As physicians we are remarkable fortunate. We make a relatively good annual income despite the enormous debt we take on. We also start later in life. However, we are fortunate because we have a remarkable stable job, we are in demand and for the most part we can write our own ticket especially if we are willing to move.
One of our biggest financial problems is overcoming our’s and society’s perception that we are rich and that we have to portray that lifestyle.
If you believe that, you deserve an old mustachian face punch!
If you are interested in gaining your freedom after years of training/indentured servitude you must gain financial freedom, your loans and your expenses are your new master. So what do you need to do to get out from underneath this new yoke?
1. Control your spending- I am not saying you need to continue to live like a resident, but at least slowly grow into your income. You will be shocked by how much more money will be in your attending paycheck than your resident paycheck, even those of us in academia! Evaluate what purchases really give you satisfaction and spend money there instead of just buying indiscriminately.
2. Pay down your debt- First, payoff any credit card debt you have since it is typically the highest interest. If you are like many of us, you graduated with student loan debt consider paying it off since it is not tax deductible given your new high earnings. The only exception to this may be if you have a great interest rate on your loan, the remaining balance on my federal student loans that I consolidated is 1.75% so I am taking my time paying that down. Next, consider paying down your mortgage if you have one, you can think of paying off that mortgage interest as a guaranteed earning. i.e. saving 4% interest is equal to earning 4% interest (probably more so, since you may be taxed on that 4% earning).
3. Fully contribute to your retirement accounts- Pay yourself first. Pay the max into your retirement fund. With a traditional 401k or 403b this money goes in pre-tax so you save money on taxes. Your employer also may match contributions so don’t leave free money at the table. Even after paying yourself first, you will still have much more money than you ever did as resident to spend.
4. Consider opening an HSA- If your dependents and you are generally in good health or you have a great employer plan consider getting a High Deductible Health Plan. This will allow you to put money in pre taxes (once again saving you taxes now), it grows tax free (more saved taxes since you don’t pay on the interest), and then you can spend it tax free if it is for a qualified health expense.
5. Invest in yourself and in your family- Don’t be tempted by the money. A career in medicine is a marathon so don’t sprint after the fast money. Take time to do the things you enjoy, reconnect with family and friends, and grow as a person.
Well, I hope this helps. For more reading on being a financially independent badass, I recommend reading Mr. Money Mustache, all of his posts may not apply to you, but there are definitely points you can glean from most of them.