There’s 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 a growing administrative burden, fighting burnout, and trying to manage work-life balance in a demanding career, you have plenty on your plate. While personal finances should not be on this list of stressors, unfortunately, that’s often the reality. We believe that finances shouldn’t detract from your quality of life, and in this post, we’ll share some thoughts on how you can minimize financial stress.
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’s easy to fall into the trap of taking on too much debt because many companies are happy to lend you money (and often encourage you to take it). 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 on it. It’s true that certain types of debt, such as student loans and mortgages, are often necessary. However, it’s best to avoid getting into the habit of financing everything or becoming too comfortable with debt, since that can lead to trouble. Remember that just because you can make the monthly payments for a certain type of loan, doesn’t actually mean that you can afford the item you are purchasing with that 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’s something 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. And despite what some insurance salespeople might tell you, remember that insurance is 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. 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% for retirement alone), you should take the next step of 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 call this behavior “paying yourself first,” and by following this approach, you never have to think about your savings or decide what you can and cannot spend. It provides peace of mind knowing that you’re on track for your goals, and 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 most satisfaction with their spending when it’s aligned with their values and what’s most important to them. For the money you spend, ask yourself this question: does this match up with who I am and what I value? For certain types of spending, such as gas, groceries, utilities, etc., there isn’t much reflection involved. However, the question becomes much more relevant for discretionary spending. Would a particular vehicle make you happy or would you receive more satisfaction by spending some of that money on a family vacation instead? 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.” Make sure the way you spend your money reflects who you are as a person.
5) Discuss Finances With Your Partner
Every year, money ranks as one of the leading causes of separation in America. This isn’t always because of a lack of money. It’s often simply because people feel differently about money, usually based on their own upbringing. As a result, individuals have difficulty managing finances jointly. Exacerbating the issue, money is frequently a taboo subject 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, since that provides an important foundation for developing a system of financial management that works for both of you. When money is an afterthought, rather than a point of contention, home and work life is much more enjoyable.
While it may not be possible to completely eliminate financial stress from your life, it’s within your power to greatly reduce it. If you choose to manage your own 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 financial advisor. There’s no right or wrong answer here. Regardless of the path you take, the ideas discussed here can help reduce the amount of stress that finances add to your life. Life is too short, and your work is too important, to let finances interfere with your enjoyment of either one.
About MD Wealth Management: We are a financial planner near Ann Arbor that specializes in providing financial planning for physicians and retirees. We are CERTIFIED FINANCIAL PLANNER™ professionals and fiduciary financial advisors who operate on a fee-only basis, which means we do not sell financial products or collect commissions. We enjoy working with clients both locally and remotely.