Four Financial Tips For New Attending Physicians
So, you’re a new attending now, huh? The big money is rolling in. Your pager doesn’t go off as much at ridiculous hours of the night. Life is good. Life is going to be even better when we take our newfound riches and buy a Mercedes, right? Wrong.
Like other professionals that come into big paydays very quickly (professional athletes, lawyers, etc), physicians are highly prone to making very rash decisions with their money right out of the gate.
Nothing will set you up for misery more than tieing up your hard earned cash in petty things. New attendings tend to think they are invincible now that their paychecks have changed.
Your dream job you have now is perfect, right? No way it will go south and become awful. What if your job is actually terrible? What if you are ready to jump off a bridge six months in? It happens a lot, and the person that was smart with their money and can afford to make a change is in a much better position than the person driving the Benz.
So with that, I’d like to offer some free advice to the new attending crowd. Some of these tips I followed personally. Some I didn’t, and I have learned from the school of hard knocks. Heed my warnings so you can be in the best position possible.
Like any good boss, I don’t do all of the work myself, especially in the personal finance arena. There are a myriad of excellent blogs devoted to physician personal finance. Where applicable, I have linked to them so you can benefit from their wisdom.
Don’t Spend Differently
On the day you get your first attending paycheck, you should celebrate by eating out…at Subway. My first tip is don’t change your spending habits at all. If you bring your lunch to work every day, then keep bringing it. If you have a push mower to cut your lawn, then keep pushing (OK, maybe you can go self propelled here).
My point is don’t let your expenses grow with your new paycheck. When your expenses change with your paycheck, I call that living paycheck to paycheck. When your expenses are low and your paycheck is big, you are headed towards financial independence.
The temptation is so great in this arena that I propose literally hiding your money from yourself. Figure out how much you need to continue living your residency lifestyle. Keep that much in your checking account. Take the rest and put it in a separate account. Savings account, checking account, whatever. If your HR department lets you deposit your paycheck in multiple accounts, then do it that way. There is a bunch of free budgeting software out there that can help you keep track of your money across all your accounts. Pick one and use it. I use Personal Capital.
The White Coat Investor has many excellent articles about maintaining your residency lifestyle to grow wealthy. I recommend you check them out. Personally, I fell into this trap and then cut back my lifestyle after discovering my mistake. Don’t copy my screw-ups. Do it right from the beginning.
Want to track your money for free? I use Personal Capital. Check it out!
Max Out Your Retirement Accounts
Do you want to retire one day? Do you want to become financially independent so you can just do the work you want to do? Both goals involve saving and investing money, so start doing it. The best way to save and grow your money in a tax deferred way is through your retirement accounts (401K, 403b, SEP-IRA etc).
If you’re making the average new attending salary in almost any specialty, then you can afford to max these out. The current maximum for those under age 55 in 2017 is $18,000 per year of employee contributions to a 401K. Divide that up by the number of paychecks you get per year and contribute that amount every paycheck.
There are multiple free resources available regarding the technicalities of retirement accounts and the different selections you need to make. For those already familiar with the numbers and terminology, I’ll say to set up your asset allocation with low cost index funds so you can reap the benefits of your contributions and your employer match. For those that have no idea what that sentence means, then read the following articles:
1. Index funds
3. 401k basics
Clean Up Your Student Loans
If you’re like me, you came out of medical school with six figure student loans. You need to clean that mess up, pronto. You probably don’t have the free cash to pay all of those bad boys off immediately, so you need a plan.
This topic is very intricate, and there are a myriad of blogs and entire websites devoted solely to this topic. In a nutshell, here are the items you need to address:
1. Loan pay off vs. Loan forgiveness
2. Find any applicable loan assistance programs
3. Find the lowest interest rate
4. Variable vs. fixed interest rate
5. Identify the best loan term
For quick links that can give you great information on making these decisions, check out the following:
Public service loan forgiveness (PSLF) is the most popular loan forgiveness program. This applies to anyone working for a 501 (c) non profit or federal/state government. It is fantastic program that will allow your entire remaining loan balance to be forgiven tax free after 120 on-time, qualifying payments. This article gives you more in depth details regarding this.
Folks choosing PSLF should realize that your entire strategy changes if you are going this route. If you choose PSLF, then your entire focus should be on making your payments as low as possible. That way, you pay the smallest amount possible and maximize the amount that is forgiven. Pay close attention to what a qualifying payment is so you don’t wonder outside the bounds of the program in your search for the lowest payment.
Lastly, the subject of loan assistance programs is not well covered in the physician student loan world, in my opinion. You can negotiate with your new employer to write a check for your student loans for each year you’re employed with them. I have seen amounts ranging from $25,000/year to $50,000/year. You can also make sure they throw in enough to cover the taxes on that check.
Several government agencies also offer loan assistance above PSLF. The Department of Veterans Affairs will pay you up to $120,000 over five years through the Education Debt Reduction Program in some cases to work for them, just as an example. Don’t ignore these types of possibilities.
There are enough resources available for physicians to be very successful with your finances without having to pay exorbitant fees to someone else. I have linked to several above, but here are links for the main sites of a few that will get you on your way.
If you follow my Twitter account as well, you will see me mentioning any new resources I find.
If you still want personal guidance after looking at these resources, then I recommend getting professional help in the form of a fee only financial planner. Fee only planners are financial professionals that will give you personal financial advice for a flat fee.
I mention this particular type of financial advisor specifically because they are the most likely to give you unbiased advice. Just like doctors that get paid by Pfizer are more likely to recommend drugs made by Pfizer, financial advisors paid by a certain services are more likely to recommend those services. You don’t want the services they get paid to recommend. You want the best ones. The National Association of Personal Financial Advisors is a great place to start looking for a fee only financial advisor.
So there you have it, my four financial tips for new attendings. Hopefully it prevents you from falling into some of the traps I fell into. I enjoy talking about money now that I’m starting to be responsible, and my life is always better when my financial ducks are in a row. I hope my tips help you do the same!
For those of you further down the line in attending world, leave a comment with your best advice for the younger crowd or maybe a personal story of something you did or did not do well financially. I’d love to share others’ experience in addition to my own.