Everyone should have a developed, thoughtful, and unique financial plan. However, newly practicing physicians face more unique financial challenges than most recent graduates due to many having a considerable accumulation of student loan debt. Once physicians begin earning their real income, there are pressures to play catch-up with peers who have had longer to establish their careers and savings accounts.
We asked several of our clients, who are established medical professionals, what financial pitfalls they faced at the start of their careers. If they could start fresh, from that first big paycheck, where would they focus? These insights, along with our planning experience, reveal numerous elements medical professionals should consider when navigating their financial future.
Financial Illiteracy
While we do not expect everyone to have considerable financial knowledge and know-how, paying insufficient attention to your finances can lead to additional stress. There are multiple downfalls like not living within your means, not understanding your various investment and savings opportunities, and not adequately focusing on eliminating student loans and other consumer debt that can adversely affect long-term financial success. Set and start working toward short-term, mid-term, and long-term financial goals by planning in advance and building your financial literacy.
Rapid Income Accumulation
Spending should not grow as quickly as your income; if it does, you will miss an opportunity to build real wealth. The initial years of wealth accumulation should be a balanced approach focused on debt elimination, saving for a house down payment, and catching up on retirement savings. Easier said than done, as many of your peers have a head start on this, but your future self will thank you! On top of these things, it’s also important to find balance and enjoy your life in the present too.
Lack of Savings
As many have recently realized, having emergency savings is very important. Having retirement savings is also a priority; you should be maxing out your retirement plan contributions as soon as possible. Remember, it takes an enormous amount of investing down the road to make up for inadequately funding a portfolio in the early years.
Navigating without Trusted Advisors
Finding a trusted advisor, someone who aligns with your values, expectations, and experience, should be a top of mind precedence. A sound accountability partner, which a good advisor is, helps you focus on your goals and avoid some of the misguided opportunities or pitfalls that will come along in your professional career. Whether it is a tax, financial, or legal advisor, there is no replacement for a good and trusted confidant in these areas of your personal and professional lives.
Investing with a long-term strategy
There are many ways to build a solid investment strategy. One must consider their risk tolerance and be committed to consistent saving. Saving and investing are essential factors in creating wealth. For more direction on the three main areas of savings and investing, read “Another Drop in the Bucket,” by Bridgeworth Associate Advisor, Taylor Brown, CFP®. Remember that each of our buckets need and require ongoing attention and consistent contributions.
Entering the workforce in a historically demanding profession, with the added stress of feeling behind their peers, presents a significant hurdle for medical professionals. Tack on a global pandemic, and it’s a recipe for poorly calculated financial decisions. Prepare yourself to make sound financial decisions early on to build a stable foundation for a prosperous financial future. Not sure how to best set your foundation? Reach out to a Bridgeworth advisor today.
Published in Birmingham Medical News.