Common Financial Mistakes Made by Physicians
Financial health is just as important as physical health for a productive and successful life. Doctors help heal the physical ailments of their patients, but they often neglect their own financial wellness. While the annual income is generally higher than that of most professions, more money also breeds more choices and with that, the greater potential for financial issues.
Here are common financial mistakes made by medical professionals and how you can avoid them:
IGNORING STUDENT LOAN DEBT
It’s no surprise that a decade of schooling, in preparation for your career, would result in at least some student debt. However, neglecting your debt and its repayment is the worst thing you can do for your financial well-being. If you find yourself grappling with student loans, there are repayment options. The first, and most common, is refinancing your loan. This option can lower your monthly payment, reduce your interest rate and extend the term of the loan. Before you decide to refinance, research all available options – including private lenders and your financial institution – for the best rates and payment plan. There are also government programs that offer repayment assistance for those in the medical field.
PURCHASING THE WRONG INSURANCE
Those in the medical field require more coverage than other professions. Outside of health and term life insurance, doctors also need to carry physician disability insurance to protect them in the event of an illness or injury and medical malpractice insurance for legal liability protection. Navigating the balance of coverage and cost can be tricky, so it is best to consult a financial planner for medical insurance specialist recommendations. By performing your due diligence, you can protect yourself from potential pitfalls while keeping your costs low.
NO RETIREMENT PLAN
There are typically a number of employer-sponsored retirement programs available to you – how do you know which one is the right one? Adding a retirement plan to your portfolio will allow you to grow your health quicker than investing your employer’s 401(k) alone. A retirement planning consultant can devise a plan and personalize your portfolio, allowing you to reach your retirement goals.
NEGLECTING YOUR CREDIT SCORE
Much like an annual checkup is for your physical health, checking your credit score annually is essential for your financial health. A lower credit score can result in major financial implications, so it’s important to improve your credit. For example, you have $150,000 in student debt and would like to extend the repayment term to 20 years. With good credit, the loan interest rate would be 5 percent; with poor credit (and potentially higher credit risk), the rate jumps to 6 percent. That one percent doesn’t seem like much at first, however, the monthly repayment amount is $990 versus $1075. Over the life of the loan, you would pay nearly $20,000 more in interest with poor credit.
Coping with the stresses of the medical field can cost you money and keep you in debt. Some deal with the pressure by indulging in high-priced purchases and impulse buying, which can lead to financial strain. Another added stress is the “keeping up with Joneses” mentally. High-earning doctors usually socialize with other high-earning doctors, which can result in spending however or whenever the mood or situation strikes. The key is to create a realistic financial plan, save for retirement, and live within your means. Plan for indulgences and experiences while finding other ways to deal with stress such as exercising or spending time with friends and family.
Foster Crown, LLC is a boutique physician recruitment firm that works closely with candidates to understand education, experience, capabilities, employment history and background to reduce the recruitment timeline. Time is a valuable commodity and we understand that ‘time is of the essence’ in meeting objectives. Call our office at 262.646.2860 to find out how Foster Crown can help you achieve your goals