It's a long road from the beginning of medical school until one's first "real" job as a physician, and the roadway often includes years of living in cheap apartments and driving older model cars, noted Dave Denniston, physician financial adviser, in a recent post for Physicians News Digest.
But although that first salary of $150,000 or more is hard earned, Denniston cautioned against spending it without a long-term plan in place.
Therefore, an early career physician's first order of business should involve paying down debts and saving for "rainy day" expenses, such as a broken furnace. Physicians should strive to save at least $6,000 in this emergency fund within the first few months, he wrote, and place funds in a low-risk investment account that can be withdrawn without penalty when they exceed $15,000.
Next, new doctors should concentrate on reducing debts by locking in interest rates and aiming to reduce the payback period to 15 years or fewer. A $150,000 loan paid over a 30-year period with a 5 percent interest rate, for example, would cost a physician $140,000 in interest alone, Denniston noted.
He also urged physicians to investigate various debt-reduction or forgiveness programs, the types of which he explained in a separate post for HCPLive. One rarely discussed financial strategy, he added, is for physicians to combine the benefits of two debt-relief programs, such as a federal public loan forgiveness program and a state forgiveness program, simultaneously.
Finally, he urged physicians to live within their means. "Physicians have big hearts and big dreams. They may want to pay for their kids' college education, buy the cabin or second home, buy a boat or RV, or give lots of money to worthwhile charities," he wrote. "Hold off on these things until you are debt-free. Remember that once your debts are paid, you'll have the cash to fund these other projects."