As a physician in your thirties, you may be signing your first attending contract while paying down medical school debt, buying a home and starting a family. While you are likely to have a significant increase in income, years of delayed earnings make the choices you make now especially important. This is the decade in which your career success enables you to build long-term financial security. Like all projects that seem overwhelming, starting is the most important step. We recommend breaking this punch list into parts and tackling one every few months.
1. Turn Your First Attending Paycheck into a Plan
To prevent lifestyle expenses from consuming your increased paycheck, raises or bonuses, consider automating at least a 20% transfer of your paycheck accounts earmarked for your financial priorities (debt payments, emergency fund, home down payment, and retirement savings). This may mean a portion of the 20% of automating savings goes to retirement accounts such as 401(k) or 403(b) plans offered by your employer, Roth IRAs for tax-free growth and SEP IRAs if you have self-employment income. This 20%/80% approach limits your lifestyle spending to the remaining 80% of your paycheck. If your take-home pay is lumpy due to call, locum tenens or productivity compensation, when budgeting, be sure to limit any must-pay recurring monthly expenses to your most dependable income, which is likely your base pay.
2. Choose a Student-Loan Strategy Deliberately
The fastest student-loan repayment strategy is not always the best one. When deciding how to manage your student loans, consider the repayment options and benefits available to you, along with how each fits your career, finances, family goals and comfort with debt. Before refinancing federal loans, it is also important to understand which borrower protections and forgiveness options would be lost. If you plan to pursue loan forgiveness, keep copies of your employment certifications and payment records in one organized place.
3. Create Cash Reserves for More Than Household Emergencies
Your cash reserves should account not only for an unexpected home or medical expense but also for the possibility that changing jobs will take longer than expected. Physicians can face credentialing delays, restrictive covenant transitions, relocation costs, unpaid parental leave, contract disputes and gaps between positions. A larger reserve may also be appropriate when the household depends heavily on one physician’s income or when a substantial portion of your compensation is variable.
4. Protect the Income Your Financial Plan Depends On
Your ability to practice medicine is likely your largest financial asset. Employer disability coverage may be capped, taxable or lost when you leave your job, so consider reviewing whether individual own-occupation disability insurance is appropriate for you. Pay close attention to how the policy defines disability, residual or partial disability benefits, future purchase options and exclusions. Also take a look at whether the policy protects the specific duties of your specialty. Coverage purchased while you are younger and healthy may also be easier to obtain.
5. Read Your Employment Contract Beyond the Headline Salary
Keep in mind that compensation is only one part of an employment offer. It is also important to consider work-RVU formulas, quality incentives, call responsibilities, outside-work restrictions, repayment provisions, termination notice, restrictive covenants and what happens to unpaid bonuses when employment ends. It is also wise to confirm whether malpractice coverage being offered is occurrence-based or claims-made, as well as who is responsible for tail coverage.
6. Create a Back-Up Plan for Those Who Depend on You
You need to be sure that your loved ones are cared for in case you aren’t around, so it’s time to get life insurance and an estate plan. As your income and family responsibilities grow, it is a good idea to coordinate life insurance with an estate plan that includes wills or trusts, guardianship provisions, durable powers of attorney, healthcare directives and current beneficiary designations. The goal is not simply to replace your income; it is to give those you trust clear instructions and access to resources they would need if you became unable to manage your affairs.
7. Plan for a Home Without Crowding Out Retirement
A larger home, private school tuition, childcare and college savings can all become meaningful goals. Still, commitments like these should also be tested against your retirement savings and debt reduction. Decide what you can comfortably support on reliable income rather than assuming every future bonus or productivity year will be strong. When purchasing a home, be aware that special mortgage programs for physicians may offer benefits such as lower down payments or flexible underwriting.
8. Prepare for Estimated Taxes if You Receive 1099 Income
A taxable investment account can give you greater flexibility if you change employers, reduce your hours, or need money before retirement. Keep your investments diversified, particularly if you own employer stock, an interest in a medical practice, or real estate. If you receive 1099 income, consider setting aside money for estimated taxes and keeping your business and personal expenses separate.
9. Check Your Credit
If your credit score is low, lenders, insurers or employers view you as less reliable so you’ll pay more to borrow or get insurance and could even be passed over for a job. For information on how to request your credit reports and understand and improve your score, click here.
10. Learn About Investing
Now that you are starting to save, you need to learn the basics of investing. You should know how to evaluate your investment performance and determine whether your asset allocation fits your needs. Let us know if you would like to participate in a basics of investing workshop or want us to take a second look at how you’ve structured your investments. If you are ready to open an investment account and take advantage of the power of compounding, watch our short video here to get started.
11. Make Financial Planning a Regular Family Conversation
Consider setting aside time at least once a year to review your debt, savings, insurance, estate documents, career plans and the goals that matter most to your household. Written priorities make it easier to decide how to use a bonus, whether to accept a new position or how much lifestyle growth is reasonable. By the end of your thirties, the goal should not be financial perfection but rather to create a long-lasting system that works for you, even when life and your practice become more demanding.
No matter where you are in your financial journey, thoughtful planning can help you prepare for what lies ahead. Explore our tailored financial tips for those in their forties, fifties, sixties, and seventies to learn more about the key priorities and planning opportunities to consider during each decade.
If you could benefit from a conversation with our advisory team, we would be happy to provide a complimentary consultation.
Important Disclosure: Beacon Pointe Advisors does not offer legal or tax advice. Please consult with the appropriate tax or legal professional regarding your circumstances. This information is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Only a tax or legal professional may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement any design discussed herein. Nothing herein should be relied upon as personalized investment advice, nor should it be considered an individualized recommendation, offer or solicitation for the purchase or sale of any security or to adopt a specific investment strategy. An investor should consult with their financial professional before making any investment decisions. Beacon Pointe is not responsible for errors or omissions in the material on third-party websites and does not necessarily approve or endorse the information provided.