Five Ways for Physicians to Reduce Financial Stress
By: MD Wealth Management, LLC
Trent DeBruin, MBA, CFA, CFP®
Andrew Musbach, CFP®
There is no shortage of items that add stress to your life as a physician. From concerns about your patients, to the hassle of dealing with your organization’s EHR and growing administrative burdens, fighting burnout, and trying to manage the work-life balance amidst a demanding career, you have plenty on your plate. While personal finances should not be yet another item on this list to worry about, it unfortunately is often the reality. MD Wealth Management believes that finances should not detract from an individual’s quality of life. In this article we will share advice and ways to minimize your financial stress and allow you to focus on being a physician.
1) Avoid Taking on too Much Debt
Your net worth is the difference between what you OWN, and what you OWE. As a higher earner, it is easy to fall into the trap of taking on too much debt because there are many institutions that are happy to lend money (and often encourage you to do so). The problem is that taking on debt both weighs down your net worth and also puts pressure on your cash flow, since you must make monthly payments. It is true that certain types of debt, such as student loans and mortgages, are often necessary. However, you should avoid getting into the habit of financing everything or becoming too comfortable with debt. It is easy to get into trouble by taking on too much debt, especially too large of a mortgage. It is important to remember that just because you can make the monthly payments for a certain type of loan, it doesn’t actually mean that you can afford the item you are purchasing with a loan.
2) Protect Against Your Risks
All physicians face certain risks, such as premature death, liability, or an injury that limits your ability to work. While these would of course seriously jeopardize your financial situation (or that of the dependents you leave behind), fortunately, there is something that you can purchase to mitigate these risks: insurance. While certain types of insurance, such as health and medical malpractice, are taken for granted and are often covered by employers, other types of insurance such as life, disability, and personal liability umbrella insurance are equally important. Having the right types and amounts of insurance coverage will help you sleep better at night. Despite what some insurance salespeople might tell you, insurance should be for protection, not for investment.
3) Automate Your Saving
One of the best ways to ensure that a behavior continues is to automate it. This removes the need to rely on willpower or discipline to continue the behavior. In the case of saving, this can be done easily. Once you decide how much of your income you are going to save (we generally recommend somewhere in the range of 15-20%), you should take the next step by setting up automatic transfers from each paycheck into the accounts where you plan to save money. These accounts might include your employer retirement plan, an individual retirement account, a savings account, etc. We refer to this behavior as “paying yourself first.” By doing this, you never have to think about your savings or decide what you can and cannot spend. And more than anything, it provides peace of mind knowing that the remaining money you receive from your paycheck is yours to spend as you wish.
4) Be Intentional With Your Spending
People tend to feel the greatest satisfaction with their spending when their actions and decisions are aligned with their values. For the money you spend, ask yourself this question: does this align with who I am and what I value? For certain types of spending such as gas, groceries, utilities, etc., there generally isn’t much reflection involved. However, the question becomes more relevant for discretionary spending. Would a particular vehicle bring you happiness or would you receive more satisfaction by spending some of that money on a vacation? There’s a saying that goes, “show me your calendar and your checkbook, and I’ll tell you what you what’s important to you.” Be sure that the way you spend your money reflects how you want to be seen as a person.
5) Discuss Finances With Your Partner
Every year, money ranks as one of the leading causes of separation in America. This is not always because of a lack of money. It is often simply because people feel differently about money, often based on their upbringing. As a result, individuals have difficulty managing finances jointly. Exacerbating the issue, money is frequently a taboo subject in our society and people can be reluctant to discuss it even within the confines of their own homes. This is why clear and open channels of communication about money are extremely important. Even if you don’t see eye-to-eye with your partner on financial matters, you must work to understand their perspective and views toward money as it lays an essential foundation for determining a system that works for the couple. One such system we often recommend is for partners to have a joint checking account and two discretionary accounts, one for each person with a monthly allowance. This way, each person has the autonomy to manage their discretionary account and spend (or save) as they wish. When money is an afterthought, rather than a point of contention, your home and work lives are much more enjoyable.
While it may not be possible to completely eliminate financial stress from your life, it is fortunately within your power to greatly minimize it. If you choose to manage your personal finances, be sure to invest the appropriate time in educating yourself. If you choose to seek professional help, be sure to find a trusted, fiduciary financial advisor. There is no right or wrong answer here. Regardless of the path you take, the ideas discussed in this article will help reduce the amount of stress that finances contribute to your life. We believe that life is too short and that your work is too important to let finances interfere with your enjoyment of either one.
To learn more about us and the services we provide to physicians like you, call (734) 433-9600 or visit our office, MD Wealth Management, LLC, located at 109 W Middle Street in Chelsea.