Physicians have a good steady income, and if they can devise a good plan and stick to it, they can easily build wealth. But, they are notoriously bad with money. It is tempting to follow the herd and develop expensive hobbies and tastes.
Although it might be simple to blame it on the physicians, but when you have spent your entire lives in school, accumulating a mountain of debt, only to find yourselves suddenly making astronomical sums of money, slip-ups are bound to happen.
But, do not fret! Today we are going to navigate these topsy-turvy paths together! Follow the below-mentioned four steps to building wealth as a physician and gaining financial security.
1. Build an emergency fund
There are bound to be rainy days, and your emergency fund can help you navigate those days with confidence. Most experts recommend having 3 to 6 months of worth of expenses built up. You will need to prepare a solid budget to figure out what those expenses are. We understand that having six times the amount of money you spend in a month will not happen overnight. So start small and work your way up. Set a goal of one month of expenses and start saving for it.
Save up for an emergency fund
Before you start investing, building an emergency fund is crucial. It will be your security net. Having an emergency fund allows you to keep calm in the event of a medical emergency or a job loss. You will also feel more at ease when reviewing your bank statements. If you have an emergency and require cash, it’s available. If no emergency arises over the years, you will have made a head start on retirement investing. It is a win-win situation!
2. Spend less than you earn
These five words cannot be stressed enough. If you can abide by it, you are golden. But how do you do it? Start by analyzing your financial habits. It's amazing how easily money can be squandered without even realizing it. Knowing where your money goes helps you understand where you can cut back to free up extra cash to pay off debts or save more money.
The second step is preparing a budget, and more importantly, sticking to that. You should have a solid understanding of your recurring expenses as well as a clear idea of how much money you spend on variable costs such as petrol, groceries, travel, entertainment, and so on. To keep your expenditures under control, use your budget as a guide.
You are no longer playing catch-up and living paycheck to paycheck when you spend less than you earn. The stress of living paycheck to paycheck and worrying about bouncing checks or missing payments can be crippling. To fully appreciate life, you owe it to yourself to live as stress-free as possible!
3. Make your money work for you
You have built up your emergency fund and prepared a solid budget to adhere to. It is now time to make your money work for you. Everyone gets paid for the hard work they do during the day, but only those who make money while sleeping really maximize their income. The smartest way to do that is by developing streams of passive income.
Creating any type of passive income stream necessitates an initial investment of time or money, but it can pay off handsomely in the long run. Few common forms of passive income for a physician can include real estate investments, stock market investments, buying bonds, etc.
Make your money work for you
One other and simple way to make your money work for you is choosing credits that offer rewards that are actually useful to you. Try this strategy and if this does not work for you, remember to pay your bills in full every month. If you do not, the interests would add up and eat into your budget.
4. Write everything down
Once you create a plan, you have got to stick to it. But that is easier said than done. There are bound to be roadblocks, but a written plan can be your north star, helping you navigate the way to financial security.
“You need a written plan,” insists Dr. Dahle, an EM physician. “90% of investing questions are answered with the question, ‘What does your written plan say you should do in this situation?’”
The market is volatile, and if you don’t have a written plan, it will force you to make investment decisions that you otherwise might not have taken. Don’t let the market drive you. You should be the one in control.
Also, consider reading books, taking courses, following a blog or two, or working with a financial planner to show you how and not to do it for you. It will help strengthen your financial foundations.
We hope we have helped you gain clarity on how you can build as a physician. Keep budgeting and following these steps to become financially secure.
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