Doctors are among the high-earning professionals. But, some face financial insecurities due to substantial academic debts and expensive professional expenses. Failure to cultivate good money habits as a physician can cost your mental health. So, what money habits should you adopt as a doctor?
This post covers 5 incredible money habits that doctors should adopt ASAP. They include:
- Take life and disability insurance for physicians
- Track your monthly spending and maintain a cash flow
- Avoid bad debts by paying cash for your expenses
- Automate your saving
- Investment in Stock
Good money habits do not happen effortlessly. They need discipline, knowledge, commitment, and time. Let’s dive in to learn how you can own these financial habits.
1. Take a Life and Disability Insurance for Physicians
Physicians have a high level of risk exposure. Unexpected injuries and illness may lead to death, disability, or long-term loss of income. And although there are various types of insurance covers you can take, we’ll look at life and disability insurance for physicians.
Life insurance offers protection for your loved ones when you die. You’ll pay more for your life insurance policy if you have many dependents. Which is worth it because you know your loved ones’ future is secure.
There are two types of life insurance policies:
- Term– It covers a predetermined period, and it is cheaper.
- Permanent– It covers your entire life and is more expensive than a term policy.
The best practice would be to take life policy when you are young. You will find affordable policies at low premiums because you are healthy.
Disability insurance, on the other hand, ensures you continue earning even when you are not working as a result of injuries or illness. The younger you are, the better this policy is, as it will cover even your future working years.
2. Track Your Monthly Spending and Maintain a Cash Flow
Do you account for every dollar you earn, or do you spend it however you want? Budgeting for finances is a discipline that you should have as a physician. Being in the bracket of high-income earners, impulse buying can lure you into spending beyond your earnings.
Also, you may miss out on important opportunities tomorrow because you spent your money on invaluable things. To avoid such a situation, account for every dollar you earn. Ensure it contributes towards your short-term and long-term goals.
A cash flow helps you track what is coming in and out of your account. Here is how you maintain your cash flow:
- Record all your earnings from salary and investments
- Gather all monthly expenses
- Deduct the total expenses from total earnings
- The result is a cash flow statement of your earnings and spending
Budgeting is a financial habit that will keep you accountable and guide you towards financial success.
3. Avoid Bad Debts by Paying Cash for Your Expenses
Did you know paying for your expenses in cash can lid you off debt? Cash purchases keep you connected with the actual cost of a product. You become more intentional and aware of your spending habit. You feel the pinch of ripping your wallet.
Most people get into bad debts through:
- Personal loan
- Credit card
- Automobile loans
These debts attract an interest rate, and you pay more than cash expenditure. You can reduce and avoid debts by creating a financial plan. And if you can’t pay for an item by check, you can’t afford it.
With a sound financial plan, you can save for an automobile you want to acquire in the future. Paying for it in cash, you attract a discount and save more.
4. Automate Your Savings
Saving has never been easy for many physicians because it comes last after apportioning for every need. And the needs are sometimes so many to have enough to spare. Automating your savings helps overcome this problem.
You should channel your savings into an account you have no access to. This makes you consistent in your saving and helps you cultivate a healthy financial habit. You can start with as little as 10% of your earnings and keep increasing the amount as your earnings increase.
5. Investment in Stocks
While clearing out of medical school is admirable, you may have so many debts to pay in the long run. Multiplying your earnings can make the debt-paying and life after school less daunting. A great way to increase your earnings is by investing your extra income in stocks.
But, you may need a stock market advisor to ensure your investment portfolio is intentional. Your portfolio should define:
- Why you are investing
- How much risk you’re willing to take to achieve your goals
- The time you need to achieve your goals
Building a solid financial habit takes time. Yet it pays handsomely in future. All you need is a clear financial goal and the right mental perspective. Start small and stay consistent. You’ll be surprised how intentional spending and accounting shapes your future.
I am a CFP® (Certified Financial Planner). I have a severe phobia of bridges and dirty balance sheets. Hobbies: blogging, meditation, and loving Bull Market (my dog).