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Doctors and debt: the good, the bad and the ugly

Many doctors have an enduring love-hate relationship with debt. You may start of as a recently graduated intern with a mountain of student debt. Whilst you are paying this off, you may also get a car loan and then a mortgage. Next on your list is an investment property, for which you borrow close to 100% as well.

And it is not uncommon for more senior doctors to have home mortgages totalling multiple millions of dollars…

It is not hard to see how debt can start to rule a doctor’s life, and how it can start to affect your quality of life and stress levels.

Because debt is an ongoing issue in many doctors’ lives, let’s look at some debt-related behaviour and strategies.

The Good

When used in a controlled and considered way, debt can be a tremendous tool in the creation of wealth, as it allows you to ‘leverage’ your financial resources.

‘Good debt’ refers to a situation where you use borrowed funds to acquire an asset that should increase in value, such as a house for example. Some people narrow this definition down even further, and only consider debt to be ‘good’ when you can claim a tax deduction for the interest cost on the loan. This would be the case where you take out a loan to buy an investment property or a share portfolio for example. Under this stricter definition, borrowing money to buy your own home would therefore qualify as ‘bad debt’.

Some examples of where debt can be ‘good’:

– Investing in property, shares or managed funds via an investment loan, having sought financial and tax advice; – Buying your own medical rooms (potentially through superannuation); – Your home mortgage, provided you can pay it off in 10 years or less.

The Bad

‘Bad debt’ on the other hand, refers to the purchase of consumer goods on credit, for example cars, furniture, or even holidays. This type of debt is mostly incurred through credit cards or personal loans and may have a very high cost (i.e. interest rate). Bad debt does not offer the benefit of a tax deduction, and as such the real opportunity cost of the interest rate needs to take into account your marginal tax rate; the higher your marginal tax rate, the higher the real cost to you.

Some examples of bad debt:

– Your home mortgage, where it takes you more than 10 years to pay off; – Car loans, as you are borrowing for a depreciating asset (note: there may be some tax benefits if the car is predominantly used for work/business purposes).

The Ugly

Debt can also spiral out of control if you are not careful. I have seen some downright ‘ugly’ debt situations, which is not a situation you want to get into.

Some typical examples of ‘ugly’ debt:

– Where you need to borrow for living expenses or holidays to keep up with your peers, usually by means of a line of credit; – Credit card debt, where you are unable to pay off your balance in full every month; – Personal loans.


Doctors and debt – it remains an interesting relationship. I have seen many doctors build significant wealth through smart use of debt, but I have also witnessed some pretty dire situations where doctors lost control of their debt. Seek financial advice early and make the most of the leverage and wealth creation opportunities offered by good debt management.

You can also contact me for your free Finance and Debt Management ebook. Please email me at to request a copy.

About me

I specialise in managing and coordinating the financial affairs of medical professionals and have been recognised as one of the best financial planners in Australia. I am a Certified Financial Planner and member of the Financial Planning Association of Australia.

As I understand your time is extremely valuable and scarce, I am able to offer flexible meetings times, including outside business hours and during the weekend. I can even come and meet you somewhere convenient, or talk via videoconference on Skype.

My first consultation is free. I allocate up to 90 minutes to discuss your personal circumstances and to establish how I may best assist you. Where you already have an existing adviser, I would be happy to offer a second opinion. I always quote a fixed dollar fee before we start working together.

Please contact me on or call me direct on 08 9381 2704. You can follow me on Twitter @YvesSchoof or connect with me on Linkedin to receive new articles.


Yves Schoof and Affluence Private Wealth are Authorised Representatives of Synchron, AFS Licence No. 243313. The information posted is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS) or other offer document prior to making a decision.

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