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Financial Planning for Future Doctors

The road to becoming a doctor is long. From college to medical school, residency and fellowships, it can be years before doctors begin earning a substantial income. And the process can generate massive student debt. If you are pursuing a medical career, financial planning is critical. From my personal experience working with more than 100 physician families as a financial planner, and as someone who attended medical school myself, I have strong opinions on how an individual should approach these financial issues.

Let’s divide preparing for your future financial life into three steps: college and medical school, residency, and practice.

Step One: College and Medical School

One of the major changes since my time in medical school is the staggering debt load that most people accrue. From a financial planner’s perspective, a future doctor’s first step should be to try to minimize or avoid this debt burden for both college and medical school. There are many ways to accomplish this, beginning with your choice of college. You could choose to attend a state school instead of a private one and save a fortune in many cases. You can seek work-study programs and grants or scholarships. Any options are better than just borrowing funds that you cannot pay back until many years later, as it is easy to accumulate debt that will compound with interest for years.

Once you are accepted to a medical school, you have new options to minimize or even avoid debt. Consider public service or military scholarships as ways to reduce debt. As an Air Force Reservist, I have observed many young physicians who have either avoided debt entirely or severely mitigated it with limited military service.

Step Two: Residency

The next step of planning occurs during your residency. While your residency will likely provide you with some income, it will probably not be enough to pay back significant debt. You might choose this time to explore public or military service to help pay back debt already incurred.

Step Three: Practice

The third step is when you enter practice and finally begin to make a higher income. Believe it or not, this is usually at least 11 years after high school! The goal during this period should be to eliminate debt, including the mortgage on the house you will probably buy. From my experience, most physicians should save and invest toward an early retirement because of the high prevalence of burnout. You can do that by planning to have enough money (and no debt) by your early 50s, which will at least give you options for how you spend your working time and nonworking life. If you are lucky enough to still enjoy medical work at that time, all the better. It can be good to practice to “live like a resident” until your debt is paid off (i.e., live on not much more than you made as a resident while aggressively paying off debt, and then move toward aggressive retirement savings).

The alternative to this approach often leads to less desirable results. It is not uncommon to meet doctors in their 60s who appear accustomed to an expensive lifestyle that will keep them working in a way and perhaps for a duration that is not enjoyable. The good news is that by the time many physicians enter practice, they have become experts in delayed gratification. You can use that experience to your financial benefit.

You can also seek out financial expertise that goes beyond the scope of your medical degrees. Look for a CERTIFIED FINANCIAL PLANNER™ professional who can help guide you through the financial issues doctors face and help ensure your financial security later in life.

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