The Ultimate Road Map to Financial Planning for Physicians
By Jared Andreoli, CFP®, CSLP®
New and seasoned physicians have different needs. The common denominator is that comprehensive financial planning for physicians plays a pivotal role in pursuing long-term financial fulfillment.
From the early days of post-residency to the peak of their practice to late-career hurdles, strategic financial planning is crucial. A strategic plan includes tax planning, financial planning, investment management, the right insurance policies, a retirement plan, and collaboration between medical and financial professionals.
In this article, I share key financial planning tips and techniques for physicians at various stages of their careers.
Just Out of Residency
Physicians fresh out of residency frequently have to balance the weight of student loan debt with their enthusiasm for beginning their careers. Consolidating debt repayment with emergency fund building can be a daunting task. In addition, the transition to a substantial income can lead to lifestyle inflation if not managed carefully.
Financial planning for physicians often suffers as a result of the pressures of starting a medical practice or finding a suitable position. Young doctors can potentially lose hundreds of thousands of dollars in areas like homeownership, retirement savings, and insurance coverage if they don’t have a strong financial plan.
Here are my suggestions for overcoming these challenges and building a solid financial foundation instead:
Create a plan to pay off your student loans.
Verify that you have the appropriate insurance, including a true own-occupation disability policy. Buy life insurance if you have kids.
Live below your means. Set up a budget and stick to it. Trying to change your lifestyle to reduce expenses after you’ve already bought a nice house or luxury car is a lot more difficult.
Pursue financial literacy.
Optimize your retirement accounts.
Don’t buy the shiny new tech stock; consult a professional financial advisor instead.
Build an emergency fund to cover six months of expenses.
Mid-Career
During mid-career, some physicians might be celebrating the end of their medical school student loan debt. However, as new personal expenses like mortgages or rent and auto payments increase, greater wealth also entails greater financial responsibility.
It’s true that a lot of doctors get paid well. But the old financial planning adage is still true: “It’s not what you earn, it’s what you keep.” A doctor’s rising income can easily be offset by growing expenses and increased debt if they don’t carefully plan and monitor their cash flow.
Planning for retirement is another financial challenge for physicians. After a demanding day of patient care, it’s undoubtedly hard to find the energy to think about retirement preparation. And even if they manage to find the time and energy, they still need professional guidance to make the right decisions.
To help offset the financial challenges of mid-career physicians, I list some tips and techniques below:
As your paycheck increases, make sure your savings do too. One of the smartest ways to do this is to automate the money transfer from your paycheck to your savings account.
If you have kids, establish 529 plans for college savings.
Optimize your retirement accounts by contributing the maximum amount.
Make it a habit to work with your financial advisor to review and update your insurance policies.
Set up appropriate investment accounts.
Create an estate plan.
Late-Career
Just like fine wine and well-aged cheese that develop deeper flavors over time, a physician’s career also gets better with age. They’re at the pinnacle of their career and earning potential.
Since the “end of student debt” celebrations have been replaced with “end of mortgage” and “empty nest” celebrations, expenses and debts are now under control. With careful preparation and consistent contributions to their retirement plan, physicians should have amassed more than enough assets for a comfortable and happy retirement.
At this stage of their careers, these are my suggestions for physicians to continue pursuing financial health:
Review your estate plan and verify it’s up to date. Consult both your financial advisor and an estate planning attorney to pay as little in taxes as possible.
If you own your practice, fine-tune your succession plan.
Confirm you’re on track to retire when you planned.
Verify that your retirement income aligns with your lifestyle goals.
We’re Here to Help
Whether you own your own practice or are part of a hospital-owned practice, Simplicity Financial can help you with financial planning at every stage of your career. From buying a house and paying off student loans to planning for retirement or a growing family, we work with physicians to identify their financial picture and create a plan that aligns with their values.
Get started by scheduling a free consultation, or reach out to us by emailing jared.andreoli@simplicityfinancialllc.com or calling 414-207-6473.
About Jared
Jared Andreoli, CFP®, CSLP®, is president and financial planner at Simplicity Financial, a fee-only RIA dedicated to helping early-career physicians conceptualize their financial picture and achieve their financial goals. Jared specializes in devising individualized financial road maps for clients, and he loves nothing more than a full day meeting with clients who value his partnership to solve problems—big and small.
After college, Jared spent six years working as a mutual fund administrator for a large company. While he learned an immense amount about the financial world, he was missing the personal connection of working with individual clients. Combining his passion for finance and personal connection, he established Simplicity Financial in 2017.
Jared has a degree in finance with a concentration in financial planning from Western Kentucky University, along with the CERTIFIED FINANCIAL PLANNER™ (CFP®) and a Certified Student Loan Planner (CSLP®) certifications. Outside of work Jared enjoys cooking and traveling. He played baseball in college and still coaches occasionally. He and his wife recently welcomed a daughter, who occupies most of their time. To learn more about Jared, connect with him on LinkedIn.