Doctors: 4 Steps to Building Your Finances

Karen Riccio


December 21, 2018

In This Article

The First Steps to Managing Your Finances

Whether you're attending medical school, completing a residency, or transitioning to a job or practice as a new doctor, you'll eventually be rewarded with a healthy six-figure income. But the road to wealth for young physicians is often a long and bumpy one complicated by high expectations, six-figure debt, and sometimes marginal cash flow.

With an average of $200,000 in student loan debt, a doctor's financial situation is uniquely challenging. Now that those at this career stage have their academic and/or professional houses in order, their focus should shift to finances.

According to, the first key step is to create and stick to a strict budget, and spend smartly. A budget allows you to take control of your finances and enables you to build sufficient cash flow; pay down student loans; and set future financial goals, such as buying a new home, getting married, taking a major vacation, and retiring comfortably.

To start, you'll need to know your net (after taxes) monthly income and your monthly fixed (rent/mortgage, debt, food, transportation, insurance, and utilities) and variable (entertainment, clothing, dining out, household items, miscellaneous) expenses.

Once you determine your monthly income and expenses, subtract your total expenses from your total income to calculate the difference. If you have extra, then you're spending within your budget. Most financial experts also suggest building an emergency savings account equal to 6 months of income.

The next important step is to save first. Your savings can be applied to longer-term goals, such as a car or home. Regardless of the goal or timeline, by saving first, you'll be forced to prioritize your spending on the basis of your remaining income.

If you don't have enough money to cover your expenses, you may need to consider adjusting your variable expenses. Because these may fluctuate each month, this could be an area where you can make up for shortages.

1. How to Prioritize Your Spending

Create some spending guidelines. They're meant to keep you on track, so they should be aligned with your desired lifestyle while allowing you to stick to your savings plan. Spending guidelines will vary from one person to the next, on the basis of needs as well as the actual cost of living where they reside.

Matthew White, a partner with White & McGowan, a financial firm for doctors and dentists based in Little Rock, Arkansas, points to social influences and a young physician's increasing income as reasons to set spending limits.

"Excessive spending is normally driven by social expectations to have some semblance of perceived success," he said. "This isn't a problem for just young physicians, it's everyone; but it confounds those transitioning from having very little income to suddenly having so much."

"The combination of built-up delayed gratification and competing with the materialism of the Western world is a recipe for disaster," White continued. "We suggest that once doctors settle on a specific job, they begin building a plan immediately, primarily to prevent the tendency to make wasteful alternative plans for the money."


Comments on Medscape are moderated and should be professional in tone and on topic. You must declare any conflicts of interest related to your comments and responses. Please see our Commenting Guide for further information. We reserve the right to remove posts at our sole discretion.
Post as: