Young physicians under 40 years old may be torn about whether to start paying off medical school debt or start saving for retirement. AMA Insurance created a five-step strategy for young physicians to get a hold on their finances.
Here are five strategies:
1. Start saving immediately, putting 20 percent of your monthly income into savings. From the get-go, establish an emergency fund with at least three months of living expenses.
Then, invest in qualified retirement plans like 401K or 403B. If those plans aren't available to you, find out other retirement plan options.
2. Create a budget that extends past your debt repayment. Although 83 percent of physicians under 40 years old face student loans between $150,000 and $200,000 plus, young physicians can't let debt override their retirement funds.
Understand your true expenses and establish a budget that accounts for loan repayment and savings.
3. Know your employment contract like the back of your hand. Understand your benefits and how much life and disability insurance your employer provides. If a monthly benefit is taxable, it may be quite significant.
4. Expect the unexpected. Make sure you have a solid disability insurance policy, and adjust the plan as your income increases. Consider new responsibilities, such as children and a new home. An ideal disability policy will protect you if you can no longer practice your specific specialty.
Purchase a life insurance policy early, as it will be cheaper. Although 60 percent of young physicians have children, only 24 percent have an updated will and medical directives.
5. Work with a financial advisor to manage your funds. Ask other physicians for referrals and make sure the advisor is someone you trust and with whom you can develop a close working relationship.
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