When you’ve worked so hard to get your medical degree, and the paycheck starts hitting your bank account regularly, it’s easy to get excited and spend every penny. This shopping spree is normal and expected, but some of the expenses you take on now can have long-term financial consequences.
While you’re adjusting to the new income that being a physician affords you, it’s important to plan for the future, too. Consider these four common mistakes new physicians often make, and use this knowledge to help you avoid following in their footsteps.
1. Ignoring Student Loan Debt
Med school isn’t cheap, and most students take out student loans. According to studies, the average med school graduate takes out 2 ¼ times more debt than other postgraduate counterparts. This reality can saddle you with more than $200,000 worth of student loans by the time you finish school, but if you tackle it correctly, it doesn’t have to be part of your forever future.
Your repayment options depend on the terms of the loan. You may qualify for income-driven repayment plans as you first get started. Paying more than the minimum on those lower monthly amounts can reduce interest by putting more toward the principal. Paying extra payments or paying multiple times per month also lowers interest faster.
If you work in a government or non-profit sector, you may receive loan forgiveness if you agree to serve in a qualifying position for a pre-determined time (usually ten years).
Should your income be more than you need to live comfortably, you can also consider applying all your extra income to paying off debt. From credit cards to student loans, tightening your belt for the first few years of working as a physician can make the rest of your financial life easier.
2. Taking On New Long-Term Debt
Many med school students wait until they graduate to make major life changes, such as getting married, buying a house, and buying a car. This is a wise decision when you’re living on credit cards and loans, but it also makes it tempting to go big once you start earning a decent income.
If you haven’t noticed yet, you’ll soon see how willing lenders are to give doctors big lines of credit. That massive dream house you’ve been imagining or a flashy car with all the bells and whistles is just a signature away.
However, taking on new long-term debt early can be a slippery slope to financial struggles later. Consider waiting until you’ve saved up money for a deposit or have a higher credit score so you can enjoy the perks of lower interest rates. In the meantime, opt for an average home and a reliable car with lower monthly payments.
3. Being Too Nervous to Negotiate Contracts
Negotiating contracts is a common part of the hiring process in medical facilities. As a new graduate, you may be nervous about asking for more money or benefits and losing out on the position. However, your contract terms should be fair. Even the American Medical Association recommends negotiating to ensure you know what your hours will be, how much time off you will have, and what is expected of you.
The medical field is currently in the middle of a nurse and physician shortage. As long as you did your research as to what other doctors in the area with your experience are making and what you’re asking for as fair, a short negotiation can satisfy both parties.
4. Skipping Essential Insurance Policies
Part of your contract should include various insurance policies, such as health, dental, vision, and life benefits. If you’ve never had coverage before, the cost of insurance can be off-putting, and you may want to skip “optional” coverage like disability and extras that come out of your pocket.
Before you decide on your insurance coverage, talk to a financial advisor who specializes in physician portfolios. What seems like a lot to you right now could be the best deal you’re likely to get. This article by OJM Group can help you understand which insurance policies are an essential part of your portfolio and which ones you can skip.
Conclusion
You’re walking into a new world where you are highly respected and making a decent income. This change from the frugal living of residency can be a challenge to get accustomed to, but armed with the knowledge of the four mistakes most new physicians make, you can start your journey to a successful financial future early.
