Top Financial Mistakes of Young Doctors

Marcy Tolkoff, JD


April 26, 2016

In This Article

Financial Mistakes Are Not Uncommon

Everyone makes financial blunders, and physicians are no exception. Young practitioners not only have the potential mismanagement issues that plague most burgeoning professionals; they also need to avoid some physician-specific traps.

Here's what several financial experts had to say when asked to weigh in on the most common money missteps by physicians. Perhaps heeding their advice now will help reduce those "shoulda, coulda, wouldas" when you look back on your early years in practice.

Mistake 1: Spending Way Too Much Too Soon

"I felt like a lamb being led to the slaughter," says James H. Dahle, MD, in describing his dealings with financial professionals when he was just starting to practice. The Utah emergency medicine physician and author of The White Coat Investor said he wants to help other doctors avoid having the same experiences.

Dr Dahle says most medical school students graduate with around $200,000 in debt. Because a resident's salary typically may not leave enough money to cover the interest, the debt may balloon even higher by the time their training is complete.

The problem is further exacerbated by the fact that young doctors often start spending their future income before they have begun to earn it. The result is that many start their professional careers with a car payment and a large mortgage in anticipation of a high income.

Dahle points to three factors that tend to keep young doctors from living within their means:

  • A sense of wanting and 'deserving' to spend after sacrificing for years;

  • A change in self-perception, prompting them to identify with rich physicians and desiring to spend that way; and

  • Progressive tax ("My taxable income has quadrupled, so my spending can too").

"Young physicians should plan to live like a resident for 2-5 years after residency. It not only helps them to avoid growing into their income before they have it, but it helps to delay growing into it as long as possible," says Dahle.

It's important to make it a priority to pay off your student loan debt. There are fairly painless ways to chip away at it. "If you're working at a nonprofit hospital or facility, consider the Public Service Loan Forgiveness Program," advises Dahle. "You're required to make 120 payments, which include the tiny, income-driven payments made during residency and fellowship. After that, the balance of your debt is forgiven."

And if you don't work for a nonprofit, you may be better off refinancing—an option before the financial crisis that was reinstated in 2013, once the major aftershocks of the recession had subsided. There are both fixed and variable interest rates available for refinancing. Both can be as low as 2%, but typically attending physicians get a variable rate around 3% or a fixed rate around 4%.


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