The stereotypical doctor has it all: the perfect family, a massive home, and a nice car for every door in their garage. But in today’s society, the reality can be a far cry from that vision.
Doctors typically make more than many other career professionals. However, gaining financial stability, particularly when you start in debt from years of medical school, takes time to achieve.
So how can you get closer to your financial freedom goals and smooth sailing into retirement? Follow these tips, and you’ll be on the right path to achieving the dreams you had when you began your educational career path.
Increase Your Income
The first tip sounds obvious, but many physicians don’t realize there are alternative ways for them to make more money without changing jobs.
Increasing income will help you pay off debt or sock more money into your retirement plan. So how can you boost your cash flow and still avoid the dreaded burnout that often comes with the healthcare profession?
Start by sitting down and digging deep into your finances. Where are your largest debts? Which debts would be easy to pay off and get out of your hair? How can you reduce your monthly bills and use those funds to put toward investments?
Paying off debt instantly increases your cash on hand without any extra work on your part. But if you need to make more money to get rid of debt, consider these suggestions:
- Reduce costs by shopping around for auto, health, life, and malpractice insurance policies. Look for cheaper but similar utility plans, and cut unnecessary subscriptions.
- Take continuing education courses that boost your value to your current employer, and request a raise when you’ve completed them.
- Look for part-time work in your current field, such as taking on workloads for doctors at the hospital or filling in when someone goes on vacation.
Ultimately, the best type of “extra income” is passive income. Depending on your risk confidence and skills, this might mean investing in the market, writing a book and getting royalties, or taking another avenue that brings you income for doing nothing each month.
Live Within Your Means
The same stereotype people have of doctors is often what causes them to get into uncontrollable debt. You do not need to prove to other people that you make good money by living outside of your means. You can be a financial role model by living well and having no debt.
Before you buy a big house or fancy car, start small. When you’ve paid off any loans or saved up enough for your dream item, then you can invest in it, and it becomes an asset rather than a liability.
Turn any disposable income that isn’t used into emergency savings. Once that’s solidly built, start a retirement portfolio. This income will work for you, increasing your money the longer you don’t touch it.
Invest in Insurance
When something is important to you, you want to protect it. You ensure your and your family’s health with medical insurance. You keep your car safe (and your bank account protected) with auto insurance. And your ability to practice medicine hinges on keeping current with your malpractice and liability insurance.
If it’s been a while since you took out coverage in any area, look through your documents and check the policy limits. Are they sufficient enough to fully protect your assets in an emergency?
For example, does your homeowner’s insurance cover your new furniture or any jewelry you’ve purchased? Are there any riders, like flood insurance, you didn’t think about getting with your original policy?
This is especially important if your company is paying for your insurance. Review the terms, and decide if your life, disability, and health coverage are enough to meet your needs. If not, take out your own policies, or ask about adding additional coverage to your existing ones.
Boost Your Credit Score
Financial experts often debate the necessity of a good credit score. For most people, though, this number determines your ability to do many things, like get a mortgage, buy a car, and, in some cases, obtain a job.
Although it’s not commonly pursued, when you’re in a position of authority, such as healthcare, some employers review your credit history to see if you’re responsible. Poor credit management can negatively impact your chances of getting a job, a loan, or opening your own clinic.
Good credit scores save you money by lowering your interest on debt and increasing the opportunities you have. While you’re paying off debt and making other sound financial investments, your credit score should automatically increase. However, you may need to actively work on this until you get your score to your goal number.
Financial stability is one of the toughest goals to achieve and maintain. But with these tips and your determination, you can have the life of your dreams and a solid financial future.