Episode 35: From Residency to Attending... 10 Financial Planning Tips for New Attending Physicians

In the 35th episode of the 'Retire Early Podcast,' hosted by Hunter Kelly of Palm Valley Wealth Management, the focus is on providing financial advice to new physicians transitioning from residency to attending physician roles. The episode outlines ten critical tips for managing new income, debt repayment, budgeting, investing, and insurances, offering strategies like reverse budgeting, automating savings, understanding student loans, evaluating housing options, negotiating salaries, and planning for taxes and estate needs. Emphasis is placed on optimizing these factors to ensure long-term financial goals and stability.

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Transcript

0:18

And welcome. Welcome to the retire early return. I'll podcast. I'm your host hunter Kelly owner upon valley wealth management. And this is the 35th episode. I released these episodes every Tuesday to help physicians and attorneys get best educated on how to retire early and retire. Now. And so today's episode, we're going to talk about 10 tips that doctors should follow, um, as they graduate. residency and then move on to an attending physician. Uh, profession or job. Um, and so. Obviously you've worked all your life for, um, getting to this point where you've gone through undergrad medical school residency, sometimes fellowships, things of that nature. Um, and to finally get to the point where you are. Uh, an attending physician doing clinical work and getting the pay raise to be honest, getting that extra cash on hand to start paying down student loans or achieve whatever other financial goals that you have, um, is deeply rewarding as what you've been working for. Obviously. Uh, the practice of medicine and rewarding itself, but also the time and effort that you put in, um, it is. It's probably a joyous feeling. Obviously I'm not a doctor, so I don't know, but it's a joyous feeling to say, Hey. Um, all that workout put in. Now I'm going to reap the benefit of the studies and the hours. Uh, sleepless nights, things of that nature. And so. Uh, the last thing you want to do is put yourself in a position where you start burning through that new income that you're earning and not really making progress toward whatever goals that you have. And so. Generally speaking, uh, student loans is, is one of the biggest priorities for doctors because, um, you have large, uh, debt because of, uh, Post grad school, medical school. Uh, potentially masters in there, whatever the case may be. And then having a period of time after graduating medical school, uh, where you're not making necessarily that much income relative to, to what your expertise is or will be. And so. Uh, these 10 tips will help you kind of navigate that. As you go from making 50, 60,$70,000 a year to multiple hundreds, thousands of dollars a year. And so the first thing is first on this list and that is. Uh, figuring out your budget, understanding where you want that new cashflow to go. And so, uh, the method that I like to employ for my clients. Uh, is what I like to call, pay yourself first. Or some people call it reverse budgeting. And so this is setting up. Accounts, um, or just a system to make sure that you're funding those goals first and then anything left over can be your spending money. Left over money. Uh, to do whatever you want to do. And so we need to figure out one what's our fixed expenses. What's our fixed and variable expenses like electric bill, things of that nature. And then what are our goals, uh, with this extra cashflow? That we have that we want to, uh, allocate right. And so that'd be student loan debt saving for a home. Buying a new car. Uh, retiring early at some point. Right. And so making sure that we're filling those buckets first before. Uh, we go out and start doing lavish vacations or expanding. A ton of money eating out or hanging out with friends, things of that nature. If it's not on the top of our port authority. Now, if travel is one of your priorities, then we'll make an account for that. Um, and things of that nature. And so what I always tell my clients, I'm not going to. Judge you on what you spend. The only thing I'm going to do is hold you accountable to the goals and priorities that we set through this reverse budgeting method. Um, and make sure that we're accountable to those. But if you want to go get a Starbucks, it's not going to make you poor. Right. Um, we just got to know that we're taking care of the things that are important first, right? And so the next thing to that reverse budgeting or pay yourself first method is creating those accounts, um, to facilitate. Um, those goals, right? And so obviously opening up a checking and a high yield savings account so that you can earn a little bit more interest, um, on that cash that will build up, uh, in your emergency fund. Uh, and then from there we want to open up potentially a brokerage account. If we have a more long-term goal. Uh, whether it's buying a house or a car down the road or retiring early, things of that nature will want to open up a brokerage account. And, uh, make sure that we're, we're building that out with investments that meet that time horizon and our risk tolerance to get us to that goal. Right. And then from there, we want to obviously make sure that we're contributing, contributing enough to our retirement accounts through our employer. Um, for one. Uh, to retire at some 0.2 and then two for taxes, right. Um, making sure that all right now we're making 3, 4, 5,$600,000 a year. Our tax rate has skyrocketed. Um, and we want to make sure that we can. Uh, mitigate some of that, uh, along the way, the, uh, our 401k. For three, B 4 57 B whatever our options are through that. Right. Um, and so the other good thing about that as well is that it's going to potentially help. Uh, with some of those repayment plans. Through student loans. Right. Um, if you're on an income driven plan, We'll putting into this particular, uh, retirement account may help, uh, would that, that payment right? And so, uh, the next thing we'll want to look at is just automating the savings, right? If you're in a W2 job and your salary is relatively consistent. And, you know, you're getting$15,000 every two weeks or$10,000 every two weeks, whatever that ends up being after taxes and withholdings and all of that. Uh, we want to automate the next day to those buckets that we're saving for. Right. And so, um, whether that's putting that thousand dollars a month or the brokerage account, or$2,000 a month, or the brokerage account, or paying down our student loans early, Um, if that's something that's important to us, whatever those things are automated, so that it becomes, um, a non-factor as far as having to go in there, making it a pain to go into those accounts and transfer that money. If it's automated, then you don't necessarily have to worry about it. Now you'll want to review it every so often and recorder, um, biannually, whatever the case may be, that that fits your need. Um, but on a month to month basis, week to week basis, uh, you don't necessarily have to worry about it. You know, that that money is getting funded to the proper accounts, right? And so we want to make sure that that is automated. Just like we would automate our 401k savings. And so the next thing would be understanding student loans. Like I've mentioned a couple of times, student loans is going to be a. Uh, an important part of your overall success and wealth. Uh, figuring them out and understanding what repayment plan I should be on, whether that's a standard repayment plan. Should I apply for public service loan forgiveness? Because I'm working. At a particular hospital that, uh, where I can apply that particular forgiveness. Um, what should I do? Should I pay it off in two years? Should I pay it off in five years? Should I string in. Along the whole standard repayment plan of 20 or 30 years. What does that look like? What does it look like when that loan is forgiven? Do I owe taxes on that? Um, and so understanding. The different nuances of how to get the student loans repaid. Um, and making sure that, uh, you have at least a plan for it, right. That's one of the things that we do, right. Client comes in, they just graduated from residency. we start working on how w how are we going to most efficiently get this student loan paid down? The next thing is probably one of the bigger decisions that, doctors make MDs make is, deciding on whether to purchase or rent a home. And generally, I would say. We'll purchase because you want to build equity and so on and so forth. But, um, as I've worked with more and more physicians, uh, in this particular spot, It is likely that they will not be at the same hospital for longer than a handful of years, because they're going to move on to maybe a different city that they like better or a different part of town to a different hospital. And so. Generally, what I would recommend is rent for one or two years, understand the part of town that you like or get through that transition period where, you know, Hey. Uh, I'm going to work for this hospital for a handful of years and I'm going to move back home. Well purchasing a home. May not make sense. Um, because of all the, the front closing costs, buying the furniture, um, potentially having repairs on the home, things of that nature. Whereas if you rent, you know that, Hey, my rent is this much a month. Um, and it just may. The math may work out better, uh, especially if it's a more short term. Uh, Timeframe where you're going to move on. It would make more sense to, to purchase the home. Or to rent the home. Right. And then once you settle in, you're like, Hey, I'm in a hospital that I think I'm going to be at for, for years and years and years or the rest of my career, then purchasing a home may make sense. Or let's say you're in the process of having a family, you got married, you're having a family. Um, and you think that you want to start our home, but that starter homes hung in the last few, 2, 3, 4 years. If you're not planning on staying in that home for longer than five to seven years. Then potentially state. Purchasing that home may not make sense because of all the costs involved with purchasing. Um, an interest in. All of those things. So renting may be the better move, but, um, each, each case is different. So I would say sit down and think about what you want to do. If you have a significant other. Obviously talk with them, um, and then come up with a plan as far as, okay. These, this is what we want to do over the timeline. Whether we want to stay here or we want to move. Um, And so. That will help you determine whether you want to purchase or rent. Um, at least in the short term, And so the next thing would be, um, as you are. Um, applying for your new attending physician position. Um, whether that be at the hospital that you're at currently or moving to a different city. Uh, maybe back home to where you were. Whatever that may be, um, learn how to negotiate your salary. And so obviously there are different. Positions or different practices were negotiating, uh, as a little bit more. Um, flexible, I guess is probably the best word to say. And then other types of practices where if you're a hospitalist or just a primary care, um, there are probably Most doctors or a vast majority of doctors can practice. Uh, general medicine, right? And so the negotiating. Um, stakes. There is not very high because you're, you may have. Uh, a handful of doctors behind you that will take that same job for less money. Right? Or if you have a specific specialty orthopedics. Um, whatever the case may be, where there is a higher level of specialty. Well, now you can come in and you can negotiate because maybe you're the only one, um, or the only handful of doctors in the area that can practice that particular specialty. Right. And so, um, understanding your contract, get with an attorney to read the contract so that you understand, um, your benefits and, and what's inhaled within that particular job so that when you have multiple offers, You can pick the best one that fits you were needs and suture. Your needs, right. Um, So one of the things I want to do, uh, here in the next few weeks or months, Uh, is actually getting an attorney on that reviews, those contracts. Um, so that he can go into more of the nuance of what he's looking for. Um, to help the physicians with their contracts and negotiating their salaries and things of that nature. So I think that would be pretty valuable to you guys. And the next thing would be to understand those benefits. So what is your health insurance look like? What is your longterm disability look like? If it's offered through the employer? Um, Do they have life insurance group, group, life insurance through, um, the employer. What is your match look like with your, uh, 4 0 3 B or 401k? Do they offer a 4 57 B plan where you can contribute to both of them? Is there a Roth option for, uh, one of the retirement plans? And so. All of these things you would want to review. Because it isn't just the salary. It is. Okay. Well, what are they paying for, uh, as far as the health insurance premiums or are they offering, are they matching an HSA contribution to me? Um, is the disability, um, worth having, do they have enough coverage? Am I going to have to go out and get my own or at least more of my own, um, and so on and so forth. And so understanding your benefits, uh, maybe you take a little bit lower salary, but you get more on the benefits side or. Or vice versa. You got to go out and find a higher salary because you know that, um, there's more benefits that you're going to have to pay for privately, right? Um, and so understanding those employer benefits, the next thing. Make sure you are properly insured. You've done all this work, the past eight, 10 years of medical school, residency, undergrad. Um, and so the last thing you would want is to become injured. And now I can't practice medicine anymore. I can't do surgery because I broke my hand and I have a tremor now. Right. And so. Getting properly insured with disability insurance, long-term disability insurance, understanding the definitions. Is it own occupation? Um, so if, if I can, um, If I can't do my particular area of practice, whether that be surgery. Or what have you. But I can go and teach, uh, about neurosurgery or orthopedic surgery. Uh, at the local medical school. Then maybe I can get some sort of benefit because I can't practice medicine. Right. And so, um, making sure that you have proper DIJ insurance as far as the amount of coverage, but also those definitions, that cover specific types of injuries that you could potentially incur. Um, where it would inhibit your ability to practice medicine. Um, the next thing would be life insurance. Again, um, you may have a husband or a wife that is depending on your income. And so again, the last thing you would want to happen is that you do all of this work to become a physician. Um, and to have the higher earning potential and God forbid you pass away to, uh, untimely. Through an untimely death. And now your family is left with essentially nothing. Right? And so, um, having the proper life insurance to make sure that you can cover that lifestyle. However you guys. Um, see fit, but making sure that your, your, your wife, your husband, your potential kids. Um, any debts that they would owe are taken care of and they can live comfortably, um, after your passing. Um, not an easy conversation to talk about, but, well, one that is super important. Um, and, and. Uh, you just wouldn't want it to happen that way. So, um, the next thing would be tax efficiency. So go ahead and start setting yourself up for, um, tax efficiency. And so how do we do that? One, we want to make sure that we're contributing properly to our employer. Retirement plans. So we should be doing analysis. Do we want to do all pre-tax? Is there a rock Roth option? Should we be contributing to the Roth 401k or should we be going all? Pre-tax. Um, potentially looking at two-step Roths. Um, so that would be a way that if you're making too much money or you're over that income threshold for contributing to a Roth IRA, um, should we do that backdoor method where we're making that nondeductible contribution to our IRA and then just converting it over to Roth? Um, And then any, a brokerage accounts that you have, making sure that, um, you're putting yourself in a position where that the portfolio is not spitting off a lot of taxable income each year to you, uh, obviously early on you start contributing to those accounts. It's not necessarily such a big deal, but. As you as a account starts to grow and grow and grow over the years, um, that can become an issue. So just. No, how to build that portfolio. Where maybe it's more growth oriented and there's not a lot of dividends each year. Or if you have some fixed income, maybe look at Noosaville bonds, um, things of that nature, or potentially having your fixed income in retirement plans, where now I don't necessarily need to worry about the type of income that is being spread out because, um, it's an. Deferred growth. Uh, deferred tax type accounts. Right. And then the last thing. Um, that we would want to consider and make sure. We are doing is meet one attorney to do your estate planning. Right. Again. All of this work through medical school residency. Um, we don't want it to go to waste, so make sure. One that you go meet with an attorney. Especially if you have a wife and kids or a husband and kids and get those docs right. Uh, how, how my kids going to be taken care of in the event that, uh, my spouse and I pass away. Um, where's that money going to go? Do we need a trust? Um, what, what type of decisions do I want to be made if I'm incapacitated? So I want my spouse to know exactly the type of treatment that I want. And then honestly, if you're in that type of work, if you're, um, in a profession where you're working with ICU patients and things of that nature, it's a good, uh, practice to go through because now, you know, the type of decisions that they've gone through and the paperwork and all that. Um, and just gives you a little bit better understanding of, uh, that particular side of things. So. Uh, hopefully this was helpful. I want it to keep it short and sweet. So we're, we're at about 20 minutes the first time I'm filming this. So we'll see how this turns out. Um, but. I work with physicians and attorneys. And so, uh, I helped them. transition from residency to attending physician. And obviously that's a big change. It's something that you've worked very hard for. Um, and so we want to make sure that we maximize that transition so that. Um, one, you can retire and live the lifestyle that you want to live. Um, maybe you don't want to retire, but you want to have the option to slow down whatever that case may be. Um, and we, we help with that. Right. And, uh, it's been very rewarding to do so. So if you're unsure about your situation, maybe you just finish a residency or you're getting close to that and you have questions. Uh, feel free to go to my website, Palm valley. awm.com. Um, look at my process page, see how I work with clients. Uh, schedule a call and the first call is free. Um, and then we can decide how we want to move forward from there, but, uh, look forward to it. And, uh, we'll start filming a little bit more of these. If you liked this content. Uh, go ahead and leave a five star review and subscribe to my YouTube channel Palm valley. Uh, wealth management. See ya in the next one. This podcast is for educational purposes only. It is not meant to be financial or investment advice. If you need help about your specific situation, please seek a financial tax, legal or insurance professional about your situation as always keep Palm valley wealth management in mind when making those considerations.