Advice for Young Doctors Deep in Debt

February 8, 2011

What can young physicians do to manage the day-to-day costs of life, and overwhelming debt load, while focusing on launching their careers at the same time? Here's some advice to help manage the complex financial problems young doctors typically face.

In 2010, Coastal Research Group, a nonprofit medical education organization, did this eye-opening case study that broke down the finances of a young professional couple drowning in education debt. What can newly trained physicans do to manage this kind of overwhelming debt load, while focusing on launching their careers at the same time?

U.S. News & World Report published the following tips from Kimberly Palmer, senior editor and author of "Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back" to provide some advice to help manage the complex financial problems young doctors typically face:

Get on a budget. Don’t wait to start a budget; free online tools such as Mint.com and Bundle.com do the work for you. Ideally, Palmer writes, food, transportation, and housing should take up just half of your income.

Save, save, save. Aim at least one-quarter of your pre-tax income for retirement and other goals, Palmer says. Make a list of your long-term and short-term to give you the motivation. “Do you want to volunteer with a medical unit after a natural disaster in a developing country? Live and practice medicine overseas? Start up your own community center that focuses on preventive medicine?” Palmer says. “Write down a five-year plan.”

Target high-interest student-loan debt. Loans that carry a 5% or 6% rate or more will east away at any savings yield at today’s low rates. First, though, give yourself a financial cushion of at least three months of emergency savings before you start paying off high-interest debt, Palmer says.

For more of Palmer's money tips for young doctors, see U.S. News & World Report. You can read some responses to the case study mentioned above from medical school administrators here.

Readers of the Wall Street Journal responded to Palmer’s article with their own tips for young doctors in a post on the Journal’s Health Blog that offer a very clear-eyed view of the circumstances young doctors face early in their careers. Here are a few snippets:

“Loan-to-pay-off or no-loan-to-pay-off, it’s OK and a smart business decision to accept cash as payment for services rendered in primary care. By accepting cash as a primary form of payment, your office overhead and the price that you charge for your service is drastically reduced immediately, i.e. no billing services, awaiting third-party reimbursement, etc. Yes, it’s more like operating an old-school “country doctor” practice, but well worth the payoff in the long run.” -- Dr. Ken Romeo, The Alzheimer's Doc

“Work your ass off out of residency…Unfortunately don’t do charity work to start with, If you do want to volunteer do it as separate from your practice as possible. If you try to include Medicaid patients in your regular work you will get labeled and soon your entire practice will be filled with non-payers. Charity should be no more that 5-10 % of your patients, otherwise you will not be able to meet overhead. The trend of more doctors working for hospitals or large multispecialty groups is because they screen your patients. In private small practice setting its easy to say yes to needy patients, but if you do too much you’ll be out of business very quickly. The government has plenty of work for you, but remember there is no government pension.” — omg

"Here is a timely book that addresses these issues: and a corresponding blog by the author that addresses the deceptive income of physicians: Many premed and medical students, like the general public, have the preconceived notion that physicians are wealthy. After a careful analysis of educational debt, earning years deferred for training, number of hours worked, lack of pensions, and other factors, Dr. Ben Brown shows that physicians are not nearly as wealthy as many believe." -- DP

Veteran physicians, what advice do you have for young physicians to help them chart a course for a more secure financial future? We’d love to hear your thoughts and advice in the comments below.