Being a physician is scary enough. Perhaps what’s even more frightening are some of the horrific things doctors do with their money.

We have a simple mission for physician personal finance: Help doctors keep more of what they earn, and help them grow what they keep. Unfortunately, many doctors’ balance sheets are so saturated with red that they look like the aftermath of a Michael Myers and Jason Vorhees duel. We want physicians to face their financial fears and avoid these 13 frightening financial missteps.

 

Stick their heads in the sand

Physicians tend to be a bright bunch. Most understand the importance of having a nest egg. But sometimes a doctor arrives on some financial advisor’s doorstep well past the age of 40 without a dollar saved.

It’s simple, but not easy: Doctors need to make a habit out of creating and maintaining personal financial health. The earlier you start, the better.

 

Skip budgeting

Having written about personal finance for a while now, we’ve noticed a trend among high-earners, including physicians. Many use a budget early in their careers when money is tight. Then, as their salaries increase, doctors may jettison or forget about their budgets.

For example, do you really want to be spending hundreds on unused subscription services, your languishing gym membership, or takeout each month? Maybe you do, but you should at least be conscious of what’s happening with your money.

 

Live without an emergency fund

 

If you have lost revenue at any point as a result of canceled procedures, skipped appointments, or declining patient volume, then you may have profound appreciation for the value of an emergency fund. Creating your budget will tell you how much you spend monthly. Aim to accumulate 3-6 months' worth of expenses in cash to address the next pandemic, dead furnace, or blown-out transmission.

 

Ignore their student loans

Here’s something that makes the hair on the back of our necks stand up: Many doctors repay hundreds of thousands of dollars in student loan debt–needlessly! Countless healthcare organizations have nonprofit status, making their doctors eligible for Public Service Loan Forgiveness (PSLF). This is also applicable for docs employed by federal, state, local, or tribal governments. Even if you don’t qualify, there are several money-saving approaches you should take to your student loans.

 

Fail to optimize retirement savings

Most doctors are astute enough to use the retirement accounts offered by their employers. This may include options such as a 401(k) or 403(b). Some accounts come with an employer match, up to a specific percentage of salary or dollar amount. Again, physicians are bright, and they know not to turn down free money.

Unfortunately, once they check those boxes, many doctors think their retirement is covered–and it very well may be. But why take the chance? It's worth exploring other investment vehicles that help keep you comfortable in retirement. For example, a 529 account can help pay for your kids' college educations.

 

Pay too much in taxes

Blue Angel flyovers are cool and all, but if the federal government really wanted to thank their healthcare heroes, perhaps some tax relief is a good place to start. Physicians, especially, get hit pretty hard each April.

However, there are some tax-saving basics that all physicians should attend to, including withholding pre-tax funds for retirement accounts and HSAs and, if needed, working with a CPA.

 

Forgo disability insurance

What’s your greatest asset? Most doctors will say something like their house or their retirement accounts. But, your house can burn down and the market can always tank. What you can always fall back on is your ability to practice medicine. After all, people are always going to get sick and require your services. That is, unless you suffer a disabling injury and can no longer practice medicine. Talk about scary! That's why you need disability insurance.

 

Fail to investigate their malpractice insurance coverage

A malpractice claim is a statistical inevitability. Luckily, nearly all physician employers offer some form of malpractice coverage. Unfortunately, the type of policy may be inadequate, particularly if you switch jobs or retire. Ask your employer what type of coverage they’re providing. You may need to purchase what is known as “tail coverage.”

 

Buy too much house too soon

Many doctors err by buying too much house, too soon. They land their first post-residency gig and buy the big house in the nice neighborhood that they plan to fill with kids in the months or years ahead. Then, they find out they hate their employer. Or that they chose the wrong neighborhood. Or that their child needs to attend a school that’s three towns away.

Buy the house that suits your needs right now, then get a bigger and better one when you need it later.

 

Get the wrong type of financial advisor

Once again, doctors are smart. You may not even need a financial advisor. But if you a) are completely uninterested in managing your personal finances, b) have amassed a large sum of savings, or c) are wondering if your money could be doing more for you, it may be worth having a conversation with a financial advisor. Just be sure to pick the right one.

Work with a fiduciary financial advisor–one who is ethically obligated to put your interests (not theirs) first. Otherwise, you may be working with a glorified salesperson. Also, ask them how they get paid.

 

Chase every trendy investment

This one comes to us from the OG of physician personal finance, Physician on FIRE, by way of Warren Buffett. There are no called strikes in investing. Think of every potential investment opportunity as a pitch thrown by a pitcher. Here comes cryptocurrency on the outside corner, passive real estate at the knees, mutual funds right down the pipe.

In investing, you can stand in the batter’s box all day and let all of these investments pass by without getting called out on strikes. Swing only at the investment opportunities that make sense to you.

 

Succumb to lifestyle creep

We’ve seen this one bite doctors badly. Lifestyle creep is a debilitating financial disease. If you’re afflicted, each pay bump fuels an upward creep in your lifestyle. You drive a nicer car, live in a bigger house, or buy better clothes, for example. Eventually, the raise is nullified by your more expensive tastes.

 

Fail to use it

Of all the frightening things physicians do with their money, this is the scariest. Some never use it.

On their deathbeds, no one says, “Man, I really wish I didn’t take that summer-long road trip to all of the Western national parks.” Or, “Buying my dream car in cash was a huge mistake.” Or, “Why did I ever think supporting that anti-malaria charity was a good idea?” If this sounds like you, it's worth asking yourself more about your relationship with money.