As a physician, you put your time in during medical school and residency. Now, you work long hours doing demanding work. Fortunately, you are compensated well for it. Nonetheless, most doctors encounter unique financial challenges when it comes to increasing physician wealth.

With high student loan debt and potential credit card debt from medical school, many doctors enter their wage-earning years with substantial loans and bills. Paying off these debts can result in a late start in building physician wealth. Inviting investment opportunities, lavish lifestyle inflation, fearsome financial risks and more make managing money as a doctor feel daunting.

Maximizing proactive wealth strategies will set you up for greater success and better financial security. This article will discuss physician income and wealth trends, common challenges to building wealth, wealth-building strategies for physicians and financial mistakes to avoid.

Income and wealth trends for physicians

Generally, physician income correlates with the school you attended and your specialty. The highest-earning physicians often graduate from top-tier medical schools and typically do not work in primary care. According to a Stanford report, female physicians earn about 30% less than male counterparts.

Other factors impacting physician income and wealth include Medicare payments, physician shortage, debt, financial illiteracy and investment mistakes.

After adjusting for inflation, the American Medical Association reported that Medicare physician payment has declined 26% from 2001 to 2023.

Despite this grim statistic, the 2023 Medscape Physician and Wealth Report states that average physician compensation continues to rise. It was $299,000 in 2018 and $325,000 in 2023.

Medscape projects physician income will continue to increase because of the physician shortage. According to their findings, more physicians are burned out, retiring, cutting hours or changing their work, which will drive salary increases.

The medical professionals with the highest incomes are plastic surgeons, orthopedic doctors, gastroenterologists, urologists, cardiologists, ophthalmologists, radiologists and oncologists. The specialties with the lowest physician pay are family medicine and pediatrics.

Challenges to building wealth as a physician

While many professionals enter the workforce with student loans, the unique progression and expense of medical school can put doctors at an initial financial disadvantage.

The average student loan debt in the United States is around $30,000. But, medical school debt averages $202,000, according to Medscape.

Extended education, training and continuing education loans can feel overwhelming for doctors. When they begin earning a paycheck, their first inclination is to pay off those looming loans. However, focusing exclusively on paying off their student loans may cause physicians to get a late start on their retirement savings.

Physicians may have also accrued credit card debt in their medical school years. Credit card debt is one of the most expensive types of debt. With interest rates at 20% or more, carrying credit card debt can prevent anyone from building wealth.

Strategies to increase physician wealth

Developing financial literacy is one of the best financial strategies for physicians. Learn about these aspects of building wealth for physicians.

1. Budgeting and expense management

Though physicians make a lot of money, it is easy to get into trouble by overspending or living beyond one’s means. Operating without a budget may limit one’s ability to meet current and future financial goals.

Create a budget and stick to it. In your budget, focus on paying off credit card debt and student loans, saving for retirement and building an emergency fund. Also, plan to live below your means.

Identify other short- and long-term financial goals and factor them into your budget, too. If you need assistance building a budget, check out the Financial Counseling Association of America’s Debt Freedom Tool.

2. Investment strategies 

Choose a certified financial planner who focuses on long-term planning and building your net worth. Life insurance brokers are not financial advisors and may push you to purchase products you do not want or need.

Interview financial advisors to ensure their approach fits your financial situation and goals. In the interview, ask how they are compensated and how much they make to prevent any unpleasant surprises later on.

Save for retirement early. Maximizing contributions to tax-advantaged retirement plans is important to start early in your career and maintain throughout it. Beyond obtaining more money through employer matching programs, compounding interest will grow your investment over the long term.

Accounts like 401 (k), 403 (b), 457 (b) and IRAs each function differently. So, work with your advisor to determine which best suits your goals, what fees are involved and how they can provide financial security for physicians.

Grow your knowledge of personal finance by reading books, attending seminars and working with a financial advisor. This will enable you to make smart financial decisions.

3. Tax planning and optimization

Work with a qualified tax professional to identify ways to save on your taxes. Adjust your W-4 withholdings to find the right balance and not overpay the government.

Reduce your taxable income by maximizing your contributions to retirement accounts. Consider matching your employer’s contributions to your 401(k) or 403(b), then adding the maximum contribution to a Roth IRA or backdoor Roth. Then, return to your employer and maximize your work retirement account.

A tax professional can also advise you on asset allocation, whether you should pay estimated tax payments throughout the year and keep you up-to-date on tax laws.

4. Financial security through insurance

Protecting your wealth through insurance and risk management is wise. Experts recommend purchasing disability insurance early in your career when you are younger and healthier, which makes payment cheaper.

Life insurance is also a consideration, especially if you have a spouse or family. You would not want to leave them saddled with debt if anything were to happen.

Common financial mistakes physicians make

Avoid these common pitfalls in wealth management for physicians:

• Failing to make a budget or set financial goals
• Carrying debt that accrues interest and hinders wealth-building
• Neglecting to have an attorney and financial advisor review your employment contract before you sign
• Purchasing insufficient insurance coverage
• Delaying retirement savings for too long and being required to contribute more to catch up for lost compound interest
• Falling for investment scams or taking “free advice” from unlicensed advisors
• Splurging on lifestyle wants without considering the time and effort it will require to pay off before you retire
• Making real estate mistakes like overpaying on a mortgage, buying at a bad time, purchasing a high-maintenance property or overlooking good deals on homes

Reach your financial goals with TinkBird Healthcare Staffing

The medical industry today presents unique financial challenges in wealth management for physicians. While doctors are taught how to care for patients and work within healthcare systems, they often lack financial literacy and wealth strategies.

Build healthy financial habits to foster physician financial security and wealth-building opportunities. Good habits include making and living within a budget, setting short and long-term goals, creating an emergency fund, paying off high-interest debt and saving for retirement.

As you look for positions that meet your short and long-term goals, consider working with TinkBird Healthcare Staffing.

As a healthcare recruiting company, we focus on making quality matches, providing superior customer service and delivering a hassle-free medical staffing experience for both providers and facilities. We are happy to discuss your goals and how we can help you meet them.