicians can ask themselves as they seek to hone their financial skills is this: How do I ask meaningful, high-level questions? When talking with financial experts, posing good questions is instrumental to expanding your knowledge. Also, you can cut through any antagonism and get what you need.
Four tips for building financial literacy
Now that you’ve established your knowledge base and financial needs, take action.
Here are four ways to practice financial literacy, according to an article published by MedicalEconomics.com:
Get to know your cash flow. Gather your financial records. Assess income taxes, and chart your current expenses. Although potentially painful, this will help you achieve a better understanding of your financial habits.
Cut unnecessary expenses. We tend to spend most of our money “side by side,” or throughout the day. This is especially true of those who work in offices and on Zoom. After a long day, sometimes it’s easier to ditch the (cheaper) homemade meal for a dinner out. A cash-flow sheet will highlight the money you spend on things you can do without, making it easier to save.
Commit to saving. How often are you putting money in a savings account? If the answer is “I’m not sure,” try this: Schedule a regular time to save. Whether weekly, bi-monthly, or some other schedule, committed savings t will grow your assets faster than you’d expect.
Work with a trusted advisor. You don’t have to navigate the complicated world of finance alone. Ask friends or family if they have an advisor they trust. The economic fallout from the COVID-19 pandemic is still being felt, complicating financial planning.
What this means for you
You may make a sizable income as a physician, but you, along with the majority of physicians, may not feel comfortable managing your finances. To improve your financial competence, you can take a structured approach. Start with what you know, and pinpoint the gaps in your knowledge. Once you’ve mastered the basics, you can analyze cash flow vs expenses, cut down where possible, and commit to regular saving. Learning the financial nuances of business practices will help you grow as a leader. Finally, a good financial advisor can help guide you in these uncertain times.