Yes, this sounds very ominous. However, there is a reason why I wanted to alert you to the fear of mismanaging your finances. Doctors live in the limelight and are highly traceable on the internet. Also, physicians earn large amounts of money, which can sometimes be overwhelming, giving a false sense of never running out of it. Therefore, I want to review the top four mistakes doctors make with their money.

Mismanaging finances

Paying off debt. Failing to pay off student loans, automobile loans, and credit card debt can saddle you with years of costly interest. College and medical school were pricey, and now that you are making a significant income, you can service the debt. Start paying off these loans with surplus monthly cash flow. Additionally, understand your options for refinancing and student loan forgiveness. It is vital to get organized since you cannot hit the target you cannot see. Implement a debt paydown strategy by listing all debts by balance, payment, interest rate, and provider. Then, budget how much you can allocate to one loan and start paying it off in an orderly manner.

Giving money to friends and family. I always tell doctors that they will be targeted for money once they start their full-time job. Stockbrokers, insurance agents, and business ventures will hound you to invest in a new business or product for the rest of your life. Additionally, friends and family will think you are their lifeline to help in financially strapped situations. These examples are a recipe for disaster. Do not lend money to friends or family. If you feel moved, give them the money with no strings attached. Moreover, do not invest in business ventures that sound too good. There are more pressing needs for your money.

Overspending. Now that you have your first job as a doctor and see how much you will make, the urge to spend money can be overwhelming. Establishing and sticking to a budget is key to not spending more than you make. It will also help you determine how much you can invest and pay off debt. Set up direct deposit into your savings account and 401(k) plans. Doctors are no different from high-earning occupations that can live paycheck to paycheck.

Neglecting savings

Overlooking savings is often part of poor money management. Spending too much and not allocating income toward retirement or emergency savings can be catastrophic. Not doing so poses a considerable risk to your short-term and long-term goals.

Establish an emergency fund with 3 to 6 months of expenses. Your emergency fund should be in a savings account for life’s emergencies, not for investing. Aim for six months, as this will enable you to self-insure.

Invest 10 to 20 percent of your paycheck into retirement savings. You cannot borrow for retirement! Set up an automatic draft to channel money from your paycheck or checking account into retirement accounts.

Other savings goals. Set up savings accounts for specific goals, such as a vacation, wedding, or new car. Start contributing to them so you can pay cash when the event arrives. Avoid using debt to finance your lifestyle to keep more of your hard-earned money in your pocket.

Insufficient insurance coverage

Insurance is the best way to protect yourself from major financial disasters. Its purpose is to secure your wealth. Since you earn a substantial salary, your insurance needs are more important.

Life insurance. Life insurance aims to pay for future income and expenses if you pass away. The amount of insurance will depend on your needs and what you want the money to cover. Some of these include the income for a spouse, paying off the mortgage, children’s college expenses, and potential future weddings. Also, as your assets increase, your insurance coverage should decrease. Term life insurance is the best product for doctors. A coverage amount of $1 to 3 million over 20 to 40 years should suffice.

Disability insurance. You are 3.5 times more likely to be disabled than to die. Additionally, 25 percent of American workers will have a long-term disability before retiring. Getting the right disability policy is crucial for a physician. There are many kinds of disability policies, but the essential riders are “own occupation” and “non-cancellable and renewable.” These two features ensure you get paid if you cannot perform the duties of your profession, and the policy renews each year at the same price.

Umbrella insurance. A doctor must have an umbrella policy for liability claims on their home and automobile. Being a physician requires you to be highly visible. People can instantly find you online and realize you are a physician. A $1-2 million policy is affordable and worth the investment if you get sued. Remember, the goal of insurance is to protect your assets!

Poor investing standards

Do you know what investments you own? Do you understand why you invest in the assets you own? If you cannot answer these questions, you should research the answers. Many doctors are limited to the investment options their employer’s retirement plan chooses. Additionally, many of those investments have hefty expense fees that you pay each year. Research the expense ratio for each investment and determine if it is worth paying. Usually, expense fees over 0.5 percent are costly. Substitute investments that own the same companies but come with lower costs.

Do not invest in things you do not understand. If you question how to make money in Bitcoin but do not understand how it works, do not invest in it. Many sales associates will come knocking at your door, asking you to invest in their new business. You need to ask yourself why they are coming to you. Why aren’t banks or lending institutions giving them credit for their business? They are likely not safe businesses to invest in.

It is easy for physicians to fall into these financial mistakes or bad habits. With some planning, you can avoid these hazards and achieve financial wellness.

Jordan Benold is a certified financial planner.