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Physicians' Biggest Debt Mistakes

Although physicians tend to have far more formal schooling than many other professionals, that education typically omits any formal training when it comes to personal finance. Combine that with high debt levels, an inability to save in early adulthood, and a massive income jump at the start of your career, and it's no wonder that some physicians are prone to making money mistakes — especially when it comes to debt.

Here's a look at some of the more common debt mistakes that physicians make and advice on how to avoid them.

Mistake 1: Remaining Financially Uneducated

Especially if you haven't received any personal finance education in school or elsewhere, spending some time to learn the basics of personal finance is one of the best investments you can make for your family's financial security. Some feel that financial knowledge is something they can "pick up" from friends; others just aren't aware of how much there is to know, especially if they are managing their own finances and investments.

What to do : This course is a great starting point for learning about personal finance, but there are plenty of other resources out there that can help, including books, blogs, and podcasts aimed specifically at helping physicians with their unique personal finance challenges.

When it comes to debt, it's important to make sure you understand the terms of both your current loans and any other borrowing you're considering.

Mistake 2: Living Like You're a 'Rich Doctor' Right Away

After years living on a resident's salary, it's understandable that you'd want to buy the nicest house and car you can afford when you finally get that bump to a full physician's salary — even if that requires taking on substantially more debt. But even though your new income may leave you feeling richer, it may take some time for your net worth to catch up.

Whether you're trying to "keep up with the Joneses" or simply feeling that you've earned it after the hard work you've put in, it can often be difficult to avoid the urge to overspend.

What to do : Make a budget that includes your after-tax income and your current debt payments and other expenses to determine how much you can spend on your house and cars right now. That budget should also include savings and discretionary spending. Having a budget is a great way to make sure you're following the number one rule of personal finance: Spend less than you earn.

You'll also want to keep an eye on your expenses over time. Even if you avoid the "rich doctor" trap early in your career, you may be subject to "lifestyle creep" in which your expenses slowly increase over time. This often leads to people living beyond their means financially.

Mistake 3: Investing While You Have High-Interest Debt

No matter how great an investment appears, it's almost always a better financial move to pay down high-interest debt, such as credit card loans. That's because you can't beat a guaranteed return of 16% (the average credit card interest rate), which is essentially what you'd get by paying down the card.

What to do : If you have high-interest debt, prioritize paying that off as quickly as possible. (The calculations are a bit different for mortgages and student loans, which tend to have lower interest rates and may carry tax benefits.)

Mistake 4: Following Bad Advice

The folks who sell financial products, from securities to life insurance, love physicians because doctors often have assets they're willing to invest and are anxious to make up for lost time when it come to their finances. That said, not every financial advisor has your best interest at heart, and it's easy to encounter bad advice.

What to do : Actively seek out good advice. A good place to start is by finding an adviser with experience working with physicians; they'll have a better sense of the specific challenges that you face. Interview at least three potential advisers to find the one with whom you feel the most comfortable and who has a money philosophy like your own. You can also ask for references in the interviewing process.

Ideally, this adviser will be a fiduciary, which means they're legally obligated to give you advice in your own best interest, not theirs. In addition to asking a potential adviser whether they're a fiduciary, ask them how they get paid — and make sure that you understand their answer.

There are also several certifications to be aware of in the financial advisor field, and these may be important to you. A Certified Financial Planner® has passed several courses and exams in order to become an expert in financial advice.

In addition, there are different ways in which financial advisors get paid, which could influence their advice to you. A fee-only financial advisor typically is paid a percentage fee for managing your investments, whereas a commission-based advisor gets paid when he or she sells you certain investment products.

Mistake 5: Focusing on Debt While Ignoring Other Personal Finance Goals

Given the incredibly high debt loads with which many physicians begin their career, it makes sense that many doctors focus on paying down that debt as quickly as possible. Although that's an admirable goal, it's important to pay down your debt in conjunction with actions that will improve your financial security in other areas.

What to do : Look at your financial picture holistically to determine how much you can put toward debt vs other goals. It may make sense to pay just the minimums on your debt, for example, if doing so allows you to contribute at least enough money to your 401(k) account to get an employer match. Matching funds are a guaranteed return, and the tax benefits and ability to take advantage of compounding means that the sooner you can start saving for retirement, the better.

Similarly, you may want to prioritize setting aside an emergency fund with at least 3-6 months' worth of expenses. That way, if you need money quickly, you won't be forced to run up your credit cards or borrow against retirement accounts.

Mistake 6: Not Having a Plan for Your Debt

As discussed in Chapter 1, debt can be a great financial tool for physicians, but when used improperly it can create long-term stress and money problems. Even if you're comfortably able to manage your current debt payments, having a plan to pay down your debt while also making progress toward other financial goals will give you control over your money and reduce the impact of that debt on your financial security.

What to do : Keep a close eye on your overall debt levels. If eligible, you may consider refinancing or consolidating your loans. You may also have access to student loan repayment programs if you have federal loans.

Whether you're just starting out after residency or you've been practicing for a decade, it's easy for physicians to make financial mistakes. By being aware of the mistakes outlined above, however — and actively taking steps to avoid them — you'll set yourself on a path for financial success. In Chapter 5, we'll discuss strategies that physicians can use to manage and pay down their debt.

This material was adapted with permission from Joshua A Daily, MD, MEd, a nationally recognized lecturer in physician debt. He is also a pediatric cardiologist at Arkansas Children's Hospital, where he teaches medical students, residents, and fellows about personal finance. He has written multiple academic articles and given lectures both locally and nationally on financial topics for physicians.

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Welcome! This article is part of a Medscape Physician Business Academy course, . Visit the Course Page to take the full course and receive a certificate.


Ned Palmer, MD, MPH; Michael Jerkins, MD; Beth Braverman

| Disclosures | January 01, 2022

Authors and Disclosures


Ned Palmer, MD, MPH

Part-Time Instructor, Department of Pediatrics, Harvard Medical School; Staff Physician, Department of Medical Critical Care, Boston Children's Hospital, Boston, Massachusetts

Disclosure: Ned Palmer, MD, MPH, has disclosed the following relevant financial relationships:
Serve(d) as a director, officer, partner, employee, advisor, consultant, or trustee for: Panacea Financial, LLC

Michael Jerkins, MD

Physician, Department of Internal Medicine and Pediatrics, Baptist Health, Little Rock, Arkansas

Disclosure: Michael Jerkins, MD, MEd, has disclosed the following relevant financial relationships:
Serve(d) as a director, officer, partner, employee, advisor, consultant, or trustee for: Panacea Financial, LLC
Serve(d) as a speaker or a member of a speaker's bureau for: Panacea Financial, LLC
Have a 5% or greater equity interest in: Panacea Financial, LLC

Beth Braverman

Freelance writer, New York, NY

Disclosure: Beth Braverman has disclosed no relevant financial relationships.