7 Small Things Doctors Can Do to Get Their Finances on Track

I was recently speaking with a medical colleague who was struggling to get their finances on track. They didn’t ask for specific advice, so I held off from offering anything unsolicited. However, the interaction got me thinking.

I could relate with what my colleague was going through. Before starting my financial comeback story, I was feeling burnt out and had trouble getting started. Luckily, there are small things we can do to get our finances on track. The first goal is to gain traction, and once that happens, bigger steps, like creating a written financial plan, become easier.

It’s all about starting the engine…now let’s dive in.

1. Read about personal finance for 5 minutes a day

No matter your knowledge level about personal finance, you can always learn more. If you’re having trouble gaining traction, immersing yourself in the subject is a great way to find inspiration.

Too often, us healthcare professionals think we need to go from being a novice at something to immediately being an expert. Nothing in between will do. My best guess is this arises from our innate perfectionism coupled with the way medical training works. Regardless of etiology, this is not realistic, in medicine, in finance, or in anything else.

So, embrace being a novice. And don’t rush through that stage.

Pick a personal finance blog to subscribe to. I would be honored if it is mine. But any will do, and there are many great ones out there! Then just read a single post each day.

2. Create a savings rate of 1%

A very simple formula for doctors to reach financial freedom is:

Save 20% of your gross income and invest in index funds.

This is a very effective and safe plan, assuming you invest for the long term throughout your medical career. And, especially in the beginning, how much you save is much more important than how successfully you invest.

Of course, saving 20% of your gross income can feel very daunting. But you don’t have to jump from 0% to 20% overnight.

So, challenge yourself to save 1% of your gross income in 1 month. So, if your gross (pre-tax) monthly income is $10,000, save $100 in your first month. This $100 is not going to get you to retirement. But that’s not the point right now. The point is proving to yourself that you can do this.

Then, the next month, save 2%. Then 3%. And on and on. Until you reach at least 20%. Sure, you can jump up by 5% if you want. The point is that you’re building a bridge to your goal.

A permissive budget is the most helpful and complete way to accomplish this step. However, it is not 100% necessary to have one to create a savings rate. So, don’t let that stop you from starting to establish your savings rate.

3. List all your debts in one place

Managing debt is key to financial success. But, if you are anything like me when I got started, you don’t even know the exact amounts of all your debts.

The problem is that without knowing exactly what they are, we can’t effectively plan to get rid of them. Depending on our perspective, they either feel “not real” because we haven’t come to terms with them or they seem “too real” and scary, causing us to avoid them.

So, spend 15-20 minutes making an Excel sheet of all of your debts:

• Credit card debt
• Student debt
• Car debt
• Home debt (mortgages)
• And so on

Seeing all your debt in one place helps make it real. Staring it in the face can also alleviate some of the fear (I experienced this paradoxical reaction). Then, you can begin to attack the debt effectively using one of these strategies.

4. Determine your net worth

I went back and forth with including this in this list of small things to get your finances on track. Mostly because I didn’t want to scare anyone away. Determining your net worth sounds like a “big thing.”

But in reality, it isn’t. And completing this step really has an outsized impact.

To determine your net worth, simply Google “net worth calculator.” I use this one. But they are all pretty much the same.

I first determined my net worth about 4 years ago when I knew very little about personal finance. My net worth was roughly minus $500,000. I did not like looking at that number. And chances are, you won’t like the number you see either.

But seeing this number did empower me. Because now I knew what I could do to improve my net worth — by decreasing liabilities and increasing assets. I knew the rules of the game.

5. Meet with your HR representative or equivalent

At a bare minimum, all doctors need to maximize their retirement accounts. This provides tax advantages along with typical employer matches. So, this is a great place to start when investing.

The problem, however, is that many of us don’t actually understand how these accounts work. I know I didn’t. The most effective way to start using your retirement accounts is to meet with your HR representative.

Larger employers will have specific representatives who you can see. Smaller practices will still have a point person who can review your benefits and refer you to others as necessary. For self-employed doctors, you can meet with a fiduciary financial or tax advisor who can help you understand the options available to you.

Once you understand all options and how they work, funding the accounts becomes way easier.

6. Invest with play money

Before I invested in a retirement account, I first invested in a taxable investment account. This doesn’t really make sense from a rational perspective. Your investment accounts are like a waterfall. You fill up the most tax advantaged bucket until it is full, then you fill the next bucket and then the next. A taxable investment account is typically the last bucket to fill.

However, I wasn’t being rational when I started investing for the first time. I knew all about how index fund investing beat active investing 80% of the time. So, I had my investing strategy. But I still needed to get my feet wet before I started investing large amounts of money.

Once I got comfortable dipping my toes in the water, I was able to dive in.

7. Find someone to talk to

This is perhaps the smallest yet most impactful of these steps to get your finances one track.

By simply having someone to talk to about personal finance, you gain an accountability partner. Even if it is just an acquaintance, you have someone to stimulate your interest when it wanes. Even more ideally though, it will be a close friend or significant other.

Your partner does not need to be at the same knowledge or even same interest level as you when it comes to personal finance. They just need to want to improve their financial well-being too. If you know more than your partner, enjoy being a mentor. It will sharpen your skills as well. And if you are the mentee, learn from your mentor and pay it forward.

Stacking the Building Blocks

These seven steps to get your finances on track are straightforward. None are complicated or require even a basic knowledge of personal finance.

Nonetheless, they can be both humbling and exciting. I certainly experienced this mix of emotions as I progressed in my journey. I was embarrassed to be in my situation at first, but once I started taking these steps, I felt empowered to change my financial future.

Remember that each step is a building block. One won’t get you to financial freedom. But once you start stacking them, you will find your goals are closer than ever, motivating you to continue gaining traction and to take even bigger steps to improve your financial well-being!

Jordan Frey, MD, is a plastic surgeon at Erie County Medical Center in Buffalo, New York, and founder of The Prudent Plastic Surgeon.