Doctors face different financial issues at different stages throughout their career. In this series of articles, I would like to explore the main financial considerations at specific stages of your career. Let’s start with the key financial issues for interns and registrars.
Buying a house
Property ownership is a common goal for many young professionals, and it is no different for doctors. Typically, you would prefer to live close to the hospital and also lifestyle amenities such as cafes and restaurants. For your first and subsequent house purchases you would spend more than the average Australian your age. However, it is important to note that you should not be influenced too much by peer pressure and over-extend yourself, as too much home loan debt can cost you significantly and can cause financial stress. For more tips on how to pay off your mortgage sooner – click HERE to read my article.
Establishing your lifestyle
Don’t let lifestyle creep get the better of you – you can read more about this topic HERE. Just like big home mortgages can wreak havoc with doctors’ cash flow, so too can an expensive lifestyle. I have seen too many doctors who get frustrated by the fact that they need to keep working hard to fund their lifestyle. You need to develop a savings discipline early on in your career and set an increasing savings target as your income goes up.
Using the power of compounding
Start investing early. Let’s consider the example where someone starts investing $2,000 per annum from age 20 for 10 years, versus someone who starts investing $5,000 per annum from age 45 for 20 years. Who do you think will have the highest balance at age 65, assuming the average return was 7% p.a.? Surprisingly, it is the person who invested less ($20,000 in total versus $100,000), but started earlier, who ends up with approximately $337,800 as opposed to $240,000, or a difference of approximately $97,800.
Your income is your biggest asset and you should protect yourself while you are young, to establish a base level of insurance cover. Doctors rely on specific skills and abilities to generate their income, so you are at a higher risk than the majority of the population. You would be surprised how relatively inexpensive the cover is, particularly if you factor in the tax deductions available on income protection.
Taking control of your debt
I have already highlighted the fact that you should not over-extend yourself with regards to your home loan. You may also have significant student loans and perhaps a car loan or credit card debt. You need to take control of your repayments, and typically you would focus on repaying the loan with the highest interest rate first. ‘Chunk out’ your debt if need be – target smaller balances you can repay quickly, so you can get some momentum. You may also be able to consolidate some debt into your home loan at a lower interest rate – if you keep up the same repayments, your debt will disappear before you know it.
Summary – key financial issues for interns and registrars
This is the time in your career where you lay the foundation for your financial future. Will it be a shaky foundation that leads to financial stress, or will you take control and start your journey to financial freedom?
About Yves Schoof
I specialise in medical financial planning and coordinating the financial affairs of medical professionals. I have been recognised as one of the Top 10 financial planners in Perth and 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 firstname.lastname@example.org or call me direct on 0432 885 295. 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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