Achieving Financial Independence in Medicine: The Ultimate Guide

When this article was published, early in 2024, writing and reading about physician financial independence had become mainstream. Numerous websites, blogs, books, and podcasts are already dedicated to physician personal finance. The vast majority of information is relatively the same. Work hard, save, avoid debt, invest, and live well. This is all true. However, as we enter the new year, I wanted to continue a series I started a few months ago that revisit periodically: The Ultimate Guide series.

The Ultimate Guide series seeks to tackle big concepts and dilute them into one digestible article. Now, these will only delve into some of the nuances, but the hope is that the passing reader can learn much in a relatively brief article. If I have more to say on the issue, I will link to another helpful article.  

For our second Ultimate Guide article, let’s discuss how any physician can reach financial independence with enough grit and intelligence. Given that this article is directed toward the healthcare professional community, I know you are smart enough, but do you have the grit?  Here is Achieving Financial Independence in Medicine: The Ultimate Guide!

Disclaimer: Physician Finance = Personal Finance

A quick disclaimer. I write a lot about physician finance. I have quite a passion for it. However, I must constantly remind myself that, overwhelmingly, physician finance is just personal finance. The overwhelming majority of good physician finance is solid financial advice to the rest of the working world. Only a tiny portion of a physician’s finances differs from other professions. This usually involves our duration of training, our cost of education, and our high incomes; however, for pharmacists, dentists, veterinarians, mid-level providers, etc., all of this also applies to you. Onward.

Achieving Financial Independence in Medicine: The Ultimate Guide

Navigating Medical School Finances

For the first section, let’s talk about things future physicians can do that will drastically ease their future financial burden. The following tips regard optimizing your finances during your medical education to position yourself better as you enter your post-graduate training.  

Attend a Low Cost-of-Living Medical School

When applying to medical school, I recommend attending the school that provides the biggest bang for your buck. However, this may not mean what you think it does. There can be unnecessary pressure to attend an Ivy League school for your education. These will commonly be some of the most expensive and mainly out of-state. Fight this temptation. Aside from a few bad apples, no matter where you attend medical school, M.D. or D.O., you will walk away with an appropriate education. Further, if you apply yourself and perform well throughout your education, you will still have many similar options regarding specialty prospects and The Match. Save yourself the money and attend an in-state program if available.

Borrow as Little as Possible

Next, borrow as little as necessary. This is challenging and requires preliminary financial understanding and budgeting. However, determine your essential expenses (housing, utilities, groceries, gasoline, etc.) and add these to your cost of tuition and work to borrow little over this. When building your budget to estimate your expenses, work to see where you can save money. Remember that every penny you borrow will suffer the miracles of compounding interest. 

Consider Having the Military Pay for Your Education

Are you looking to avoid educational debt? Why not have the military pay for your training? This path is likely not for everyone, but the various branches of the United States Military offer some pretty enticing incentives to let them pay for your schooling. These incentives commonly include paying for your entire tuition, a monthly cost of living stipend, and a signing bonus. Remember that following your medical education, you generally have to attend a military residency, or, should you choose to pursue a civilian residency, you will still have to owe the respective branch of military service time.

For example, if you attend a four-year education paid for by the U.S. Army, you will serve in the U.S. Army, following residency, for at least four years as a military physician. However, once you complete your service time, you walk away with a lot of experience and a debt-free education. Not a bad deal.   

If Undecided Between Two Specialties, Choose the One That Pays More

Here is a simple concept that medical students often need to consider. If you are approaching the end of your clinical years and are still struggling to decide between two specialties, please choose the one that offers higher compensation. This is somewhat overly simplistic. What I mean is, if you are undecided on the specialist you wish to be, and work-life balance, happiness, fulfillment, intrigue, and longevity all seem to be equal in your eyes… please choose the specialty associated with higher pay. Not sure how to best gauge expected specialty compensation? Check out the most recent Medscape Physician Compensation Report.  

Start to Cultivate Healthy Financial Habits Now

Medical school can be one of the best times to begin your financial education. Look, to date, I have yet to learn of a single medical school that has a linear financial curriculum. If I am wrong, please leave a comment below. For now, I have yet to find one. As such, you will soon graduate from medical school, begin to make money, and (hopefully) transition away from the borrowing phase of your education. 

While in medical school, take some time to pick up a non-clinical book or two sincerely. I have five financial books that I recommend. Every medical student should work their way through this list throughout their education. Even reading this handful of literature will place you leaps and bounds ahead of your peers as you transition into residency. Get ahead of the financial learning curve now.  

Navigating Residency Finances

Ah, the moment is here. You are now an altruistic and eager young physician with a ‘Dr.’ in front of your name and a pager strapped to your hip. You feel ready to take on the world. Good. You will need that kind of attitude to survive the next few years (depending on your specialty). On top of that, you will need to find the time between the night call and the weekend coverage to get your financial affairs in order. The sooner you do, the better off you will be as you near training completion and begin to make real ‘doctor money.’

Guard Against Financial Disaster

You will (likely) never be as healthy or as young as you are in residency. This is the best time to begin to put in place mechanisms to protect your future earnings and the financially unexpected. First, as able, work to build an emergency fund housing at least three months’ living expenses. It’s easier said than done on a resident’s salary, but you should at least try nonetheless. Start with a goal of one month’s living expenses and build from there.  

Second, get own-occupation disability insurance and term life insurance now. These commonly come with required physician’s visits as well as a myriad of drug tests and blood work to make sure you are as healthy as you claim. Complete all of this again, while time is still on your side. Your future self will thank you. If you are looking for reputable agents for physician disability and life insurance, I have excellent sources for you. Check out our pages on recommended disability insurance agents and life insurance agents. 

Attend a Low Cost-of-Living Residency

Akin to attending an in-state medical school, the same rules apply for residency. When you make your rank list for the match, you should seriously consider the cost of living. If you are choosing between two great residencies, and one is located in a somewhat rural area with a low cost-of-living (COL) and another in a metropolitan area with a higher COL, please save the money and choose rural. Again, this is not a blanket statement, but overwhelmingly, you will get a similar education unless you strive to be primarily research or in a nuanced sub-subspecialty.  

Live Below Your Means

This rule is just as applicable in residency as it will be for the remainder of your life. Fortune favors those who know how to handle it. Live below your means while in training. This may not be too difficult as you will be working or sleeping. This is only a partial jest. Avoid eating out with too much regularity, but enough to keep spirits up. Shop smart, meal prep, and do not live like you are already an attending. Residents should only drive a new sports car if they had a successful career before medicine or receive economic outpatient support.  

If Pursuing PSLF, Start Payments Immediately

Residency is where you should seriously have a firm grasp on how you best plan to handle your education debt. If you choose to pursue Public Service Loan Forgiveness (PSLF), make sure you are applying to qualifying residencies. Spoiler: almost all training programs do. Also, ensure you are enrolled in a qualifying repayment plan at the start of residency. Qualifying repayment plans include:

• Income-driven repayment (IDR) plan
• Pay As You Earn (PAYE) plan
• Income-Based Repayment (IBR) plan
• Income-Contingent Repayment (ICR) plan
• Saving on a Valuable Education (SAVE) plan

You can find more on which repayment plans qualify for certified payments at Studentaid.gov.  

Decide If Fellowship is Right For You

It is vital to decide early on if pursuing a fellowship is right for you and financially worth it. Fellowship can correlate with high earnings but often means you are extending residency earnings for 1-3 years (or more). For some, pursuing a subspecialty is how they find true happiness in their professional career. If you can only see yourself doing this one subspecialty, then by all means, go for it. However, unless it substantially increases your earning potential, sometimes the pinch isn’t worth the squeeze. If you struggle to decide if a medical or surgical fellowship is worth it financially… then it probably isn’t.

Navigating Early Career Finances

Whew, thanks for sticking with it. This article, much like formal medical education, is lengthy but content-packed. After completing your residency, you will ultimately sign a contract and begin to reach your real income potential. Your checking account will swell, and the age-old adage ‘more money, more problems’ will start to have all new meaning. Early careers are a time of excitement, challenge, anxiety, and learning. All of this rings true for your finances, too.  

By now, hopefully, you have built an appropriately sized emergency fund, have your own occupation disability and term life insurance, a debt repayment plan, and a well-written financial plan to guide you as you periodically steer off course. Now, let’s talk about financial practices that you should make a habit of as you begin to receive a healthy paycheck.  

Again, Choose a Low Cost-of-Living Area

Do I sound like a broken record yet? Work to find a job in an area with a lower cost of living. Depending on your specialty or subspecialty, this may be challenging. Still, for most internists, family practitioners, general surgeons, emergency medicine physicians, radiologists, anesthesiologists, etc., you will be needed everywhere, so choose wisely. Shop around Unless you have family pulling you to a specific location. As you travel to interviews, ask about the region and the cost of housing for renting and buying. This can save you thousands annually, which adds up throughout a healthy career.  

Live Like a Resident For At Least Five Years

You knew it was coming. Look, most cannot avoid this period. It may only be two years for some motivated individuals, possibly longer for others. How long you need to live substantially below your means will be a product of how much debt you owe, how you plan to pay that debt off (i.e., PSLF v. refinancing), and how quickly you wish to achieve financial independence.  

However, I will add that I think it is good practice to avoid changing your lifestyle for just a few years after you complete training. This will teach you to save, invest, prioritize your earnings to what matters, and avoid rushing into larger purchases (cars and homes, to be exact).  

Execute Your Debt Elimination Plan

Now is also the time to ensure you are executing your debt-elimination plan. This is also why I advocate for continuing financial education while in residency. Hopefully, by now, you have a firm grasp of how PSLF works and what reimbursement plans qualify. I would also recommend contacting your lender periodically to ensure everything is still appropriate.  

Hypothetically, if you chose to refinance your student loans instead of pursuing PSLF, then now is the time to make substantial payments towards its elimination. If you are in the ‘live like a resident’ period, this is why… so you can funnel excess income towards your debt.  

Max Out Retirement Contributions

Some argue that this section should be preceded by a section about ‘getting the employer match.’ I chose not to do this because I can kill two birds with one stone by recommending you max out your retirement contribution. If you are an employed physician, which statistically, most reading this will be, simply by maxing out your retirement contributions you will also satisfy the contribution needed to receive your employer match. Unclear what are the contribution limits for your retirement plan? Just follow the link here to see retirement contribution limits for 2024.  

Save For Children’s Education

If you plan to start a family, it is never too early to begin saving for their education. Children are expensive enough, but few investments are more important than their education. Many states offer various educational savings funds (i.e., 529s). As you start your early career and work to most efficiently save your hard-earned money, another smart way to save is using a 529 to house your future children’s educational expenses.  

Avoid Lifestyle Creep

This one is a ‘life hack’ for anyone looking to control their finances better. ‘Keeping up with the Joneses’ can place a physician or family on track to live paycheck to paycheck. Far too often, physicians feel a cultural pressure to live up to society’s expectations. Aren’t you a rich doctor? Little does the lay community understand the colossal debt many physicians carry. Do yourself a favor and work to keep your lifestyle ‘as is’ as your paycheck grows. This will not only allow you to invest and save more money, but it will also keep you in touch with reality.

Once you make a real physician’s salary, you will be in the upper 5-10% of incomes nationwide, much less the world. Remember that as you feel compelled to own a larger home or a nicer car. It is all relative.    

Diversify Your Investments

Now that you have made it this far, one of the best things you can do to expedite financial independence is to ensure your money is working for you, even while you sleep. How does one do this? Simply by making sure they invest wisely. Do not overthink it. Overwhelmingly, the physician finance community has it correct. A busy physician does not need to waste time micromanaging their investments. You should overwhelmingly be invested in U.S. stocks, U.S. bonds, and international stocks. 

Early in your career, it would be recommended to have a slightly more aggressive portfolio targeting a higher percentage of growth stocks and a lower portion of bonds and international stocks. However, this will be primarily influenced by your risk aversion and comfort in the market. Remember, though, time in the market is always better than timing the market.  

As you make investment contributions automatic and rid yourself of debt, consider other forms of investments including real estate. Many physicians have reduced their clinical burden and diversified their incomes through real estate investing. If you want to learn more, check out our article titled How Real Estate Investing Can Accelerate Physician FIRE Now.

Adjust Your Savings Rate

You are on the home stretch, my friend! By now, you have navigated medical school, the trials of residency, and perhaps fellowship, and entered your early career financially prepared to manage your money wisely. As you crest the mountaintop and look out towards the next peak you wish to conquer, all that awaits is financial independence. Now, you only need to look internally to determine how you feel about your career and how long you plan to practice medicine in any capacity. If you wish to pursue a long and prosperous career, you only need to save roughly 20% of your income and invest it wisely. 

For those looking to achieve financial independence as fast as possible, you may need to adjust your savings rate dramatically. This may mean living substantially below your means for a decade to save 50% of your income or more. However, if you execute what I have outlined above and save what remains, you will surely reach financial independence in medicine.  

Take Home Points

The road toward personal financial success only requires patience and determination. Everything I have discussed here is relatively straightforward. It does not take a physician’s level of intelligence to know you can only spend what you make and that saving and investing are good things. There are some nuances, but overwhelmingly, this is simple stuff. 

Where so many healthcare professionals in medicine fail is when their emotions get the best of their finances. Our delayed gratification makes many in our profession feel they deserve that new sports car or McMansion on the Hill. Our kids deserve to go to private school. These approaches are not inherently wrong, but they will drastically hinder one’s ability to reach financial independence with any brevity. 

Recognize that all of us will interact with these emotions from time to time. Still, if you have a solid financial plan in place and determination, then you will indeed navigate around these obstacles and come out financially free! As always…

Stay motivated!

The Motivated M.D.

I hope you enjoyed this article Achieving Financial Independence in Medicine: The Ultimate Guide! If you did, please share it with others using the ‘share’ buttons located on the left-hand sidebar (on desktop) or below this article. It would also be very helpful if you would follow us on social media! Instagram and X (Twitter) accounts can be found using the right-handed sidebar (on desktop) or below (on mobile devices). Thank you!

Do you find tips on this list helpful? Anything you would have included? In the comments below, let us know about Achieving Financial Independence in Medicine: The Ultimate Guide! We love to hear from you.

Standard Disclaimer: None of the information on this website is meant as individualized financial or medical advice. These posts may contain affiliate links.