24 Observations about Physician Finances

This post is a collection of thoughts and observations about the physician finances, based on what I’ve seen over my career working with just physicians. I’m going to simply post the list, without much commentary, as most of the observations will speak for themselves. I hope you like the post.

Observations on Physician Finances

  1. There are very few physician finance issues that cannot be prevented and solved eventually by the purchase of a few reasonably priced insurance policies and living a middle class lifestyle (i.e. like a resident) while earning at attending levels.
  2. Most physicians can have anything they want but not everything they want.
  3. You only have so much ability to tell yourself “No” when it comes to your budget. Use it where it can make the biggest difference.
  4. If you cannot stomach the amount of investment volatility that you need to in order to reach your investing goals, it might be easier to “get a grip” than to change your investment goals, but you must do one or the other.
  5. Just because you are a doctor or your children deserve a nice house in a safe neighborhood, a safe car, and “the best” when it comes to their education doesn’t mean you can actually afford to give them those things. Those are generally excuses for overspending.
  6. Very few people need life insurance for their whole life so it is silly to pay for that unneeded insurance, especially given how much it costs to have that coverage in later decades.
  7. By the time you know enough to recognize high quality investment management, there is a good chance you are now capable of managing your investments yourself.
  8. Like health care, financial advice is expensive stuff. Only consume what is truly necessary.
  9. Sharing experiences with people you care about is likely to make you happier than any material item you can purchase.
  10. If a stock investor can manage to capture market returns, keep his costs low, and avoid selling out at market bottoms, he will be successful.
  11. Retirement accounts are the tax break and asset protection plan you have been looking for.
  12. Mistaking a commissioned salesman for a financial advisor is a common error. Consider yourself lucky if you have never done it.
  13. The sooner you figure out how much “enough” is, the happier you will be.
  14. Perhaps the best use of your money is to purchase your time.
  15. Learning to be content with a simple portfolio has great value.
  16. The only asset protection plan most physicians will ever need involves treating people nicely, buying professional and personal liability insurance, and maxing out their retirement accounts.
  17. Estate planning is to make sure your money and minor children go where you want, to avoid probate, and to avoid estate taxes. Most doctors won’t have to worry about estate taxes at all.
  18. Credit cards are not for credit, they’re for convenience. If you’ve ever paid interest on them, you probably shouldn’t use them. You also should not use them if it is hard for you to save 20% of your gross income, because you almost surely spend more using credit cards than you would using cash, even if you include the rewards. You are not immune to this effect just as you are not immune to drug rep advertising.
  19. The more I learn about investing successfully, the more I realize it is mostly just risk and cost management. If you focus on risks and costs, you will eventually reach your goals.
  20. Few doctors have read their 401(k) document and most doctors do not know about the Backdoor Roth IRA or the unique tax advantages of HSAs.
  21. It isn’t lifestyle creep you have to avoid, it is the lifestyle explosion that usually occurs upon finishing training.
  22. Financial independence means having about 25 times the amount you spend each year.
  23. If cycling seems expensive, try home improvements. If home improvements seem expensive, try boating. If boating seems expensive, try private school. Before long you’ll be living paycheck to paycheck on $400,000 per year. Learning to be content with cheap hobbies can go a long way.
  24. The first few good financial books you read may be worth millions.

Questions about Physician Finances

  • What do you think?
  • What other pearls of wisdom would you give to thousands of doctors if you could?
  • Which of these do you agree with or disagree with? Feel free to email me at reedt@rtacpa.com with your questions and comments about physician finances.

Additional Resources on Physician Finances

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