How HCPs should manage their money amid economic uncertainty

By Joe Hannan | Fact-checked by Barbara Bekiesz
Published September 19, 2022

Key Takeaways

  • It’s likely that clinicians will continue to cope with rising interest rates, inflation, and market volatility in 2022 and beyond.

  • That does not mean that they are powerless against these strong market forces.

  • Healthcare professionals (HCPs) can assess their debt, lock into fixed-rate loans, use valuable assets like homes for additional liquidity (as a backup plan), and stay invested in stocks to potentially profit on a possible rebound.

Are we or are we not in a recession? It’s a subject up for debate among leading economists and the Federal Reserve. But one thing is certain: The current economic environment is hitting the wallets of clinicians hard.

There’s no telling precisely what the economic environment will be like in the future. But there are HCP-specific best practices that can help you navigate whatever may be in store.

What’s going on?

We need to understand what’s disrupting the economy.

The American consumer is trying to stay afloat in a confluence of economic forces.

First, there’s inflation. August 2022 US Bureau of Labor Statistics data indicate that the consumer price index is up 8.3% year over year.[] Food costs consumers 11.4% more than it did last year, energy 23.8%, and new cars 10.1%.

The second major force is rising interest rates. The Federal Reserve has been raising interest rates to cool the overheated economy. Federal Reserve chair Jerome H. Powell indicated in a recent speaking engagement that the central bank is serious about further rate hikes to return inflation to baseline.[]

Both factors, historically, have been associated with recessions. Classic criteria include:[]

  • Two consecutive quarters of GDP decline (which we’ve had)[]

  • Declining consumer demand (which we haven’t had)[]

  • Declining employment (rate is up slightly month-over-month)[]

So, if this is a recession, it doesn’t quite fit the historical pattern. But recession or no recession, rate hikes and economic uncertainty will be staying a while, according to Brian Hartmann, a certified financial planner (CFP) and partner at Granite Bridge Wealth Management in Livingston, NJ.

In an MDLinx interview, Hartmann said he expects to see a .75 percent increase in interest rates in the second half of 2022. To cope with inflation and economic uncertainty, Hartmann suggested using the following proven strategies.

Assess your debt

Do you have fixed or variable interest rates on your debt? With fixed rates, rising interest rates will have no bearing on the percentage of interest you pay—but that’s not so if you have debts with variable interest rates.

"If you have a fixed rate, a rising rate environment is almost a shrug-your-shoulders event."

Brian Hartmann, CFP

“But getting to know if you have a fixed rate is really important because a lot of private student loans have floating interest rates,” Hartmann added.

Certain credit cards and personal loans also have variable rates. Check your terms and agreements.

Assess your student loans

Now is an excellent time to review your student loan debt, Hartmann recommended. How you proceed will likely depend on your overall debt load, income level, type of loans you hold, and pursuit of public service loan forgiveness (PSLF).

For example, if you have variable-rate loans, you may want to consolidate and lock into a fixed-rate loan before interest rates rise further, according to Hartmann. But if you’re pursuing PSLF and are on an income-driven repayment plan, you already have fixed-rate loans, and you’re likely best served sticking to your plan.

Finally, President Biden’s 2022 decision to cancel $10,000–$20,000 in student loan debt may also factor into your decision. While this may be welcome news to any clinician carrying debt from student loans, it may also represent a drop in the bucket for HCPs with massive amounts of student loan debt, such as physicians.

The key is to know what type of loans you have, and get clear on your repayment plan and how debt cancelation affects it.

Consider a home equity line of credit

If you’ve seen the value of your home increase dramatically, as most homeowners have, now may be a great time to take out a home equity line of credit.

Hartmann explained this was like an extra insurance policy, saying, “Just for peace of mind, if something does happen as a result of everything that we’re going through in the economy, you always have that liquidity in your pocket. Once you need it, it’ll be too late to get it.”

Big-ticket purchases

Want a new car, appliance, or home renovation? It’s probably best to stick to essentials right now, Hartmann suggested. Cash on hand is useful during economic volatility, and committing to monthly payments limits your liquidity. Plus, supply-chain issues have driven the price of major consumer goods—like cars—to nosebleed heights.

While there has been increased demand for HCPs, combined with an overall increase in wages throughout economic sectors, inflation has weakened the buying power of all consumers.

Continue investing

Depending on your proximity to retirement, now may be a great time to invest despite Wall Street volatility.

"If you’re a long-term investor, there’s never a bad time to continue to put money to work."

Brian Hartmann, CFP

He recommended dollar-cost averaging: take the money you want to invest, divide it by a specific number of months, and then invest that amount monthly on the same date.

“That way, you don't have to worry about timing the market perfectly,” Hartmann said. “I think there are a lot of opportunities still there, as long as you have the time horizon. Volatility in the short term is here to stay."

What this means for you

No one knows with complete certainty what will happen in the US economy in the months ahead. However, the Federal Reserve has signaled a commitment to bringing inflation under control. That means clinicians can expect rising interest rates and some volatility on Wall Street. Best financial practices as offered by a certified financial planner will help HCPs navigate the current economic environment.

Read Next: 5 improvements doctors can make to their financial portfolios

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