Why doctors go broke—and how to avoid it

By Kristen Fuller, MD | Fact-checked by MDLinx staff
Published October 21, 2022

Key Takeaways

I’m no stranger to the financial challenges that many physicians have to deal with in their careers.

I graduated from medical school with over $200,000 in debt from medical student loans (thankfully, I did not carry any undergraduate student loans).

I deferred my loan payments until after residency, since covering them along with my living expenses on a meager resident’s salary was nearly impossible. I took one of the highest-paying jobs I could find out of residency to help whittle down my loan and waited several years before even thinking of purchasing a home.

Nearly a decade after graduating from medical school, I still carry a medical school loan payment and other expenses such as a home mortgage and car payments.

Although I’m still a high earner—and even though I no longer practice medicine full-time—I choose to live well below my means to protect myself from going down a slippery slope into frivolous spending and more debt.

It took me a few years to get my financial bearings. I’m a single physician-earner household with no kids. I love to travel as much as possible but I own a small home, I pay my bills in full, save, and invest.

"Physicians may make a high salary compared to the average US adult. But the debt we begin with can set us up for financial failure, even forcing some of us to declare bankruptcy."

Kristen Fuller, MD

Bankruptcy is also an issue among some physicians who go into private practice and have to worry about overhead, insurance reimbursements, and rising malpractice insurance costs.

Here are some common reasons why physicians go broke, along with some easy strategies to help you stay afloat financially.

The costs of private practice

Being in a small private practice frequently means higher overhead, as you must pay for employees, leasing office equipment and space, malpractice coverage, computers, electronic medical record systems, and more.

Granted, not all doctors in private practice get into financial hot water. Still, in my opinion it’s generally financially safer to be employed by a big hospital, as you don’t have to be responsible for the massive overhead associated with private practice.

Related: Is the prognosis for private practice poor?

Insurance reimbursements

Dealing with insurance companies is generally a nightmare for both physicians and patients.

Patients are constantly making payments to insurance companies and trying to decipher difficult-to-read fine print. In contrast, physicians must continuously try to get reimbursed for their services from insurance providers.

It can often take weeks (or even months) for insurers to reimburse doctors. This can result in private practice doctors getting behind with bills because they are waiting for reimbursement.

In addition, doctors who treat elderly or underserved patients, such as cardiologists and PCPs, are often reimbursed much less because many of their patients use Medicaid or Medicare.

Living above your means

For many young physicians, the decision to enter medical school can lead to accrual of debt—and possibly going broke.

The average medical school student graduates with more than $200,000 in student loans, and this debt usually gets worse before it gets better. Having no debt is a huge milestone that may take years (and even decades) to achieve.

Some physicians may never achieve this milestone. Although insurance reimbursements and medical school debt are the two biggest culprits that we don’t have much control over, doctors are also going broke due to a few more factors that can be controlled.

A surprising number of doctors get into financial trouble the old-fashioned way—they spend all their money. If you have a large salary, you’re more likely to spend more, especially if you have been in school for what seems like an eternity.

Just because you make a high income doesn’t mean you have to risk going broke because you’re trying to live large.

Luxury cars, home renovations, expensive vacations, and jumbo mortgage loans are not unheard of for physicians. Many of us want to show off the fruits of our hard work, while others may feel the need to “keep up with the Joneses.”

Related: Debt elimination strategies for physicians

Tools to help you stay afloat

If you want to build wealth, try to live well below your means and save for the future.

Place a portion of your salary (20% or more) into a savings account, and another portion (20% or more) into wise investments.

Pay off your bills each month, and then use leftover spending money to purchase fun things like vacations and fancy dinners, within your means. Shop sales, buy used clothes, and use credit card points for travel.

Hire an excellent tax professional and meet with an investment banker once or twice a year about your investment status and strategy.

Read Next: Real Talk: 8 things I wish I knew before becoming a doctor

Each week in our "Real Talk" series, mental health advocate Kristen Fuller, MD, shares straight talk about situations that affect the mental and emotional health of today's healthcare providers. Each column offers key insights to help you navigate these challenging experiences. We invite you to submit a topic you'd like to see covered.

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