Thursday, May 04, 2023

by Andrew Harms and Miriam Sweeney

For the average U.S. household, everyday living is getting pricey. Childcare, food, energy, transportation, and housing costs are all rising. Among U.S. physicians and healthcare professionals, personal financial matters may make things tougher given high educational debt-loads, capped income levels during residency years, and unique insurance needs.

Furthermore, job-related stressors emanating from clinical and patient-care priorities, administrative duties, continuing education, licensing requirements, and professional responsibilities leave little time for prudent, active personal financial management. 

Self-reported depression and burnout rates are high. In fact, in recent years more than 4 in 10 U.S. physicians report feeling burned out.^[1] When asked to rate factors that contribute to depression, results from Medscape’s annual National Physician Lifestyle Report indicate personal finances ranked second to job/workplace as a contributing factor.^[2] 

When asked what would reduce their burnout, the number one response from physicians (roughly a third) indicated the best way to combat burnout would be increased financial compensation. We want to be paid more. In fact, more money was a more common response than a more manageable schedule. 

The circumstances facing a physician's personal finances present a unique challenge to most in medicine, regardless of specialty. A predominant factor to financial troubles for physicians includes the high cost of education required to become a physician. 

According to the AMA, one in four medical students graduates with training-related debt that exceeds $200,000, and half of medical school graduates report debt burdens greater than $150,000. Those financial burdens are combined with a demanding schedule during graduate medical education and can affect well-being for physician residents and fellows. “Between financial restraints and 80-hour workweeks, trainees often struggle with having the time and budget for necessities. When residency and fellowship programs provide benefits to assist with these needs, it can significantly improve trainee well-being,” said AMA Trustee Jesse Ehrenfeld, MD, MPH.^[3] 

Compounding the difficulties, we recognize that the time and attention required to study medicine, biological sciences, and patient care during training to become a physician leaves little room to acquire a solid education in personal financial management.
 

Prioritizing personal financial literacy for early-career physicians 

Many physicians have access to financial resources early on in their career, but that doesn’t mean they’re confident about their financial situation. At the medical school level, some hopeful trends have emerged to address the rising educational debt levels burdening many graduates.

At a handful of US medical schools, financial aid offices have transitioned to financial wellness offices—aiming to better help students with personal financial understanding, housing and living expense considerations, etc.—moving beyond simply providing tuition financing guidance in order to provide holistic financial support and literacy. A great example of this is witnessed at the University of Arkansas for Medical Sciences, where Jason Mizell, M.D., and UAMS faculty have facilitated a popular ‘Business of Medicine’ course since 2012, taught to residents and fourth-year medical students.^[4] This course serves to teach early-stage physicians both practice management finance (coding, billing, malpractice, etc.) and, very importantly, personal finance. 

Another excellent example of an offering available to medical students is provided by the University of Wisconsin School of Medicine and Public Health. When medical student Rufus Sweeney struck up conversations with his peers some years ago about their personal finances, he was shocked by how few understood their student debt or even knew about options to pay it off. With a grant from the Wisconsin Medical Society, Rufus joined with Emma Crawford, UW SMPH Director of Financial Wellness and Financial Aid Advising, to develop UW-Madison SMPH’s first ever course focused on physician personal finance. This course continues and remains the most popular elective credit offering at the medical school. 

While such personal finance educational initiatives exemplified by UAMS and UW-Madison go a long way to improving financial literacy for young physicians, the trend to educate and empower physicians in the way of personal finances should be prioritized in order to meet cost of living challenges and resultant burnout rates. An introduction to personal finance is a great offering at the medical school level, and—if followed on with subsequent support at each next stage of a physician's career—would provide a proper runway to financial health and wellness. 

At the residency level, new expenditure considerations often outweigh the long-awaited first paycheck. Many times, newly minted residents find themselves unprepared to manage a tight budget. A resident may sometimes find financial resources made available as a new employee helpful—though the quality and availability of personal financial support is disparate and often inadequate. While the financial picture of a resident includes income, the AMA clearly points out the following: “It takes years to realize your earning potential. As a physician, you will not maximize your earnings until the completion of your graduate medical education. The average first-year resident makes around $60,000, (2018 report) and there’s not much wiggle room. Resident salaries are determined by an institution and correlate with training year rather than specialty. So, in a given training institution, all residents who are in their third year of training get the same salary, and all in their sixth year are paid the same.”^[5] 

Given the ceiling on income, how many physicians at the resident level have developed the experience and skills to single handedly manage the new challenges to their budget which may stem from debt-repayment, insurance needs, retirement saving, and other important considerations? 

Factoring in time constraints and the reasonable desire for a personal life, very few residents have the time to dedicate to getting a handle on personal finances. A host of negative consequences may arise if physicians make financial mistakes at these early stages.

Where to start? Where to turn for help? Start simply. 

Financial health should be treated in a similar way to attending to physical and mental health. When viewed from this perspective, the training of physicians gives this occupational group an advantage when tackling personal finances. 

Let’s outline some simple steps early-career physicians can take to prepare for a healthier financial future: 

• Become familiar with your financial vital signs

While carving out time from a busy schedule may seem impossible, scheduling a bit of time to learn some basics about your individual circumstances is essential. Dedicate some time—think about this as you would think about making an appointment with a doctor. Put it on your calendar. 

Begin with some basic information gathering: Identify all sources of household income (review your paychecks, line by line); identify your fixed monthly expenses (housing payments, childcare costs, set-aside contributions for savings, etc.), as well as your variable monthly expenses (utilities, subscription services, transportation costs, etc.). As in most things in life, the best first step is figuring out where you are.

• Construct a monthly budget

You may think of this step as you would a treatment regimen. Crafting a monthly financial plan that identifies each incoming dollar and prudently purposes each outgoing dollar will provide a way forward and likely reduce the mental burden of financial unknowns. There are many good budgeting templates and guides. Like finding a good primary care physician, find yourself a budget that you like and works well for you. And like any treatment regimen, stick to your budget in order to achieve good health.

• Know your debt repayment options

For the majority of physicians, this step is vital to understand and implement. One resource worth checking out is provided by Doctored Money^[6], a non-profit serving physicians that has wonderful debt repayment tools and calculators.

• Identify support and establish communication

Assess your surroundings to locate trustworthy financial resources and fiduciary support, if needed. In many cases, the institution with which you are affiliated may have personal financial resources offered. Take advantage of these opportunities when available, if nothing else than to better educate yourself. Once you’ve built a network of professionals with whom you can confide, communicate to them as you would with your PCP, remembering that your goal is to limit risks and improve your overall health.

• Conduct routine financial check-ups

Living within a smartly formulated monthly budget is a winning health strategy, and combined with periodic (quarterly, semi-annual, annual) reviews of your financial vitals will increase your ability to achieve your financial goals. Schedule these reviews on your calendar well in advance, and approach them as you would a visit to any healthcare specialist. Satisfied debts, cost of living adjustments, salary increases, unexpected expenses, changes in the investable landscape, and other life events will prompt adjustments to your monthly budget. Regular check-ups will help you recognize and appropriately transition your personal finances. Utilize your network of resources and professional support on a regularly scheduled basis. 

We’ve been talking a lot about early-career physician groups, but our suggestions are applicable to most, if not all, readers. 

Address your financial needs with consistency, and in spite of uncertainties facing the cost of goods and households, we’ll make the U.S. healthcare system a secure, confident foundation for personal and community growth.

^[1] Medscape National Physician Burnout & Suicide Report 2020: The Generational Divide

^[2] Medscape National Physician Burnout & Depression Report 2018

^[3] https://www.ama-assn.org/residents-students/resident-student-health/resident-physicians-should-get-help-shoulder-financial

^[4] Business of Medicine Course Preps Med Students for Real World | UAMS News

^[5] 6 things medical students should know about physician compensation | American Medical Association (ama-assn.org)

^[6] Doctored Money