Medical trainees should enter workforce with plan for financial stability
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Living simply and cheaply in the first years after medical training can set young rheumatologists on the course for financial stability later in life, according to a speaker at the CSRO Fellows Conference.
“Money does not necessarily bring happiness,” James M. Dahle, MD, FACEP, a practicing emergency physician and veteran from Salt Lake City, Utah, said in his presentation. “But ignoring money can make your life miserable.”
Dahle, who has blogged, podcasted and authored books about financial advice for clinicians, suggested that the “secrets to financial independence” for graduating fellows and residents may not be as complex as one might think. “Make a lot of money and don’t spend a lot of money,” he said. “Live like a resident or a fellow, even after you start making the big bucks.”
Many doctors make the mistake of buying a multimillion-dollar home or an expensive sports car straight out of training, according to Dahle. He suggested waiting at least 2 to 5 years before taking these steps. “You are not what you drive,” he said.
Recent data have shown that the average rheumatologist makes approximately $260,000 per year, while the average fellow makes $65,000. “Do not assume that just because your pay goes up four times, your lifestyle should go up four times, as well,” he said.
Dahle does what he does, at least in part, because medical school residency and fellowship programs give almost no personal finance and investment training. He urged attendees to accept the reality that they are their own CFO.
Reading books on financial literacy, following reliable online advice and engaging in continuing financial education are critical. “Read one financial book each year,” Dahle said.
For clinicians who are inclined to hire a professional to help guide them in financial matters, Dahle suggested hiring someone who will teach rather than just do all the work. He urged caution in deciding who to hire for financial advice. “Brokers, financial advisers and insurance salespeople are not there to help you,” he said, suggesting that they are in business primarily to grow their own wealth. Dahle quoted a physician who believes that these professionals should be treated like “hardened criminals.”
To that point, clinicians should not take advice from unsolicited emails, from other doctors or even from family and friends. Churches, television informercials, local banks and credit unions are also bad places to go for financial advice, according to Dahle.
A financial adviser with a certified financial advisor (CFA) or certified financial planner (CFP) license is recommended.
Perhaps the most crucial decisions for clinicians first entering the workforce pertain to student loan repayment. “In 2020, the median educational debt for DOs was $260,000 and about $205,000 for MDs,” Dahle said, noting that interest rates ranged from 5.4% to 10%.
Income-based repayment (IBR) programs may be considered, along with pay as you earn (PAYE) and public service loan forgiveness (PSLF) programs, which offer incentives for working for the government or non-profit organizations. “You have to become an expert in student loan programs,” Dahle said. “It can save you tens of thousands of dollars.”
Medical malpractice insurance is also necessary but may be a simpler proposition than many new physicians think, according to Dahle. “Buy what everybody else in your areas has,” he said.
In terms of investing, Dahle suggested developing a plan that can be effective regardless of stock market volatility. “Make sure it is broadly diversified between asset classes,” he said. “Make sure it is broadly diversified within asset classes.”
Buying individual stocks should be avoided. “Most stocks are actually losers,” Dahle said, and recommended mutual funds instead. Day trading is a “bad idea,” as are shorts and options, and real estate investments should be approached with caution.
“The process of becoming wealthy is not automatic” for individuals who make a high salary, according to Dahle. “You have to spend time learning about finance and business.”
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Dahle JM. Early Career Financial Management. Presented at CSRO Fellows Conference; March 13, 2021. (virtual meeting).
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