Rx For Your Paycheck: Financial Advice for New Doctors

As a new doctor, you have a lot on your mind.

This can make it difficult to balance your work schedule, family life and finances. 

However, all of these things can be simpler if you know where to start and have the proper resources to lead you along the way. 

One resource that will add confidence and simplicity to your financial life is a comprehensive financial plan. A financial plan will outline what you have, where you want to be, and the steps you need to take to get there. 

A comprehensive financial plan can be a lot of work to develop, but there are a few simple steps every new doctor can take to prepare for financial health. 

Consider Your Goals

Everyone has a vision for their future. What would you like to accomplish with the money you make during your career as a medical professional? What initial roadblocks do you need to overcome?

Take an evening and think about your financial goals and roadblocks. 

  • Are you still paying down debt?
  • Do you want to send your kids to college?
  • How long do you plan to work? 
  • How much should you have in emergency savings? 

However you see the future, it is important to define what success means to you. You can’t create a plan without first deciding where you want to go. 

Break Down Your Goals Into Monthly Steps

As you’ve seen with your patients, diagnosing a problem is only half the battle. The most important part of your financial well-being — much like your physical well-being — is having an actionable plan, with tangible steps toward your goals.

Once you have decided what you want to accomplish, break your goals down into smaller, monthly tasks that you are able to track. This will allow you to see if you are able to budget for your long-term goals, or if you need to adjust them to something more reasonable. 

Create a Budget

After you consider your goals, the next step is to make sure your money is going where you want it to go — having a plan alone won’t do the saving for you. 

We frequently see medical professionals who just can’t seem to figure out where all of their money goes every month. 

Our recommendations:

  • Track your current spending
  • Prioritize your savings, insurance and investment goals as part of your monthly budget
  • Calculate how much of your take-home pay remains after considering these core savings and protection expenses
  • Assess your spending to see what changes need to be made in order to equalize your cash flow (maybe this means spending less, but it could also mean you have more to put back into savings) 

Find a system or tool to track your cash flow, whether you use an online tool like Mint.com or a basic spreadsheet on your computer. The important part is that you are making conscious, intentional decisions with your money. 

Assess Your Insurance Needs

As a new doctor, you also need to protect your loved ones from the financial hardship that could occur if something were to happen to you. This is especially important if your family depends on your income for their living expenses. 

In almost every situation we recommend that new doctors hold term life insurance and disability insurance policies (on top of your medical malpractice insurance). These policies are relatively inexpensive and will protect you and your family from financial hardship if you were to be disabled or worse.

Start an Emergency Fund

An emergency fund is designed to provide a cash buffer for unexpected expenses. 

We recommend our clients keep at least three months of living expenses in their emergency fund. This way, you have funds to buy you time in the event you lose your job or have to make an unexpected move.

Keep your emergency fund as a cash account— or something extremely stable and liquid, like a money market fund. Investing these funds in the stock market normally doesn’t make sense, as a poorly-timed market pullback could deplete your emergency savings. 

Create a Loan Payment Plan

Along with securing insurance and starting your emergency fund, paying off student loans is clearly another top priority for new doctors. Whatever you do, your goal with student loans should be to not let the interest accumulate. 

One way to avoid additional interest is to make payments while in residency (usually through an income-based repayment or pay-as-you-earn plan), and then pay down your balance in larger chunks once you start earning higher pay. 

It can be tempting for new doctors to delay loan payments through forbearance, but we strongly advise against this in almost every case. Start a habit of making loan payments and don’t stop, even if they’re small to start. 

Once your loans are paid off, take your payments from student loans and use that momentum to build up your assets — rolling them into saving toward your retirement goals. 

Plan Your Long Term Investments

So many medical professionals think that they always have more time to save. Even if you make a higher-than-average salary, it is easy to find ways to spend money. And if you don’t purposely set money aside, it will get spent.

It’s also very easy to get caught up in immediate needs and short-term financial goals. As important as these short-term goals are, keep in mind that a successful retirement plan starts on the first day of your career. 

It only makes sense to consider long-term investments when you are insured, making strides on your student loan debt and have an emergency fund to protect you.

At this point, it is time to: 

  • Decide how long you want to work, and how much you think you’ll need in retirement
  • Imagine the lifestyle you want to have later in life and determine how much you’ll need to support that
  • Explore where your kids might go to college and how much you want to provide
  • Think of charities you may want to support and how much you’d like to give

Each of these investment goals have their own strategies and objectives. Here are some things to consider for any long-term savings goal

  • How much do you need to save monthly or yearly to hit your goal? 
  • How should your money be invested?
  • What type of account should be used for each goal? 

The InvestRx Financial Roadmap

If all of this sounds a bit overwhelming, you are not alone. We created InvestRx to help medical professionals like you take the hassle out of financial planning.

We frequently hear medical professionals say that they think about money differently than the average person. Instead of being stressed about what you can’t do, you are trying to make the best use out of what you earn. 

So we developed the InvestRx Financial Roadmap to help you get started on the right foot, and continue to make an impact throughout your career and retirement. The service includes: 

  • A 50-minute discussion with a financial advisor where we will help you define and determine solutions to your top 3 financial goals or concerns
  • A 12+ page financial plan with your current information and tangible steps to reach your goals
  • A video from your advisor that walks through your plan and explains their recommendations

Learn More About the InvestRx Financial Roadmap

Financial planning can be overwhelming, but taking small steps now will pay dividends down the road. Start small and be realistic about what you want your money to do for you. Then create a plan, and stick to it. 

Be prepared, start early and do more with what you earn.