The early lifecycle of a physician is rather caterpillar-like.
Out of thousands of butterfly-wannabes, very few undergraduate eggs actually hatch and make it to the medical student larval stage. Like caterpillars, med students voraciously consume basic medical knowledge. When they have stored up enough, they enter the residency pupal stage. This is where the major metamorphosis takes place to convert that basic knowledge into the more elegant form used in the broader world of medical practice. This largely happens in the protected environment of an academic hospital or clinic.
Emergence from years in the cocoon of residency to spread their wings and fly as a new attending physician is a huge transition.
It is a wide-open world for them to explore and find their way in. While this is incredibly exciting, early on their wings are kind of wrinkly. They need to beat those wings to dry them out. There can also be some new financial winds that buffet them more strongly than in the past. They need to learn to navigate those too.
The goal of this post and the next is to touch upon some of these factors at a high-level to build a checklist or framework for us to explore in more detail later on the blog. It will be a mishmash of advice ubiquitous from physician finance bloggers, my personal opinion, and pearls of wisdom from my mentors. Let’s start with some of the big behavioural, job-related, and lifestyle issues that new attendings face.
Becoming an attending physician (or any high-income profession) requires at least a decade of delayed gratification. The income per unit of work was low throughout that time. Hopefully, you were wise and lived within your means during your training. That typically translates to “no means” as a med student. As a resident, it means a 60-80K/yr gross income stained by significant debt overhang.
For those residents who have lived within their means, it is easy to have a moderate spend feel like a real celebration. I would suggest something financially reasonable without ongoing costs. Having some kind of celebration helps to uncoil the spring of delayed gratification in a controlled fashion. Perpetual delayed gratification could lead to an explosive release of that potential energy later on a big-ticket item.
As Crispy Doc puts it: Like the Amish, you need a Rumspringa!
#2 Don’t Radically Change Your Lifestyle Spending
“Continue to live like a resident for a few years” was advice given to me by my mentors. It is also probably the most common piece of advice from physician personal finance bloggers.
For some perspective, the income that you drew as a resident likely landed you in the 75th to 90th percentile compared to your peers.
So, continued lifestyle-spending at a resident level should not be a particular hardship.
If you live like an average person. Seventy-five to ninety percent of Canadians your age enjoy one of the highest qualities of life in the world at this income level. Yes, you worked long hours for that income and have a larger debt than most. However, you likely still don’t require more food, shelter, electricity, etc. than them. Your Netflix subscription costs the same and the Loonie Doctor blog is free for everyone. Further, as an attending physician – your income will likely explode off the top of this chart in short order.
The image of the life of a wealthy physician with a big house, smoking-hot car fever, luxury vacations, gourmet meals, and snazzy clothes may be alluring. Especially while eating leftover pizza at the nursing station in your green scrubs. It is possible to have those luxuries, if that is what floats your boat. You can even have a wake-boat. However, as a new attending, you are still not there yet.
I was going to call this next section “You’re Poorer Than You Think”. Apparently, there is some sort of orange bank trademark thing, but maybe they will let their newly acquired CMA asset use it. I’d love to see that one floated through a marketing focus-group.
You are likely in worse shape than just broke.
The median graduating medical student debt in 2018 was $100K with a wide range around that. Chances are that it did not shrink considerably during residency.
If you make large luxury purchases instead of paying down that debt, then you are effectively purchasing them with debt. You don’t really own them. You are renting them from the bank while also paying for their depreciation and upkeep.
Sadly, you are not wealthy yet. Happily, you can be very soon if you focus on debt repayment for a few years. With debt paid off, you will be upgraded to penniless. A readily treatable condition with the big money rolling in. However:
Earning more income does not increase your spending money as much as you think it does…
This is important to remember because you will see large cheques come in. It seriously feels like winning the lottery. Every month. However, what you see is not what you get.
As a self-employed person, income tax is not automatically deducted at source like when you were an employee. However, you will still need to pay it! You’re not as rich as you think, but the government thanks you for your generosity. The “big tax surprise” can catch people with their first tax filing when they find that they owe tens of thousands of dollars. Moving forward, you will get pleasant reminders to make quarterly installments.
The other reason for the “tax surprise” is that you are likely used to operating in the “middle-class income” zone. There is a rapid and sharp blunting of your take-home pay as you move out of it. While we all conceptually understand that, the real numbers can startle people when encountered for the first time.
#3 Get A Job(s). I know that sounds trite, but hear me out.
Some fortunate residents will graduate straight into a job. Those who do were either building their academic careers during residency/fellowships/clinical scholarships to land an academic job. Others were doing some locum work on their weeks off to build connections and take their potential jobs in the community for test drives. Some are just plain lucky. Many in the current job climate, do not have a permanent job straight out of residency.
You do need some kind of job to make money, build your skills, and forge connections for when an opening becomes available.
Working as an attending is also the only way that you will discover what parts of different practices you like and what you do not. Residency gives a taste, but it is different when you are where the final responsibility for patients lies. Being on-call, post-call, “turfing consults”, charting adequately, following up patients, and paying attention to the financial structure of a practice are all very different. As an attending, you are usually not a salaried employee and there isn’t a supervisor for you to pass things on to.
There are many factors that go into the decision of where to set up a longer-term practice.
These include proximity to family/friends, community size/amenities, practice type/opportunities, the local medical community, and where there is demand for your services. You may have given it great thought and been very methodical like this Canadian resident considering where to start practice.
It is common to find that the realities and relative weights of those factors are very different once you start living them.
Whether you have a “permanent” position or are doing locums, you will likely be practicing differently in five years. Life may throw you a number of curveballs like happened to this doc. You may even ultimately decide to live in an area or pursue an aspect of medicine that you have yet to discover.
#4 Make Hay While The Sun Is Shining
This tidbit was given to me by a number of my older mentors when I started. Like a crop that is dependent on weather and seasons for optimal harvesting, the physician career has parts where it is more optimal to work hard to make money than others.
The supply and demand for any medical specialty waxes and wanes.
There are periods of plentiful well-paying work and periods of famine. Take full advantage of any job opportunities because they usually don’t last forever.
You are physically able to tolerate longer work hours and lack of sleep better when you are younger.
A more youthful and immortal me didn’t believe all this talk about having to slow down with age. I thought that if you just ate well and stayed active you would be untouched by time. Until I got older. Physical fitness helps, but it does not halt the biological clock. Yes, you likely become more efficient with experience. However, that advantage wanes when you are fatigued.
Most young doctors are accustomed to “working like a machine” when coming straight out of a busy residency. This early attending time period is also key to solidify your clinical skills. You don’t gain that experience without putting in the hours. Psychologically, it is also easier for to maintain a workload than to ramp back up to it after a lull.
The hard work at unsociable hours usually pays a premium.
It is also often the work that older attendings are looking to offload. They have more money than stamina and you have more stamina than money. A good match. Don’t get your nose out of joint that you are doing the “harder work” if you are getting paid well to do so.
In medicine, we generally strive to be egalitarian. In reality, there is often still the concept of starting in the mailroom rather than the C-suite in some physician groups. You won’t come into a group like that as the newcomer and successfully blow that up. The opportunity for that is when you have established yourself within the practice.
Do make sure that you are getting fairly paid though. The word Karma comes to mind for both sides of what should be a symbiotic relationship. When you are young, take the money and be happy. When you are that older attending, give up the income and be happy.
What about work-life balance?
Work-life balance has been heavily emphasized in recent years. Indeed, without paying attention to this, medicine can consume lives and burn people out. Working like a machine is not sustainable long-term. However, it is for a few years when you are best able. You will ironically note that most of the physician finance bloggers who currently promote how financial independence has given them the ability to work part-time, balance, etc. have a checkered work-life balance past.
When you read into their backstories, most worked liked beasts for a while. If possible, they moonlighted while in training. As young attendings, they picked up as many extra shifts as possible, locumed, and rarely took time off. Those who did not, poured huge amounts of energy into developing “passive” side gigs.
Work-life balance is important, but it is not static. It changes at different periods in our lives and careers. In addition to the job market and physicial/mental work capacity factors mentioned above. Personal factors like having children, a personal health issue, or caring for a sick relative can weigh in. These can be unexpected and the right balance will look different for everyone. Be sure to take the time to adjust accordingly. Sometimes that is working extra when the sun is shining, and at others it is scaling back when the weather turns.
#5 Don’t Feel The Need To Buy A House Right Away
If you don’t know for certain that you will stay in a community for a long period of time, it does not make sense to buy a house.
As I suggested above, you really don’t know that you will take root until you have been in practice a while. Even after practicing in a community for a while, you may discover that one area of town suits you more than another.
There are transaction costs like realtor fees, lawyer fees, and land transfer taxes each time a property changes hands. Those one-time expenses are diluted by owning over time. However, you won’t make them up if you are moving and incurring them frequently.
If you want or need to move and have difficulty selling your house, then you may face the decision of reducing price versus the ongoing costs and pain in the butt of maintaining a house you don’t live in.
While this is common financial advice, it is also very difficult for many young docs to follow.
It is not a purely financial decision. It is a decision steeped in emotion and strong opinions. There is pent-up delayed gratification. You see your friends with shorter-training period careers owning houses. They brag about how much home equity they have. The raging hormones of reproduction and nesting instincts can be huge. Your parents or in-laws may even bring pressure to bear. There is huge intrinsic and extrinsic pressure around the decision to buy a house.
It is also not a straightforward financial decision. Personal real estate is an asset class. Like stock markets, the overall trend for real estate over long periods is up, but there are dips along the way. If you buy a house for a short period because you think that you are certain to turn a profit, then you are making a speculative investment.
You pay for housing and you invest to grow your money. They do not need to both be in one basket.
From a pure investment standpoint, it can make more sense to rent housing and invest the extra capital in financial assets rather than to own a house. This depends on the rental vs homeownership costs in your area, timeline, and your expected asset appreciation. Consider an objective measure like the price:rent ratio for your city in addition to all of the non-financial considerations. There is also a more detailed buy vs rent calculator that will compare your wealth over time using different purchase, rental, and investment parameters.
Spending your time rather than your money as an early career physician is like leverage for more money/time later. When you need it most.
Our financial lives and lifestyle choices are closely intertwined. Spending our time and money wisely is a tricky balance between the present and the future. The realities of our professional lifecycle lend us towards spending more time than money as a young physician. Making some good choices early on will help a young attending to have more and better options later.
Wall Street Physician describes this concept well as completing a “financial fellowship”. Spending an extra 2-3 years to train as a specialist can result in a higher income and greater earnings over a career. Similarly, spending and working hard like a resident (except earning attending income for it) for 2-3 years can result in being debt-free and having a large nest egg to compound over the years. A physician who did not do that financial fellowship early on would take 5 years of earning double the income to catch up. Such is the power of an early start. In Canada, it would be even longer due to the bigger tax bite on earning double.
In this post, I have described some of the biggest early attending lifestyle decisions to make while “drying off your wings” or completing a “financial fellowship”. In my next post, I will cover some of the top personal financial items to pay attention to as a new attending to make your flight successful.
Such wise advice! I hope your readers take it to heart. Thanks for including me with some of my favorite doc bloggers!
Thanks! I enjoy your blog and really lots of great ideas for new attendings there. I particularly liked your Crossing the Streams post. That strategy really helped me early in my career.
Docs just have to stop actively doing things to hurt themselves financially. And it is mostly self created.
We all earn a healthy income from residency onwards. And always look at your income and cut it in half.
Realize that you will likely never be able to spend like wealthy business tycoons without harming oneself. And I agree, work like HECK early on. You worked like heck for others during your residency. Once you get to earn it for yourself- just go nuts. Good for your pocket book and increases clinical acumen rapidly.
Your human capital is most potent at this time. Trust us, it depletes.
Hey Dr MB. Nothing beats clinical experience to become better at clinically. I have learned many lessons the hard way and it is good to test your limits to discover them while you are young and heal from the mishaps better. This applies outside of finance too. I am nursing bruised ribs (again) from sparring with teenagers at karate – I am a slow learner apparently…
Humor and content, you are the total package, LD!
I would suggest exploring the different work options within your field as there can be big differences in income in the same speciality. Also marrying another doc would be good for the 2 incomes!
Thanks BC Doc!
Checking out different gigs within a specialty is a great tip. Not only for the income, but the variety. Sometimes you can even find some synergistic ones.
A double doc family does have an income advantage, but also has some increased costs to maintain the homefront while supporting two careers. It is probably a bigger advantage now that income splitting to a non-physician spouse is more limited. Too late for me either way – I could never convince my wife to go into medicine 😉
Front loading the pain (and profit) is exceptional advice. No Black Stallion ever expects their pace to slow to a My Pretty Pony, but it happens to the best of us, and you will one day answer to Starshine.
Thanks for the brilliant advice and generous shout out, my friend.
Thanks Crispy Doc (aka Profound Warlock). I loved your Rumspringa post. One of many that gave me some great chuckles along with the insights.
-LD (aka “Fearless Overlord”)
Love this post LoonieDoc!
The butterfly lifecycle analogy is perfect. I unfortunately did not have any of this advice when it would have mattered most and made a ton of mistakes along the way (made so many that I got to create 5 lengthy posts on my blog from them aptly titled “I Made Every Mistake in the Book“). I guess I was more of a moth than a butterfly.
But fortunately being in a very high paying specialty (radiology) allowed me to quickly right the ship and actually turn into a Monarch after I saw the light at age 40. Now at 47 I’m well on my way (if not already there) to financial independence and consider retiring early which would have been unheard of if I had continued my previous course.
Thanks Xrayvsn. I can honestly that I have also made mistakes in pretty much every area of personal finance or investing. The key is to recognize them, adjust course, and learn from them. Helping others to learn from your mistakes and avoid them is even better!
Great advice for the newly minted physician!
Agree that if your goal is to reach FI or some level of financial security, then you need to work hard as a new attending to pay off student debt and build up your portfolio. There is no free lunch. Combine that with living like a resident (aka “average” middle-class family) and acquiring a basic level of personal finance/investment knowledge, and you will be set.
As you have alluded to, finding a good mentor would be ideal to help you start off on the right track. But finding a good mentor in real life can be challenging. Depending on your specialty and your immediate colleagues, there can be peer pressure to purchase that big house, luxury car etc…. It would be wise to avoid listening to financial advice from these “Dr. South” docs.
With your site and Paul Healey’s FB group, it’s now a heck of a lot easier for the new Canadian physician to find unbiased, solid financial advice, compared to just a year ago. A bit of “self-directed learning” is needed, but the information is now laid out on a silver platter for them to consume!
Thanks DN! Still working on food for the platter. Hopefully better than my real-life cooking 😉
I wanted to let you know I put this feed on my daily curator I call The Hospital on my blog. All told I currently have 66 physician financial blogs that are in it with the latest post from each blog.
Check of out if you havent already
Hope you can spread it around your social network so it can gain popularity but for me it is an amazingly easy way to keep up with the latest post from pretty much every physician blogger I know.
Thanks Xrayvsn. I think your “Hospital” feed page is really a brilliant idea. I put it in my blogroll page so it will be easy to find won’t get buried in the comments. Honestly, wish I had thought of the idea myself ages ago! Nice one!