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13 Financial Blunders a Doctor Should Avoid

M3 India Newsdesk Mar 12, 2023

To prevent financial mistakes, one should always adhere to certain dos and don'ts. In this article, it is made abundantly clear how essential it is for doctors to prioritise their own financial stability.

Key takeaways

  1. High incomes are a big advantage of a career in medicine, but they also increase the risk of financial missteps.
  2. You can wind up paying for it later if you don't save, spend, or invest wisely.
  3. It's crucial to have a positive connection with money, so if you're unsure of what that entails, speak with a financial expert.

Practising medicine already presents enough risk. The horrifying things some physicians do with their money may be even more terrifying. Physicians should confront their money phobias and steer clear of these terrifying financial blunders.

1. They deny reality by ignoring it

Most physicians are intelligent people. Most people are aware of how crucial having a nest egg is. However, sometimes a doctor who is far over the age of 40 shows up at the door of a financial counsellor with nothing saved.

It's straightforward yet challenging: medical professionals need to develop and sustain good personal financial habits. It's preferable to start as soon as possible.

2. Avoid making a budget

Over the course of topics like personal finance, a pattern among high-income professionals like doctors is observed. When money is scarce early in their professions, many people adopt budgets. Doctors may abandon or forget about their budgets as their pay rises.

Once your income reaches six figures, you may not need to keep track of every iced coffee, but it's still helpful to know where your money is going.

Consider your monthly expenses; do you want to be spending hundreds on things like takeaway, a gym membership you never use, or a subscription service you never use? You may, but at the very least, you should be aware of what is happening with your money.

3. Spend without saving for a rainy day

You may have a deep understanding of the need for an emergency fund if you have ever lost money due to postponed treatments, missed appointments, or a decline in patient volume. Your monthly spending will be seen when you create your budget. To prepare for the next pandemic, broken furnace, or blown transmission, try to save up to three to six months' worth of costs.

4. Avoid purchasing disability insurance

What is your best quality? The majority of physicians will mention their home or retirement funds. However, the market may always crash and your home might catch fire. Your skill as a physician is something you can always rely on. People will always grow sick and need your services, after all. Unless you have a crippling injury and are unable to continue practising medicine. What a terrible thought! Hence, you need disability insurance.

5. Ignore their malpractice insurance

Statistically speaking, a malpractice lawsuit is inevitable. Fortunately, almost all employers of doctors provide some kind of malpractice insurance. Sadly, the sort of coverage could not be sufficient, especially if you change employers or retire. Find out what kind of insurance your company is offering. You may need to buy something called "tail coverage." Liability protection for doctors known as "tail coverage" goes beyond any prior medical malpractice insurance claims. When a former patient alleges malpractice occurred while the physician's prior insurance plan was in effect, it defends doctors.

6. Invest in too much property too quickly

By owning too much real estate too soon, many physicians make mistakes. They get their first job upon the residence and purchase a large home in a desirable area, which they want to populate with children in the next months or years. They later come to realise they despise their boss. Or that they picked the incorrect area. Or the fact that their kid must go to a school three towns away. A competent financial counsellor once advised living the hermit crab lifestyle. Purchase a home today that meets your requirements, then purchase a larger and nicer home later on.

7. Choose the incorrect kind of financial adviser

Doctors are intelligent. Perhaps even a financial counsellor is not necessary. However, it could be worthwhile to speak with a financial adviser if you a) have little interest in handling your own finances, b) have accumulated a sizable amount of savings, or c) are wondering whether your money might be working harder for you. Just make sure you choose wisely.

Work with a financial adviser who is required by ethics to act in your best interests rather than their own. If not, you could be collaborating with a glorified salesman. Ask them how much they earn as well.

8. Keep up with the latest investing fads

In the business world of investment, there are no such things as called strikes. Consider each prospective investing opportunity as a pitch that a pitcher may throw. Bitcoin is approaching from the outer corner, passive real estate is bending, and mutual funds are directly ahead.

If you're an investor, you can wait in the batter's box all day and watch all of these opportunities pass you by without being called out. Limit your financial decisions to those that make sense to you.

9. Adopt an ever-more-expensive way of life

This one has a nasty habit of biting physicians. Lifestyle creep is a financially crippling illness. If you have the condition, each raise in your wage causes your standard of living to rise. For instance, you purchase finer clothing, a fancier automobile, or a larger home. Your more costly preferences eventually cancel out the rise in income.

10. Considering monetary resources may be replenished indefinitely

It is normal for you to think that, as a doctor, you will continue to make a consistent salary each month. Money is often seen as a renewable resource by doctors.

However, having this idea might often make it challenging to foresee a circumstance in which your revenue may decline or in which you will be unable to generate as much money as you typically have been able to.

11. Neglecting to make investments using one's earned income

"Compound interest is the eighth wonder of the universe,"

-Albert Einstein

Those who comprehend it earn it, while those who do not, pay it. It is astonishing how few doctors make use of the great force of compounding to boost their personal wealth, despite being acquainted with it thanks to their study of microbiology in medical school and their student loan burden. The majority of doctors just do not get that even the most frugal of saving practices can never compare to the wealth created by cautious, consistent investments in diverse and risk-optimised investment vehicles.

Physicians often make the error of underinvesting not because they do not get the value of compounding, but rather because they do not have the money to do so.

12. The mythical idea that money would always be high

Many doctors often have the misguided notion that they will make tens of thousands of rupees every month for the rest of their life. For better or worse, the COVID-19 pandemic and the ensuing economic slump provided many doctors with their first experience with a sharp decline in income.

It is a terrifying yet probable scenario for any doctor. While many financially disruptive occurrences, such as COVID-19, medical staff complaints, or medical board suspensions, cannot be covered, many occupationally disruptive events, such as disability claims, may be insured against.

13. Retirement savings are required

Anyone who has lost a job or been out of work for many months is aware of how quickly a bank account may be empty when the cost of living, mortgage payments, and credit card bills continue to rise. Due to the permanent loss of occupational income when one reaches retirement, particularly if passive income sources are not accessible, this wealth depletion only quickens.

Many doctors are unaware that they need a multicrore nest fund to maintain their lifestyle and spending habits far into their retirement years in order to retire comfortably and effectively in their 60s. The fact that 25% of all doctors between the ages of 60 and 64 have a net worth of less than 1 cr Rs is alarming given that they are close to retiring. Despite earning at the top of the scale for many years, many doctors may have to confront the terrible truth that they cannot retire comfortably.


Based on what has been discussed, it is evident that you, as a physician, should make it a priority to ensure your personal financial stability. This should be done as quickly as possible. If you prepare ahead of time and take steps like creating a fair budget, consolidating your debts, investing in real estate, learning about taxes, and investing properly, you can manage your money more effectively and efficiently.


Disclaimer- The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of M3 India.

About the author of this article: Dr Monish Raut is a practising super specialist from New Delhi.

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