Money Tips for Young Doctors

After medical school, up-and-coming physicians face unique financial challenges.

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For all their potential earning power, young doctors also face unique financial challenges: How and when should they start paying off their massive student loans? How can they best manage a relatively low income early in their careers, while anticipating a higher salary later? When can they afford to start a family, and balance parenthood with a demanding work schedule?

This seven-part guide, based on the book Generation Earn as well as interviews with young doctors and financial experts, is designed to help young doctors get on top of their financial lives:

Get on a budget. It’s tempting to think you have plenty of money to spare as soon as you make the transition from med student to full-time MD, but the truth is, new responsibilities and temptations quickly make that new salary disappear. Don’t wait to start a budget; free online tools such as make it easy. Focus on minimizing the three big costs—food, transportation, and housing—so they take up just half of your income. (For most people, they eat up two-thirds of their take-home pay.) And be sure to reserve money to invest in professional advancement, such as association memberships, networking costs, conferences, and any post-grad classes.

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Save ambitiously, for retirement and other goals. Saving at least one-quarter of your pre-tax income for retirement and other goals might sound like a lot, but it will help you feel financially secure. That's because significant savings are the only way to weather the inevitable tough periods, such as short-term unemployment or cross-country moves, as well as move toward longer-term dreams, such as a career break or sabbatical. Make a list of what your long-term goals are to give you the motivation to save. Do you want to volunteer with a medical unit after a natural disaster in a developing country? Live and practice medicine overseas? Start up your own community center that focuses on preventive medicine? Write down a five-year plan.

Don’t wait to start investing. The power of compounding is on your side now, so don’t wait to open up a 401(k) account until you feel like you have “extra” money, because that might never happen. Instead, open up an account and start contributing just 2 percent of your salary. Soon, you can raise that percentage to 4 percent, and eventually to 10 percent or higher. For extra motivation, plug your numbers into a retirement calculator on, and see how much you need to fund your golden years—it's probably much more than $1 million, assuming you want to be able to replace at least 80 percent of your pre-retirement salary.

Pay off high-interest student loan debts early. Some young doctors graduate with hundreds of thousands of dollars of debt. Student loans that carry a 5 or 6 percent interest rate (or higher) are costing you much more than your savings can earn in this current low-interest rate environment. That means paying off a chunk of your student loans will immediately start saving you more money than if you continue to make those slow and steady monthly payments. After you have at least three months of emergency savings stashed away, start paying off those high-interest debts.

Think about when you can afford to start a family. Babies are expensive. The typical married couple earning over $98,470 a year spends around $40,000 on their child in the first two years of his life. Being as financially prepared as possible can go a long way toward easing the stress of a new bundle of joy. Give some advance thought to how you plan to arrange your work schedule, what type of child care you prefer, and how you can adjust your budget. If possible, practice living on $1,000 a less per month (the average cost of child care) before bringing your baby home so you have a savings account for all of the new baby expenses and also get into the habit of setting money aside for the newest member of your family.

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Give back, but be choosy. Doctors can find themselves on the receiving end of multiple requests for good causes. But instead of giving $50 sporadically throughout the year, consider choosing a cause that you really are about and making a bigger difference, by giving your time as well as money. One way to leverage your dollars is to join up with a group of friends and jointly give to a chosen charity. This method, known as a “giving circle,” can also be a way to find time to spend time with friends amid busy schedules.

Consider consulting with a financial advisor. Doctors facing specific insurance and legal issues should talk with a professional to make sure their assets are protected from potential lawsuits or malpractice claims. They might also want to take out extra disability insurance to protect them from income loss if they are unable to work one day. Anyone responsible for dependents, such as children, will also want to consider taking out significant life insurance policies. If you decide to work with a professional, be sure to look for a fee-only advisor to protect yourself from any conflicts of interest.

Kimberly Palmer is the author of the new book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back.