About 18 months ago I started working with my first fresh-out-of-residency doctor as part of our TriageMD program. Let’s call him Bill.
At the time, Bill was working in the Philadelphia burbs, earning an average salary for his specialty and the location, and paying a couple thousand a month for a nice apartment near the hospital. He had a comfortable lifestyle. No kids, no spouse, enjoying his job but not loving it. For the first time, I was experiencing some “I have no idea where I’ll be in three years” conversations with a doctor.
Most of my interactions before that had been with doctors who were ten years or more into their practices, with kids in school and large mortgage payments on their dream homes. It’s often difficult to change the trajectory of a financial life at that point.
Back to my TriageMD doctor: Bill was ready to move on to another hospital, hoping to find a place he would love and start a family. He wanted to remain in PA in order to stay close to his significant other’s family. He showed me offer letters from Philadelphia hospitals, and suburban hospitals, but also from hospitals that are a couple hours’ drive from Philadelphia.
Guess what? The jobs that were farther from the city were sending very competitive offers, with larger salaries, and greater benefits. Why? They really need to attract new doctors!
Bill took a job at one of these “far-away” hospitals, increased his salary significantly, and has a nice house for the same rent as his previous one-bedroom condo. He loves his new job.
I am not saying everyone should move to a small town. I live in Philadelphia and I love it, even if it means my house is on the smaller side. What I am saying is that sometimes, not wanting what everyone else wants can be a key part of financial success.
The transition from fellowship to practice in a medical specialty is likely to be the single most financially significant event in your life.
Don't ignore the power of the choices you make in your first years as an attending physician. It may be the only time in your life when you can both improve your lifestyle and increase your savings, but after years of deferred gratification, you may be tempted to tip the scale toward consumption.
Key takeaway: where you end up in 30 years depends on what you do at the beginning of your career.
When we advise people to set aside a cash emergency fund (at least three to six months' living expenses, depending on one's situation), the response is usually something like this:
"My savings account isn't earning anything. You want me to put more money into it, where it'll just sit there?"
Yes. Yes, we do.
It's the nature of emergencies that they can strike at any time, without warning. Common emergencies include a sudden loss of income, major surgery, roof repairs, or a hospital stay for the kitten. Having cash set aside can help you to manage these events in a way that won't compromise your financial situation, as being forced to take on credit card debt or liquidate investments might. It also gives you peace of mind, which is surely worth a buck or two.
You can think of an emergency fund as an insurance policy, where the cost is any return you forego. If you are extraordinarily lucky and nothing bad ever happens, then you're out a few hundred or thousand dollars a year. But chances are, sooner or later, you will need to dip into the fund. And when you do, it will more than pay for itself.
It’s that time of year when articles about optimizing the future abound.
In one such Medical Economics piece, this quote stood out for me:
“It used to be that physicians made enough money that they could let a lot of things slide".
“Used to be” is a wistful look back. But new complexities in the areas of regulations, technology and other administrative burdens are here to stay. There is a lot of new ground to cover in the already busy lives of physicians. The time needed to grow personal finances can be an obstacle if you are already overstretched. If you’d like to know more about ways we can help, please go to our contact page. We're happy to answer your questions.
As the end of the year approaches, we wish you and your families a healthy and prosperous 2015.
Happy New Year!