Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

5 tips for physicians to achieve financial freedom

James M. Dahle, MD
Finance
October 18, 2015
Share
Tweet
Share

shutterstock_86451046

In the ten years since I graduated from residency, I have noticed an interesting correlation between burnout and finances among my physician colleagues: The more secure we are financially, the more we enjoy our work. However, physicians working long clinic hours and moonlighting 15 times a month as a hospitalist in order to make alimony payments, boat payments, mortgage payments, or all of the above, are tired, grumpy, and frankly, dangerous to their patients.

Financial independence requires eliminating financial concerns from our lives. When we are out of debt, adequately insured, and on track to meet our savings and investing goals, such as college and retirement, we are free to practice in the way we see fit. That might mean fewer call nights or fewer shifts. It might mean a slower pace in clinic. It might mean hiring more help such as a PA, a scribe, or an RN instead of an MA. It might mean being able to turn down the hospital trying to buy our practice so we can practice the way you want without being beholden to “the man.” It certainly makes it easier to always do the right thing for our patients. Financial security can actually make better doctors.

It is surprising how many docs do not get much fulfillment from medicine and in fact feel trapped: They have no other way to support themselves and their families in the lifestyle to which they’ve become accustomed except to see an ever increasing number of patients at an ever increasing pace. These are doctors who would leave medicine if they were financially independent. For these doctors, becoming financially independent often injects a new-found enthusiasm for their chosen profession, but even if it doesn’t, it allows them to leave medicine for another profession, for a non-paying or low-paying career, or even simply for early retirement.

Take a few seconds to think about the various changes that would make your career more enjoyable. If you needed one-third or less of your current income, how many of those changes could you implement? Probably all of them, and it would probably cost less than you imagine, especially once you take taxes into account.

If you are a young physician, chances are that in a decade or two you are going to want the freedom to make some changes in your career. Why not start preparing financially now? Here are some steps you can take now to ensure freedom later.

1. Never grow into your income. Always be saving a significant percentage of your income. Many of your colleagues are using 20 percent, 40 percent, or even 60 percent of their gross income to pay down debt, purchase income-producing assets, and save for retirement and college. Even if all you want to do is retire at regular retirement age, it will require you to save 15 or 20 percent of your income throughout your career. If you get used to spending anywhere close to everything you make, you will not be able to have a comfortable retirement, much less have the freedom to make career changes when you wish.

2. Live like a resident for a few years after residency. “Front-load” your wealth-building activities to your early career. In the first five years out of training, you are not yet used to your high salary, and so won’t miss it. Continue your resident lifestyle and direct your savings toward your student loans and retirement accounts. Long hours, disruptive patients, frequent calls, bureaucratic hassles, and late-night work do not become less oppressive as the years go by. Assume that when you’re 45 you won’t want to be working as hard as you presently are, and you’ll want to be spending more. Put in the time and money now and reap the rewards later.

3. Create a plan. Written plans have incredible power. Create a spending plan — a budget. For a physician, a budget shouldn’t really feel confining, but rather freeing. It allows you to spend your money on what is most important to you since all of us have a limited income. Also, have a written investing plan that allows you to automate your investments as much as possible and practice good behavior when your investments have their inevitable periods of poor returns.

4. Insure only against financial catastrophe. I am often surprised to see that physicians have bought the wrong kinds of insurance. Instead of buying large amounts of health, term life, disability, and personal liability insurance, we often buy whole-life insurance and insurance on our iPhones. Why? We have no concept of the real financial risks in our lives. Build up an emergency fund you can use to pay for relatively minor expenses, like health insurance deductibles, replacement vehicles, and appliances. This not only allows you to avoid financing purchases, but reduces or eliminates insurance premiums. You don’t need an insurance plan for your microwave and lawnmower, but if you die young, your family may need millions in life insurance. When life and disability insurance is no longer needed, such as when you become financially independent, cancel it and invest the difference.

5. Save the big money. Many of us don’t realize where the big expenses in our lives are: our homes (including insurance, maintenance, heating, cooling, updating, furnishing, buying and selling the home) and transportation (especially if we’ve got a habit of buying or leasing a brand new car every two or three years). But one expense that few doctors realize is the lifetime costs of financial advice. It is not unusual for a physician to be paying 2 percent a year for investment advice and management. For a doctor saving $50,000 a year for 30 years, and then living off of it for another 30 years, the lifetime cost of financial advice could be over $7 million (after 30 years, $50,000 a year at 8 percent grows to $6.1M, but at 6 percent grows to just $4.2M. 2 percent a year of $6.1M over 30 years adds up to $5 million more, for a total difference of $7 million), dwarfing even the cost of 60 years of housing!

It is OK to use a financial advisor, but make sure you’re getting good advice for a fair price, and realize that the more you can competently do yourself, the sooner you will reach financial independence. In my experience, it is rare for an early retiree (think late 40s or early 50s) to pay any significant sum for financial planning or investment management. Rather than trying to pinch pennies on minor expenses, just get the big expenses right and the rest will take care of itself.

Physician fulfillment is dramatically increased when financial worries are eliminated. Trust me when I say you will enjoy the practice of medicine much more when you no longer have “to go to work.” Begin now to optimize your financial life by learning as much about personal finance and investing as you can. By doing so you will not only be wealthier, but more importantly, you will be happier.

James M. Dahle is the author of The White Coat Investor: A Doctor’s Guide To Personal Finance And Investing.  This article originally appeared in Fulfilled Physicians.

ADVERTISEMENT

Image credit: Shutterstock.com

Prev

Defunding Planned Parenthood will deny poor women access to basic health care

October 17, 2015 Kevin 20
…
Next

Moms after cancer are a new demographic

October 18, 2015 Kevin 0
…

Tagged as: Primary Care

Post navigation

< Previous Post
Defunding Planned Parenthood will deny poor women access to basic health care
Next Post >
Moms after cancer are a new demographic

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

More by James M. Dahle, MD

  • 8 ways to go broke as a doctor

    James M. Dahle, MD
  • How physicians can retire early: 7 steps to follow

    James M. Dahle, MD
  • A physician’s defense of active income

    James M. Dahle, MD

Related Posts

  • Essential health messaging tips for physicians [PODCAST]

    The Podcast by KevinMD
  • Are patients using social media to attack physicians?

    David R. Stukus, MD
  • The risk physicians take when going on social media

    Anonymous
  • Beware of pseudoscience: The desperate need for physicians on social media

    Valerie A. Jones, MD
  • When physicians are cyberbullied: an interview with ZDoggMD

    Monique Tello, MD
  • Writing tips for physicians from a health care editor

    Debra A. Shute

More in Finance

  • The business lesson new doctors must unlearn

    Stanley Liu, MD
  • The hidden impact of denials on health care systems

    Diana Ortiz, JD
  • Why physicians are unlike the “average” investor

    David B. Mandell, JD, MBA
  • Signing bonuses and taxes: What physicians should know

    Shane Tenny, CFP
  • 5 steps to ride out a non-compete without uprooting your family

    Stanley Liu, MD
  • What every physician should know before buying into a medical practice

    Dennis Hursh, Esq
  • Most Popular

  • Past Week

    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • Why Medicaid cuts should alarm every doctor

      Ilan Shapiro, MD | Policy
    • When the diagnosis is personal: What my mother’s Alzheimer’s taught me about healing

      Pearl Jones, MD | Conditions
    • Key strategies for smooth EHR transitions in health care

      Sandra Johnson | Tech
    • Reassessing the impact of CDC’s opioid guidelines on chronic pain care [PODCAST]

      The Podcast by KevinMD | Podcast
    • Why flashy AI tools won’t fix health care without real infrastructure

      David Carmouche, MD | Tech
  • Past 6 Months

    • Why tracking cognitive load could save doctors and patients

      Hiba Fatima Hamid | Education
    • How dismantling DEI endangers the future of medical care

      Shashank Madhu and Christian Tallo | Education
    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • How scales of justice saved a doctor-patient relationship

      Neil Baum, MD | Physician
    • The silent toll of ICE raids on U.S. patient care

      Carlin Lockwood | Policy
    • Why shared decision-making in medicine often fails

      M. Bennet Broner, PhD | Conditions
  • Recent Posts

    • The hidden incentives driving frivolous malpractice lawsuits

      Howard Smith, MD | Physician
    • Why what doctors say matters more than you think [PODCAST]

      The Podcast by KevinMD | Podcast
    • How Mark Twain would dismantle today’s flawed medical AI

      Neil Baum, MD and Mark Ibsen, MD | Tech
    • Mastering medical presentations: Elevating your impact

      Harvey Castro, MD, MBA | Physician
    • Marketing as a clinician isn’t about selling. It’s about trust.

      Kara Pepper, MD | Physician
    • Graduating from medical school without family: a story of strength and survival

      Anonymous | Education

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

View 12 Comments >

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

  • Most Popular

  • Past Week

    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • Why Medicaid cuts should alarm every doctor

      Ilan Shapiro, MD | Policy
    • When the diagnosis is personal: What my mother’s Alzheimer’s taught me about healing

      Pearl Jones, MD | Conditions
    • Key strategies for smooth EHR transitions in health care

      Sandra Johnson | Tech
    • Reassessing the impact of CDC’s opioid guidelines on chronic pain care [PODCAST]

      The Podcast by KevinMD | Podcast
    • Why flashy AI tools won’t fix health care without real infrastructure

      David Carmouche, MD | Tech
  • Past 6 Months

    • Why tracking cognitive load could save doctors and patients

      Hiba Fatima Hamid | Education
    • How dismantling DEI endangers the future of medical care

      Shashank Madhu and Christian Tallo | Education
    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • How scales of justice saved a doctor-patient relationship

      Neil Baum, MD | Physician
    • The silent toll of ICE raids on U.S. patient care

      Carlin Lockwood | Policy
    • Why shared decision-making in medicine often fails

      M. Bennet Broner, PhD | Conditions
  • Recent Posts

    • The hidden incentives driving frivolous malpractice lawsuits

      Howard Smith, MD | Physician
    • Why what doctors say matters more than you think [PODCAST]

      The Podcast by KevinMD | Podcast
    • How Mark Twain would dismantle today’s flawed medical AI

      Neil Baum, MD and Mark Ibsen, MD | Tech
    • Mastering medical presentations: Elevating your impact

      Harvey Castro, MD, MBA | Physician
    • Marketing as a clinician isn’t about selling. It’s about trust.

      Kara Pepper, MD | Physician
    • Graduating from medical school without family: a story of strength and survival

      Anonymous | Education

MedPage Today Professional

An Everyday Health Property Medpage Today
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

5 tips for physicians to achieve financial freedom
12 comments

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...