“Physician burnout” has become a major issue in the medical profession, leading many doctors to consider leaving or actually leave the medical profession among other serious decisions, including suicide.
While there are many factors that contribute to burnout, money is undeniably one of those factors.
The average medical school debt for the class of 2019 is $201,490, according to the most recent data from the Association of American Medical Colleges. Not only are doctors not taught money management in medical school, they likely are not taught about money at all!
A large percent of high income earners, including doctors, report living paycheck to paycheck. High amounts of debt (student loans, house, cars, consumer debt), lack of savings, and no budget are just a few things that can seriously impact a physician’s ability to be financially stable.
As the old saying goes, “Money doesn’t buy happiness.” Sure, but it can secure your future.
The problem is that a high-income can lead doctors to believe that they can afford everything without realizing that they are susceptible to falling into major money traps.
Money Traps That Keep Doctors Burnt Out
1. No Savings or Not Enough Savings
Perhaps, because doctors spend much of their early adulthood borrowing money, it often does not occur to many of them to save even after they start earning money.
However, when you start earning, always make sure to set money aside for unforeseen expenses. Emergencies are inevitable. You might as well save for them, so that you don’t become like the many Americans who don’t have even $400 saved for an emergency.
You should also think about saving for upcoming expenses like a vacation, the holidays, a friend’s wedding or other special occasion.
Saving even a small percentage of your paycheck can relieve you from the mental anguish of having to spend a large amount of money in a short period of time.
2. No Financial Planning
You’d never plan a road trip without mapping out how to get to your destination. Well, financial planning helps you map out your current and future life using money as a tool.
You’re probably saying, “YUCK! Budgeting!” While budgeting is important, financial planning is more than just about budgeting.
Financial planning is about managing your income, savings, debts, retirement funds, investments, and more.
If you do not have a concrete financial plan you’re probably missing out on how to make your money make more money for you – even when you’re sleeping!
And of course, always seek help from a fee-only, fiduciary financial advisor to help you with this process.
3. Too Much Debt
Most doctors are saddled with at least 6 figures of debt due to the expenses from their medical school. Imagine bringing that debt into your retirement years! Well, if you don’t have a financial plan, it could happen.
But, student loan debt isn’t the only debt that doctors rack up. It also includes consumer debt, your house, car, credit cards, etc.
Being deep in debt is one of the biggest money traps because it forces you to keep working even if you feel burnt out.
Having debt might also dictate where you work. Some doctors choose to take or stay at a job that they otherwise wouldn’t because it will help them pay their debt either through a higher salary or loan repayment.
Being in a job you hate because of money can definitely contribute to burnout. Decreasing your debt burden can free you of much more than just payments.
4. Not Enough Income
Beware of the 6-figure salary offer! Confused? Keep reading.
For many doctors, their first real job is as… well… a doctor. So, they don’t know or understand the job market or even how to navigate negotiating for more money.
Many new doctors think they’ve hit the big time – even if that 6-figure salary offer is a complete low-ball!
Do your research on the going salaries in your specialty and community and most importantly, don’t be afraid to negotiate for more money,
Remember that getting a paycheck isn’t the only way to make money. Consider leveraging your medical knowledge and other talents to make money outside of your regularly scheduled paycheck.
Locum tenens is a great way to make more money using your medical knowledge while earning 33-55% an hour more than employed doctors on average. Check out our partner, Locumstory, for everything you ever wanted to know about locum tenens.
5. Excess Spending
There’s a saying that “you can afford anything, but you can’t afford everything.”
The 7+ years of delayed gratification going through medical school and residency and/or fellowship might feed the “I deserve it” mindset which often results in excess spending.
You might feel that after so many years of hard work, you might feel that you deserve a huge house, a luxury car, a lavish lifestyle, big vacations, and more.
What you don’t deserve is to be broke and living paycheck to paycheck.
Pace your spending using a budget. Also, try not to spend too much on things that do not have financial gains would essentially have an impact on your financial standing in the present and in the future.
6. Not Having Any or Enough Investments
Too often, doctors either don’t invest, invest too little, or invest too late.
Investing can be a daunting idea, especially if you don’t like taking risks. Luckily, there are various ways to invest – stock market, bonds, real estate, startups, and more – with varying degrees of risk.
If you do not have enough investments, chances are, you’re not putting your money to work for you. In other words, you’re not making passive income or potential future earnings.
Not investing could mean working for more years and much harder than you planned.
Consider investing in lower risk investments to start, then work your way to the big guns as you learn more. Remember to use a trusted financial advisor.
7. Not Insuring, Over-Insuring, or Under-Insuring Your Income
The last thing that any doctor thinks about when they are done with training is the potential of losing their income either by unemployment, disability, major illness, or death.
The pandemic has shown us that a doctor is not immune to these possibilities.
Not having enough or any life insurance or disability insurance can put doctors in a tough predicament, especially if money management is already an issue.
Families should not be saddled with the burden of figuring out how the bills will be paid during a trying or tragic time. Life insurance and disability Insurance can protect doctors and their families from loss of income.
On the flip side, over-insuring your income might be taking away opportunities for your money to be put to better use. Don’t pay for more insurance than you need.
8. Not saving for retirement
If you’re not planning for retirement, you’re planning to keep working.
According to Forbes, “roughly 45 percent of working-age households have no retirement savings at all.”
Sure, you’ll likely be eligible for social security benefits, but will that alone cover all of your expenses? The Social Security Administration reports that as of March 2022, the average check is $1,536.94 per month.
Imagine working for 30 years or more only to realize that you can never stop working because you can’t afford to!
Doctors should start saving for retirement as soon as they start making income, typically when they start residency. Most residency programs offer residents a 401K or 403B, but there are a number of other ways to save for retirement.
Working with a trusted financial advisor can help you to optimize your retirement savings. Start saving now and retire with confidence.
9. Not Planning for Taxes
Yes! You can plan for taxes before tax season!
Your tax burden will depend on a number of variables including your employment status, income, marital status, or business entity.
Taxes can eat up a considerable amount of your income. Planning for taxes might reveal ways to lower what you owe the government.
Rather than waiting until April to realize what you could have done to keep more money in your pocket, a great tax planning accountant can help you plan what you can do now to keep more of your earnings.
Being burnt out can come from working more so that you can make more income. Don’t let more money than necessary slip away after all of that hard work!
10. Not Negotiating or Under-Negotiating
You might have heard, “You get what you negotiate, not what you deserve.”
Not negotiating or under-negotiating your salary, you could be losing income. We mentioned negotiating salary earlier, but negotiations don’t just stop at job offers.
Are you negotiating other income or expenses in your life? How good are you negotiating for a house, cars, loan repayment, and other services.
People fail to negotiate for several reasons, many of which are related to mindset. Perhaps, you are undervaluing yourself. Maybe you don’t want to appear greedy or selfish. It could be that you’re afraid that negotiating could kill the deal.
Don’t underestimate the power of negotiation to make or save more money.
If you’re not comfortable with negotiating, hire an attorney or contract negotiator to do it for you. If you’re looking for contract services, check out our affiliate, Resolve and use the code DOB10.
11. Avoiding Estate Planning
Just like with life insurance and disability insurance, it’s never exciting to think about putting your affairs in order in preparation for the worst times in your life, including death.
But, we’ve all heard the horror stories of how not having affairs in order destroyed a family. Don’t put yourself or your family in that position.
Too many people avoid estate planning because it’s more mentally comfortable not to think about it. But it’s more than just about leaving a last will and testament.
Estate planning settles what will happen in your family and to your assets during your life and death.
For example, who will make decisions for you in the case that you are unable to care for yourself?
Who will be the guardian of your children if you are no longer able to care for them or in the case of your death?
Do you need to put your assets in a trust to protect them from being tied up in a long probate process that might leave your family struggling for money?
Part of burnout is being worried about the future. You can’t control everything that will come your way, but having a plan can put your mind at ease.
Be sure to talk to your trusted financial advisor or an estate planning attorney to help you through this process.
These are just the points we think can help put doctors and anyone else who feels burnt out avoid money traps that might increase the likelihood of continued burnout.
It’s important to recognize that like any other tool, money can be used to make life easier.
But also like any other tool, you must use it the right way in order for it to work in your favor!
To hear Dr. Nii and Dr. Renée talk more about money traps, tune into Episode 265 Docs Outside the Box podcast to learn more about all the money traps that burnt out doctors should avoid.