Being a doctor is too tough to be poor while doing it. So why are medical students and doctors left to figure out the financial world on their own?
Conversations with colleagues on personal and healthcare finance has made me realise that many of us are not financially educated enough. For something that plays such an important role in our lives, our education sets us up to fail when it comes to managing money. The problem is compounded because doctors usually start earning later than their peers in other industries, as a result of the length of training. In addition, some doctors graduate with loans and are forced to play catch-up when they finally start earning. It is important for us to be savvy with our finances so that financial challenges do not impair our ability to care for patients.
Neither personal or professional finance is taught in medical school in Ireland. The situation is likely similar in the UK and the US. Medical schools have obviously not deemed financial literacy important enough to include in the curriculum. This does not get any better in residency as many programs do not incorporate a financial education curriculum. In the end we are left with excellent doctors who are financially vulnerable.
Where changes are needed
Institutional change
The first change needs to occur at medical school level. Curriculums need to equip students with financial tools that will help them make better financial decisions. It should include education about their entitlements, debt management, savings and investments and retirement planning. We should also help medical students gain an understanding of efficient tax planning. For all the time spent teaching us acute inflammation, cellular immunity and primary haemostasis, surely we could have a couple of financial literacy lectures. After-all, in-depth knowledge of the Krebs cycle isn’t going to lead us to financial independence.
Financial education also needs to be implemented post-graduation as part of specialty training curriculums. Access to professional financial advisers during training years should also be available to trainee doctors. This will go a long way in building a strong foundation in financial literacy. It will also help prevent doctors from making financially damaging decisions in the future. Surely if a well-rounded physician is what we want for the healthcare system, being a good money manager is an important part of that?
Personal change
While we wait for the powers of medical education to make our financial education a priority, here are things you can do to take ownership of your journey to financial independence.
- Make a budget
- Save up an emergency fund
- Buy a house
- Start investing
- Spend less than you earn
- Educate yourself
MAKE A BUDGET
A budget is the bedrock of your financial success and is the first step in managing your finances. Budgets help track spending and compare your planned to actual expenses. They also help identify areas of unnecessary expense and make necessary adjustments. Allow your budgets to be realistic and ensure you give yourself wiggle room so you aren’t constantly drawing down from your savings account.
Set aside an emergency fund
Set aside an emergency fund for unforeseen events that can put you out of work. If you have income protection perhaps this is less important but most early trainees don’t. The amount you need to set aside varies and depends on whether or not you have dependents, how many sources of income you have and the nature of your specialty. For example a radiologists income might be less affected by a lower limb fracture than a surgeon.
Buy a house
A house is the one good investment everyone makes. It is different from other investments in that, you’re not constantly wondering how the price of your house is doing because you are benefiting from living in it everyday. So once you have an emergency fund set aside, a mortgage deposit is probably the next step. This one is a no brainer really. Some handy tips on getting a mortgage here. It’s US-centric but some general principles apply.
START INVESTING
Investing embodies the principle of putting your money to work for you. There are many investment vehicles that require some level of understanding before committing. Your choice of investment depends on risk tolerance and how active you want to be in managing your investment. For example, investing in a fund is better for the passive investor, while individual stock picking will suit an active investor. Money sitting in your savings account is being devalued by inflation. By not investing, you are not only missing out on potential gains but you are also losing money. With investing, the earlier you start, the better due to the power of compounding.
SPEND LESS THAN YOU EARN
It all really comes down to this. Live within your means. Use your wants as an opportunity to be creative. Think up more ways to earn money as opposed to drawing on more credit and debt. In the same way that interests on investments compound over time and can make you wealthy, interest on unpaid debt also compounds overtime and can leave you financially ruined. If you constantly spend above your means to live a life that is not authentic, you will not be able to do number 2,3 and 4.
EDUCATE YOURSELF
This should probably come first. Invest in your own personal and professional financial education. Understand how to maximise your tax allowance, and claim your benefits and entitlements. Figure out the ins and outs of getting a mortgage. Learn basic business and financial lingo so you can understand what a financial advisor is doing with your money. Educate yourself on various investment vehicles, start speaking to a qualified financial advisor about retirement planning etc. There are gazillions of books, blogs, websites and podcasts out there. A doctor focused blog is White Coat Investor which is also very US focused but has some good general advice!
You can also get a financial adviser to help guide you towards your goals, but remember, your growth is your responsibility!
