One of the buzz words in personalfinance nowadays is "debtmanagement."The subject hasbecome increasingly important as thepopulation's personal debt has reachedepic proportions. Financial planning hasthankfully moved beyond just buyingand selling because more advisors arenow fee-based instead of sales-commission-driven. And from the looks of it,physicians should be rushing to benefitfrom their knowledge.
The Perfect Storm
The unprecedented wave of refinancingcaused by record low interestrates and the enormous run up in realestate valuations have led to a "perfectstorm"of debt acquisition. Couplethese developments with the enormousexplosion of national debt,lower taxes, and the current administration'scheerleading of consumerspending to support the economy, andwe have an almost guilt-free to spend. The proliferation ofcredit cards and home equity loansmake it easy to satisfy the need forinstant gratification, which has becomea staple in our culture.
Younger physicians have an additionalburden—the growing faster-than-inflation cost of medical school.The average doctor coming out of residencynow has a six-figure debt. In thepast, whatever debt a doctor mighthave had at the start of their careerswas easily conquered. Satisfactoryincomes were virtually guaranteed,banks were happy to accommodatethese low-risk borrowers, and theusual prerequisites of starting a life (ie,starting a practice and buying a home)were quite feasible.
Sign of the Times
But times have changed. The financiallay of the land is radically differentfrom just a few decades back. The threatof malpractice and the restrictions inherentin managed care have practicallymade the term "rich doctor"an oxymoron.In addition, many doctors areopting for a more balanced lifestyle and,therefore, are dedicating fewer hours perweek to their medical practice than earliergenerations. Even years ago the tidewas beginning to turn; one of my preceptorsgave me the following advice:"Don't do what I did. I neglected myoutside life working 60-hour weeks."Tighter salaries and shorter hours alladd up to lower income potential andmore pressure to manage debt.
In this issue of we have gathered a range ofpersonal finance experts to help thetypical doctor confront the problem ofdebt. Debt management isn't exciting,but it will have a tremendous impacton your finances and, ultimately, onthe quality of your life. In the end, isn'timproving your life experience all thatmoney is good for?