Doctors are typically experts in their field which is to be expected after years spent honing their skills. That being said, as savvy as physicians may be in a medical setting, the field of finance is often their Achilles heel. Below we will cover some of the most common financial challenges modern medical professionals may face. We will also offer some creative solutions that can help support financial health.
Misunderstanding Compensation Models
Working in a hospital or clinic is much different than working an average 9-5 job. Most medical professionals are paid via a contract that follows one of several compensation models. Knowing what compensation model is used and how it works is the key to financial literacy. The most common model in medicine is the wRVU model. To keep things simple, use an RVU calculator to estimate monthly or yearly earnings and stay ahead of expenses. This is also a great way to coordinate patient visits and procedures to ensure monthly thresholds are met.
Financial Limitations Due To Work Status
Every physician contract covers the work status of a particular medical professional. Many physicians find themselves unable to reach their earning potential due to being limited by a specific work status. Depending on one’s specialty, being a partner, shareholder, employee, or independent contractor will determine the limit on one’s annual earnings. In order to overcome or prevent growth and income limitations, it is important to set clear financial goals before signing a compensation contract. Make sure that the work status offered aligns with your short and long-term financial goals.
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Student Loan Debt Limitations
Student loans for medical school can put a serious hamper on the financial health of a physician. In fact, student loan debt can delay retirement savings for many years post-graduation. One way medical professionals can solve the problem of student debt is by having educational loan forgiveness built into their compensation contracts. This incentive is a smart way to trade a few years serving a specific community or hospital to get out of debt with the student loan providers.
Not Following A Savings Goal Or Setting A Budget
Creating a solid plan for the future is a common challenge faced by many physicians. When paired with a lack of budget, this can easily lead to financial ruin. As compensation increases, it is easy to fall into a cycle of increased spending, but this will do much more harm than good in the long run. A medical professional needs to create both a short and long-term financial plan as well as consider setting up a retirement fund early. Also, setting a realistic budget for comfortable living and sticking to it will help said compensation last longer when spent effectively.
Making Smart Choices For A Brighter Future
As a medical professional, spending most of one’s time honing their craft and focusing on patient care is expected. It is still important to set aside both time and energy to build a sound financial foundation that will last for one’s entire medical career and beyond.
