Are you thinking about making some New Year’s resolutions that involve your personal finances as a physician or physician family? Here are seven key financial goals for the New Year that you might consider.
Finance Resolution #1: Emergency Funds for Physicians
As a general rule, it is a good idea to have 3-6 months of expenses in your emergency fund. With that said, it does depend on life factors and where you are in your medical career.
In residency, I saved about $5,000 in my emergency fund. At this stage, it is more about having some funds to help prevent you from dipping into credit card debt. And, if you are among the 10-20% of doctors who have credit card debt, that is a financial emergency. Dealing with that takes primary importance over creating an emergency fund.
Let’s say that you don’t have any credit card debt, and you’ve finished residency. The goal then is to have 3-6 months worth of monthly spending available. As an attending physician with about $10,000 per month in expenses, we usually have an emergency fund somewhere between $30,000 to $60,000.
Yes, taking care of this step means you’ll actually have to go and figure out how much you spend each month on average. So, go and snag your three most recent bank or credit card statements (that hopefully you are paying in full each month) and do the math. It won’t take long, and doing this can also help you figure out how much you need to reach financial independence, too.
If you have to dip into your emergency fund, then the next step is to build it back up before you get back to other financial goals. If you do not have an emergency fund, 2023 is the year to focus on setting one up.
Finance Resolution #2: Save More Money
When it comes to New Year’s financial resolutions, the goal that comes to most people is that they want to save more money, but there are some key questions to ask before starting on this goal.
“Saving more money” is not specific enough as a goal. To help, start with a few questions:
- What is the purpose of the money I’m saving? Is it for retirement? A down payment on a house? Something else?
- Where will I save that money?
- What is the timeline for these savings (saving up for a house versus retirement)?
The reason the last question here is vital is because it’s important to understand if this is a short term or long term goal.
For example, if you’re looking to save for retirement, you want to start with the end in mind. What age do you want to be financially independent (no longer need a paycheck and be able to retire from medicine)? Where are you now and how much will you need to be financially independent by the age you want? Determining the answers to these questions will help you in your decision making to reach these goals.
Whether you save this money in cash inside of a simple savings account or invest the money in index funds in the market depends on the timeline of your investment. Do you need this money soon? That often means cash inside a simple savings account. Or is this money for later? The further away the time horizon is for the goal, the more time you have to let that money earn more money inside the market while accepting the risk that the value could go down in the short term.
Finance Resolution #3: Increase Your Financial Literacy
If you are just starting to get interested in savings and finances, this year would be a great time to start building your financial literacy foundation. Reading or listening to books is a great place to start. There are some great books out there, and I will shamelessly plug my own book, The Physician Philosopher’s Guide to Personal Finance.
Other ways to increase your financial literacy include listening to physician finance podcasts or audio books. Taking a local or online course. Or joining a community of like-minded doctors who are working to increase their financial literacy, too.
Once you have a foundation, just like in medicine, there is a need to continuing education. We call this Continuing Financial Education. This education could include blogs, podcasts, courses, and communities.
Finance Resolution #4: Increase Your Income
One way to get to some of your financial goals faster is to increase your income. And, if increasing your income is a major goal of yours in 2023 as a physician, there are a couple different ways you can use your medical knowledge to do so.
One option is to pick up extra shifts (this is how I paid off $200,000 in student loan debt in my first 20 months after training). This could be at your current location or adding a secondary location working as a locum tenens or moonlighting doc.
Another way to make more money is to use the skills you have acquired outside of medicine. Yes, you have transferable skills as a physician that would help outside of medicine. Often, doctors don’t believe they do, but your skills transfer to many different jobs.
For example, you could use your skills to create a physician side gig. Some popular ideas include creating real estate income, teaching online courses, advising for start-ups in your area of expertise, medical expert witness work, etc. There are many options available to you.
Finance Resolution #5: Create a Student Loan Plan
You may be looking at 2023 as the year you finally get those student loans taken care of.
Although the student loan pause has been extended to June 2023, you still need to come up with a student loan plan. Looking to refinance, get your student loans forgiven through Public Service Loan Forgiveness (PSLF), or have your state or employer pay them off are a few options.
While we are on that topic, please do not refinance your loans until you are absolutely certain you won’t be pursuing PSLF. This is a catastrophic financial mistake that I’ve seen too many doctors make.
Whatever you are trying to do to get your student loans paid off this year, create a plan to do so.
Finance Resolution #6: Asset Protection
I cannot stress enough the importance of protecting your assets. If you haven’t obtained disability or life insurance, asset protection should likely be your #1 goal for you in 2023.
Make sure you get disability insurance — stop putting it off! If you earn an income in medicine, that means you need disability insurance. Period. Yes, this includes resident physicians.
When you do this, make sure it comes from one of the Big Six disability insurance companies that offer a true own-occupation, speciality specific disability insurance definition. I cannot express how important this is for your financial security.
And if you have anyone dependent on your income (spouse, children, etc.) then you need term-life insurance (not whole, universal, or permanent). It doesn’t take long to get, and it is also quite inexpensive.
Finance Resolution #7: Create an Estate Plan
If you have dependents and you have not yet created a will or a trust, do it this year.
Your death would be devastating enough for your family to deal with — you don’t want them to have to go through all of the legal proceedings to be able to access assets. Why not help your family avoid the time and expenses of going through probate court?
Regardless of which of the financial resolutions you start with mentioned in this article, there is never a better day to start than today. The year has only just begun. There is ample opportunity to change your financial situation and knowledge in the next 12 months. It is time to get started.
What are your financial resolutions? Share in the comments.
Dr. Jimmy Turner is a practicing anesthesiologist, physician entrepreneur, and coach for doctors. You can find him on Instagram or Twitter @tpp_md. You can also learn more by visiting his website.