6 money mistakes to avoid as an early career attending physician

When you transition from resident or fellow to attending, it is an exciting time. You have more control over where you live, you can choose the job you want, and you get paid substantially more. As you enjoy this time in your life, try to avoid these money mistakes common among early career physicians. 

Inflating your lifestyle too quickly

The road to becoming an attending physician requires a lot of sacrifice and delayed gratification. 

Although you can afford to buy more of the things you desire, try to resist the urge to buy everything all at once. I see many early career attendings who buy a new car, purchase a new home, go on international vacations, and start sending their kids to expensive private schools all within the first 2 years. 

Before they know it, their debt has grown exponentially, they are unable to save a meaningful portion of their income, and they find themselves living paycheck to paycheck—despite their high incomes. 

Not investing enough money each year

The general rule of thumb is that you need to invest around 20% of your gross income in order to retire and maintain your same standard of living, especially when you factor in inflation (the fact that things get more expensive overtime). 

The percentage you save may need to be higher if you plan to retire before the age of 65. Many physicians do not invest this much. Some of them do not max out their work retirement accounts, or those who do may fail to utilize other tax-protected investment accounts open to them. While I realize there are things in your life that may take priority, I can’t stress the importance of this enough. 

Picking (and paying) a subpar financial advisor 

Many physicians experience a substantial increase in pay when they become attendings and realize they need help managing and investing their money. As a result, they hire help—usually a financial advisor. 

 Just because someone is nice and “helps” one of your colleagues does not mean that he or she is the right fit for you. Many financial advisors have high hidden fees that doctors are unaware of. Some may even convince their clients to invest in expensive insurance products they may not need, and fail to disclose whether their advice or investments are actually performing up to standard. 

Ask them to explain the pros and cons of everything they recommend so you can make more informed decisions. Have them compare your portfolio performance to the “market,” or the performance of the “total stock market index fund,” and see if your investments are underperforming or overperforming the average. 

Not having the right insurance

Insurance is necessary for expenses and events you can’t predict that would be too costly for you to pay in full. 

Many physicians have more insurance than they need in one area and not enough insurance in other areas. For example, they have life insurance but have not adequately insured their most important asset: their ability to work. They don’t have their own individual long-term disability insurance policy and only have whatever free option is available at their job.

They have health insurance and pay for extra insurance on their cell phones, but they don’t have adequate tail coverage on their malpractice insurance, and opt for the “standard” liability coverage on their car insurance, not realizing that the covered amount is largely inadequate for many physicians. My point is, make sure you have all the insurance you need. 

Buying a home that is too expensive

One of the tell-tale signs of “adulting” is buying a house, and like many Americans, most physicians desire to be homeowners. 

Many physicians take a home for whatever mortgage amount the bank will approve, not realizing that the bank may approve you for a mortgage amount much higher than you can comfortably afford. Other physicians underestimate the cost of repairs and maintenance, fail to factor in property taxes and other fees, and overestimate how much space they need. 

A good rule of thumb is not to purchase a home more than 2x your annual household income. If you live in an expensive area, then you may be able to stretch it to 3x your household income—as long as you are willing to compromise and cut back on many of the other things you desire. 

Prioritizing your child’s college education over your retirement

Many physicians want to pay for their kids' college education. While it’s commendable to try to prevent your children from having to take out student loans, many physicians prioritize this goal over their own retirement. It’s important to note that your kids can borrow for their education, but you cannot borrow money for your own retirement. 

Not doing so may force you to work much longer than you want, and it may even make you financially dependent on your children in your old age.