Introduction

Finances can be a daunting topic for physicians, who often don’t have time to think about their finances until they finish their training and start earning a significant income. This website was created to help physicians improve their financial situation through easy, actionable steps that can be taken at any stage of their careers. The content on this site is aligned with the principles of the FIRE (financial independence, retire early) movement and the investment philosophy of Jack Bogle, the founder of Vanguard. Bogle’s philosophy emphasizes the power of compounding and diversifying assets, and has inspired a movement of investors known as Bogleheads.

The structure of the website is designed to follow the flowchart found in the personal finance section of Reddit. The content is organized in the context of the different stages of a physician’s career

Step One: Budgeting

Budgeting is the most crucial step in your financial journey, especially during periods when you don’t have an income. Most physicians have to take on student loans to pay for their education, and the rising cost of tuition has led to larger student loan balances. Fixed costs like tuition and fees can’t be reduced, but you can control your cost of living by minimizing expenses for things like rent, car payments, and food. Developing the habit of tracking your spending early on will benefit you throughout your career. There are free online tools like Mint.com, Personal Capital, and publicly available excel sheets that can help you manage your budget. The goal is to reduce your spending as much as possible during medical school, residency, and even the early years as an attending physician.

Step Two: Emergency Fund

After reviewing your spending habits, the next step is to set up an emergency fund to cover unexpected expenses. You can keep this money in your checking account or open a separate savings account. The general recommendation is to have 3 to 6 months of living expenses saved in your emergency fund, but physicians typically have a high level of job security starting from residency, so it’s reasonable to keep a smaller amount, such as 1 to 2 months of living expenses. If you have dependents, you may want to consider a larger emergency fund.

NerdWallet maintains a list of online savings accounts with the highest yields, which can help you earn some interest on your emergency fund. However, the amount of interest earned is typically small unless your emergency fund is substantial, so it may be more convenient to set up your emergency fund at a bank that is easily accessible.

Step Three: Matching Funds

This step typically comes into play once you become a resident and start earning an income. If you have some money left over each month, you should check if your employer offers matching funds for your retirement account. Employer matching means that your employer will contribute to your retirement account based on your own contributions, in other words it is additional income that you recieve only when you put money into a retirement account. Many large academic centers and medical institutions offer some form of retirement matching. For example, the University of California will contribute 8% of your annual pay if you contribute 7% of your annual pay, which is essentially a 100% return on your investment. Retirement matching can be confusing because the terms vary. The best way to optimize your employer’s matching funds is to ask human resources or co-workers how much you need to contribute to get the maximum match from your employer.

Step Four: Pay off Credit Card Debt

The next step is to pay off all high-interest debt, such as credit card debt. The goal is to use credit cards with the intention of paying off the balance in full every month. There are many advantages to using credit cards, including the perks and bonuses that can help offset travel costs when you have little or no income. Credit card companies make most of their revenue from interest payments, and the average interest rate for a credit card is higher than 15%. However, if you pay off your credit card balance in full every month, you will not have to pay any interest. Paying off credit card debt should always be a high priority at all stages of your career. There are many resources online that can help you take full advantage of credit card bonuses but the steps can get pretty complex.

Step Five Paying Off Debt and/or Investing

After you have paid off all of your high-interest debts (most people consider debts with interest rates above 6% to be high-interest), you can start thinking about your financial goals. This is a good time to consider paying off student loans, saving for a down payment on a house, and investing for retirement. It’s important to note that everyone has different goals, so the following steps may not be ideal for everyone. These steps are primarily focused on helping you accumulate wealth as efficiently as possible.

  1. Open and max out a Roth IRA
  2. Pay off student debt as fast as possible, unless you are attempting loan forgiveness through public student loan forgiveness (PSLF)
  3. Max out Retirement Account 401k, 401a, or 401b. (or a individual 401K or SEP IRA for those who are self employed)
  4. Max out other tax advantaged accounts
    • 457b if you work for a govenemtn or non-profit institution.
    • Health Savings Account
  5. Consider contributing to a 529 if you have children
  6. Continue investing in a brokereage account

Miscellaneous Links: