Good Fortune For Physicians

When you look at the earning potential of professionals today, physicians are consistently ranked as some of the highest compensated professionals in America. However, in spite of the fact that most earn incomes well above the national average, many physicians still face significant financial challenges. Some of these challenges have become even more prominent given the uncertain future of American healthcare.
Fortunately, with the proper guidance, physicians can take a systematic and thoughtful approach to addressing their financial challenges, allowing them to focus on the needs of their patients and the long-term goals of their family.

Enumerating the Challenges

Even before the passing of the Affordable Care Act in 2010, the American healthcare industry has been under significant scrutiny. Based on the work that we have done with physicians over time and the results of a number of recent in-depth interviews with physicians and other healthcare professionals, we have gained meaningful insight into a range of financial issues faced by physicians today. Some of the biggest concerns we uncovered in these conversations were:

Extensive cost of education and length of training. Whether measured in dollars, years or both, the cost of education for physicians is significant. Only after many years of college, medical school, and residency, do physicians begin to realize their full earning potential. While the higher earning potential of physicians offsets the lengthy educational requirement over a long career, it adds additional costs and complexity to a physician’s financial affairs.

Cash flow management and budgeting. Given that physicians often don’t begin earning full-time salaries until later in their career, it’s not uncommon for physicians to struggle with the transition from a shoestring budget to a much more generous cash flow. One challenge echoed by several physicians was the feeling of financial freedom they felt once their residency was complete. They could finally purchase houses, cars, and other items they’d always wanted and this pent-up demand often prevented them from saving money until later in their careers. In other words, not only do physicians get a late start financially due to their educational requirements, but they also often saved less and spent more early on in their careers. Having financial discussions and establishing appropriate saving and spending levels earlier is something many of the physicians wished they had done.

Clarity regarding savings and future cash needs. Many physicians said that prior to engaging with a financial advisor, they lacked clarity regarding their financial future. Income levels were well above average and they were saving money, but they had not clarified any specific goals in order to determine whether or not they were on the right path. One physician we talked to — a boating aficionado— likened the lack of control over his financial future to being adrift in the ocean.

Occupational pressure. Physicians also expressed a sense of occupational pressure to work long hours and maintain certain productivity levels. Every physician understands the time commitment their profession entails, but many underestimate the impact it will have on their ability to effectively manage other parts of their lives, including their personal finances.

Concerns over future income levels and medical reimbursements. Most physicians have little control or influence over how much they are paid for the services they render, and few can predict what salary changes may be on the horizon. When fees are reduced, many of the physicians we’ve spoken with felt significant pressure to work additional hours in an effort to maintain their current income level.

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