So you’ve reached the pinnacle of your training years and you’re finally ready to transition into the next step of your career. Or maybe you are still a year or two away from this step but are considering what you’ll do with all that extra income once you earn that first big paycheck. Whether it is about to become reality or still yet a dream, it will come. After navigating through interviews, job offers, and contract negotiations that can feel like an animalistic courtship ritual (check out this one for a giggle), you’ve finally made it. When my wife finally reached “attending physician” status, I always joked that she had finally gotten her “big girl” job. However, the size of her paycheck and what it meant to our family’s financial picture was no joke. Her take home salary literally quadrupled virtually overnight! How many other career paths are set up to do that? Yeah…basically zero. Think about it. What other career has a financial track like yours:
Step 1) Graduate from undergrad only to take on an astronomical cost of graduate training (med school) without enough time in the day to possibly work a side hustle to offset some living expenses.
Step 2) Graduate from your graduate program (med school) only to take on a meager salary for 3 or more years that hardly pays enough to cover your living expenses and student loan payment.
Step 3) Then after graduation from residency or fellowship, you are virtually instantly guaranteed to at least triple your salary.
Because of these unique circumstances, physicians need advice from someone who understands the journey. When you’re considering where to turn to for advice during this transitionary phase, I encourage you talk to someone who has experienced it. This will most likely come from your former colleagues and mentors who have “been there and done that”. In the same sense, if you can lean on someone who has experienced it and has applied his financial knowledge to that experience, you should probably take advantage. And that’s where I come in. If there is no other quality that I can offer, at least I can offer sound advice based on experience. In this article, I’ll pass along some of my biggest takeaways from our financial transition from Resident to Attending!
#1: Now is your chance!
For my wife and I, it was an 8-year journey through med school and residency. After finally reaching the end of training, it was a little surreal. The moment you’ve dreamed of for so long has finally arrived. For many, a big part of that dream is the paycheck that comes with it. Or maybe a more accurate version of that dream is WHAT you plan to do with that paycheck. Regardless of your WHAT, I think it’s important to make a financially savvy plan to achieve it. As you’ll find, the resounding theme of this article is to make sure you make a plan and stick to the plan. As I mentioned in a previous article, that big income boost can actually act as a detriment to your big picture if you aren’t careful. Keep these pointers in mind as you begin to consider what you’ll do with an Attending Physician’s income.
First, remember that you only get this substantial income boost once in your life. Don’t waste the opportunity. If you slowly transition from living like a resident, you’ll enjoy every small boost in standard of living a little more along the way. If you leap into a new lifestyle of luxury right away, many of those smaller life improvements won’t be appreciated as much because they are drowned out by all the other new things in your life. A silly example from our transition is that I said I wasn’t going to replace my old socks until we moved. I had a reason (albeit a dumb reason), but the point was, after we moved and I threw out my old socks, I found joy in owning those new socks. If I had thrown out my whole wardrobe (which I could probably have justified), then I wouldn’t have gotten any joy out of being an owner of a dozen new pairs of socks. I’m begging you not to take it to the extreme I did, but the point remains – ease into your new lifestyle. It’s much easier to slowly loosen your grip on spending than it is to try throttling it back if you decide you should focus on longer term goals like college funds or retirement. I recommend creating a list of financial goals (both short term and long term) and a plan for how to reach them before you even start with your new employer. A financial planner can help with that.
#2: Begin to invest or pay off those student loans?
Speaking of goals, one of the biggest questions new attendings have is whether to start using their income to attack those student loans. The answer to this question is the same dreaded response your parents gave you as a kid – “Maybe”. I joke, but the reality is any advisor really can’t answer that without knowing everything about your situation. Because everyone’s financial position and long-term outlook is different, I recommend that you speak to a fiduciary financial advisor to map out a plan for tackling both. If you do not have a financial advisor, Physicians Financial Design would be happy to speak with you about creating your road map to long term financial wellness. Just click here to book your free meeting or phone call.
#3: Buying a home
Buying a home during the middle of your transition could be extremely stressful, especially if you’re moving a significant distance from your residency/fellowship or have a short time window before starting your new gig. Not to mention how challenging the current market can be for homebuyers. Besides that, you’ll have many other factors to consider as well. For example, if you’re moving to a completely new area, are you comfortable trying to pick an area of town in which to live? Or what happens if the job turns out to be not all that it was promised to be? Will you be able to resell your home in a year or two without taking a loss? For these reasons, I like the idea of renting until you’ve solidified your long-term options. However, if you are fairly confident you can navigate through those challenges and plan on staying at your new job for a while, then a real estate purchase is a great foundation for financial success.
To start that journey, I recommend utilizing a physician mortgage loan due to its many advantages that aren’t available for almost any other profession. For more on these or for a recommended mortgage lender, feel free to reach out – blaise@physiciansfd.com. My biggest caution here, however, is to be sure not to buy the most expensive house you can “afford” – plan to upgrade your house later if you think that is in your horizon. In our experience, it was scary how big of a loan we qualified for, but there was no way were we going to be comfortable stretching our budget to that extent.
#4: Insurance
If you’re like most of your colleagues, you probably have a substantially negative net worth after your student loans and…wait… did you end up buying that house? Add that to the tab… However, even though you don’t have many assets on paper, you do have one tremendous asset that you should consider protecting – your future income! If you haven’t already, now is the time to consider what gaps you may have in protecting your golden goose. You may not have had the financial means to purchase the necessary levels of insurance before now, but at this point, there are no excuses. For starters, there are three major categories of insurance that almost every physician should consider:
Life Insurance: If you have someone who relies on your income, consider this question: What would happen to them financially if you (and your income) were no longer with us? For most, the answer isn’t pretty, so life insurance is a must. If you don’t fall into this category, then life insurance might not be something you need to add to your portfolio. For more on life insurance, check out my article HERE.
Disability Insurance: This insurance not only protects your family, but also yourself in the case of lost wages due to disability. In this regard, if YOU can’t afford to live without your income, then you should get disability insurance. There are some companies and specific policies out there designed for physicians. They can seem quite expensive, but when you Google the statistics on how likely one is to become disabled during their working lives, you’ll understand why.
Umbrella Liability Insurance: Physicians are among the most likely to get sued. They are public figures, and everyone assumes they make a bunch of money, so they become easy targets. A liability policy will protect you if you get sued outside of work (much like malpractice insurance covers you while at work). These policies are affordable and can usually be bundled inside your home and auto policies, so there really isn’t a good reason not to have one.
#5: Make a Plan
The final piece of advice is actually just a reiteration of the prevailing theme – YOU NEED A PLAN! As the old adage goes, FAILURE to PLAN is PLANNING to FAIL. Don’t misstep by just taking your newly acquired income and going with the flow. Your money is best viewed as a tool to help you accomplish your pre-determined goals. No matter how big that paycheck is, it can disappear quickly if you don’t assign it a job before it arrives. For help or questions with any of the topics discussed above, feel free to reach out to me at blaise@physiciansfd.com.
Thanks for reading! For more articles geared toward young physicians and their money, click here or check out The Money Malpractice Podcast on any of the major platforms.
Until next time…KEEP SAVING LIVES AND KEEP SAVING MONEY!
Disclosures
• RichMark Private Wealth Management. LLC is registered as an investment adviser with the State of Michigan, and only transacts business in states where it is properly registered, or is excluded or exempted from such requirements.
• Content should not be viewed at personalized investment advice. Market events and other factors may affect the reliability of the potential outcomes. Simulated growth is purely hypothetical and does not represent actual performance.
• Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio.