Blind Spot #3
Undersaving. Retirement saving is one thing, but 24% of doctors say they don’t even put money away in a taxable savings account, according to the Wealth & Debt Report.
Cobin Soelberg, MD, JD, a board-certified anesthesiologist and founder and principal advisor with Greeley Wealth Management, is the treasurer of his anesthesiology group. “I get to see every month how much people are saving, and even on an anesthesiologist salary, where everyone’s making about $400,000 a year, a lot of people are not saving anything, which is crazy.”
Undersaving can be both a time issue and a mindset one.
Time: Doctors often start investing in their retirement accounts later than the average professional, says Dr. Chiang. “A lot of physicians will max out their 401k or 403b,” she explains. “But if you’re putting in $20,000 a year and only starting when you’re in your early 30s, that’s not enough to get you to retirement.”
Mindset: Doctors also see people of all ages who are sick, dying, and injured. “They all know someone who worked hard and saved and then dropped dead at 55,” explains Dr. Dahle. This, he says, can lead to a bit of a “you only live once” attitude that prioritizes spending over saving.
The Fix
Shoot for 20%. If you can’t save 20% of your gross now, strive to get to that point. Think of it as telling a patient they have to change their behavior or trouble will come - not if, but when. “Develop a written investing plan and then stick with it through thick and thin,” says Dr. Dahle. “Once you have a reasonable plan, all you have to do is fund it adequately by saving 20% of your gross income, and a doctor will easily retire as a multimillionaire.”
Blind Spot #4
Bad investment strategies. Thirty-six percent of doctors experience their largest financial losses from lousy investments, according to the Wealth & Debt Report. Meanwhile, 17% of PCPs and 12% of specialists say they haven’t made any investments at all. That’s a terrible mix of doing the wrong thing and doing a worse thing.
The Fix
Don’t overthink investing, but don’t underthink it either. “As high-income earners, doctors just don’t need to take this high level of risk to reach their financial goals,” Dr. Frey says. A good investment plan doesn’t require you to time the stock market or predict individual stock winners. Consider what Vanguard founder Jack Bogle once said about investing: “Be bored by the process but elated by the outcome.”
Dr. Frey suggests going super-simple: index funds. Ignore investing strategies with actively managed mutual funds or individual stocks, as well as risky alternative investments such as cryptocurrency and angel investments. Everyone assumes doctors have money to burn, and they will push sketchy investment ideas at them. Avoid.
Blind Spot #5
Not taking debt seriously enough. The average medical student debt is $250,000 and can exceed $500,000, says Dr. Soelberg. Many doctors spend the first 10 to 20 years of their careers paying this off. Today’s graduates are paying more than 7% on their loans.
And it’s not just student debt: 39% of physicians carry five or more credit cards, and 34% have mortgages larger than $300,000 (with half of those are more than than $500K), per the Wealth & Debt Report.
The Fix
Treat debt like cancer. It’s a lethal enemy you can’t get rid of right away, but a steady, aggressive, long-term attack will have the best results. Dr. Soelberg suggests allocating the most you can afford per month, whether that’s $1000 or $5000, toward debt. Raise the amount as your income grows. Do the same with your 401k or retirement plan. Whatever is left, you can spend. Five to 10 years later, you will realize, “Wow. I’m debt free.”
Blind Spot #6
Not putting in the work to improve your situation. Seventy-one percent of doctors admit they haven’t done anything to reduce major expenses, according to the Wealth & Debt Report. Are you leaving major money on the table?
The Fix
Audit yourself in major areas like housing and taxes. While the average professional may need to put 10% to 20% down on a home, physicians can qualify for physician mortgage loans and can often put down 3% or less, says Dr. Chiang. If you can afford the higher mortgage payment, excess savings earmarked for a larger down payment can be put toward debt or invested.
Another trick, if you’re able, is to seek an area that is less in demand at a higher salary. “Physicians in places like New York City or San Francisco tend to make less than physicians in the Midwest or the South,” Dr. Chiang explains. A colleague of hers moved to rural Pennsylvania, where he made a high salary and had a low cost of living for 3½ years, paid off his student debt, and then relocated to an area where he wanted to live long term.
As for taxes, become familiar with tax law. Research things like, “What is considered a business expense for doctors?” says Brett Mollard, MD, a diagnostic radiologist who provides financial advice to younger physicians. “What will your estimated total tax burden be at the end of the year? Will you need to make extra payments to prevent owing a large sum of money from underpaying or to avoid tax penalties?”
Blind Spot #7
Living like a rock star on a doctor’s income. Getting caught up in trying to live the same lifestyle as your colleagues is a classic bear trap. “Sitting in the doctor’s lounge, it’s so crazy,” Dr. Soelberg says. He describes conversations like, “‘Where did you go on your trip?’ ‘What new toys are you buying?’” There’s pressure to live up to an image of what a doctor’s life is supposed to look like before you’ve sorted the basic things like paying off debt.
The Fix
Live like a resident even if you haven’t been one for years, at least until you’re in a better financial position. “You’re already used to living a life of lower means, and you’re an expert when it comes to delaying gratification,” says Dr. Mollard. “Do it a little longer.” Live frugally and spend only on things that bring you joy. “A lot of physicians are trying to be really rich in all areas of their life instead of the ones that actually matter to them,” Dr. Soelberg says. Identify what’s important to you and only splurge on that.