Save Early for a Less Stressful Medical or Dental Career
Earning your M.D. or D.D.S. requires years of advanced studies. Earning your paycheck as a medical professional requires working long hours, dealing with high levels of stress, and putting your skills to their highest uses in potentially life-changing situations.
One nice tradeoff for that high bar to entry is that doctors tend to be high earners who gain more and more autonomy as they progress in their careers. But new doctors who aren't used to managing six-figure salaries need to build strong saving and spending habits early in order to enjoy those benefits later.
Here are three reasons that sticking to a budget can help young doctors and dentists boost their nest eggs and their Return on Life.
1. Keep your spending in check.
According to Salary.com, the median starting salary for a doctor in the United States is $207,532. Dentists start in the $176,657 range. It can be very tempting for young doctors to treat those first few paychecks like winning lottery tickets. And as a new member of a group of professionals who are generally high earners, young doctors also have to guard against the impulse to "keep up with the Joneses" when their more established colleagues make luxury purchases.
If splurging on a big house or speed boat slows down your student loan repayments or drives up your credit card bills, you might spend the early part of your career under a mountain of debt. Work with your advisor on a monthly budget that balances long-term goals with short-term fun.
2. Insure yourself, and your professional future.
Everyone needs life insurance, but few recent college graduates run out and buy a policy before they start eying a new car. Generally speaking, the younger you are when you purchase a policy, the better your rates and benefits will be. With proper budgeting, doctors and dentists should have the means to get in early.
But most doctors and dentists should also consider purchasing disability insurance if their employers don't provide it. According to the American Medical Association, a young, healthy medical professional has a higher probability of suffering a debilitating injury than of dying. If you’re keeping your monthly spending at reasonable levels, you should be able to afford a good policy that suits your needs. And if you stick to your plan and gain financial independence earlier in life, you can insure a smaller percentage of your income, or retire early and cancel your plan.
3. Give yourself more flexibility.
With the support of a solid spending, saving, and investing strategy, younger doctors and dentists might not feel the need to grind longer and longer hours. That could free you to find better work-life balance or use your skills to give back. Instead of scrambling for extra shifts, you might choose to volunteer a few hours every week at a free clinic, or keep your weekends clear for some well-earned R&R with friends and family. If starting a family is one of your $Lifeline goals, you might feel more confident that you have the time and means to do so.
Committing earlier in your career to long-term financial goals can also provide you with a sizable nest egg well ahead of a typical retirement schedule. Compounding interest in large savings and investment accounts can keep earning you meaningful income as you age and start to scale back your hours. With some guidance from your financial advisor, you could plot an early retirement goal on your $Lifeline. Or, you might start to feel entrepreneurial later in your career and use your resources to start your own practice.
Now that you’re a practicing doctor or dentist, what are your short-term and long-term financial goals? We’d love to talk to you about how our Life-Centered Planning process can help you achieve both.