Life is full of potential worries. Personal, professional, and other stresses can make us anxious and reduce our happiness and quality-of-life.
A major source of anxiety in our lives can be financial. A recent survey found that 85% of Americans are at least “sometimes” stressed about money and 30% of Americans state they are “constantly” stressed about it.
In order for physicians to reduce their financial anxiety, they first have to identify its causes. In this post, I’ll outline seven possible sources of financial anxiety.
Maintaining job or salary level
Physicians spend over a decade in training, either in school or in relatively modest-paying residency. However, when they finally complete training, they enjoy some of the highest average salaries in any profession.
And while job security in medicine is higher than in other professions, there’s no guarantee that salaries will not drop in the future. The government, insurance companies, and other healthcare industry stakeholders are poised to put downward pressure on physician salaries.
Physicians in private practice always had the financial stresses of running a business. While more physicians are being employed by hospitals or other entities, their pay is often tied to productivity metrics such as RVUs. A possible source of stress among employed physicians is the pressure of meeting productivity or quality metrics demanded by their bosses.
Not saving enough for retirement
Retirement can feel far off for physicians who just finished residency, or be just around the corner for physicians approaching the end of their careers. Even if it can be easy to set your target retirement number, it is harder to know whether you are on pace to hit that number, especially because future stock market returns are uncertain.
Even when you make it to to retirement, there is always the worries that you may run out of money in retirement. What if there is a big bear market right after you begin retirement? What if you have a health scare that requires you to spend an outsize amount of your retirement on healthcare?
Paying for child’s college
The cost of higher education has been rising for decades. According to statistics from the College Board, the annual tuition cost for a private non-profit four-year college in 2017-2018 was $34,740, more than double what it was in 1987-1988. For a public four-year college, the average annual tuition in 2017-2018 was $9,970, more than triple what it was 30 years earlier.
This doesn’t even include room, board, and other costs associated with college education. The cost of attending Harvard, after accounting for tuition, room, board, and fees, is $67,890 for the 2018-2019 academic year. It’s feasible for the cost of attendance at some private colleges to exceed $100,000 in the next 15-20 years.
Meeting monthly bills
Even though physicians make a lot of money compared to the average American, they can sometimes still feel that money is tight.
Physicians and other high-income professionals often get mocked when they are featured in articles talking about how they don’t feel rich on a $300,000 salary. But physicians, especially those who live in a high cost-of-living region, often feel societal pressure to live the “high life.” This leads to either feelings of inadequacy or a struggle to meet monthly bills in order to maintain their lifestyle.
Estate planning
Estate planning is certainly rich people problems. But there are important decisions to be made regarding how your assets are split after you die. There can often be difficult and emotional family dynamics that make these decisions very stressful and challenging.
Some physicians who have saved all their life may end up with a net worth that might be subject to estate taxes. Many people want to give Uncle Sam as little of their money as possible, and some plan for years to minimize their eventual estate tax bill.
Liability / Fear of getting sued
Doctors can feel like they always have a target on their back. In their professional lives, many physicians feel compelled to practice defensive medicine in order to limit malpractice liability.
Outside the hospital, many doctors feel that individuals (or their lawyers) may more aggressively target them when there are possibilities for litigation, such as after a car accident or a slip on the sidewalk.
Stock market volatility
One of the biggest determinants of your final retirement nest egg is the stock market return during your lifetime. The difference in the size of your retirement portfolio with a 4% stock market return versus an 8% stock market return can be millions of dollars.
When the stock market falls, hundreds of thousands or even millions of dollars can vanish from your investment accounts. It’s no surprise that many investors become more conservative as their portfolio value rises.
Conclusion
Physicians face many of the same sources of financial anxiety as other Americans, such as saving adequately for retirement, meeting monthly bills, and paying for children’s college educations. But some causes of financial anxiety are unique to high-income professionals, such as the need for estate planning or asset protection. Identifying the causes of your financial anxiety is the first step in the path to reducing the money stresses in your life.
What do you think? How many of these financial anxieties do you have? Are there any other sources of financial anxiety that physicians or other high-income professionals face?
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I think that a lot of anxiety can be allayed by simply having a plan that will clearly get you to all of these goals. The trouble is that some of these problems (i.e. living the high life after you finish) prevent people from forming an adequate plan. This likely doubles or triples the stress and anxiety that they have about finances.
It’s important to consider the causes and sources of financial anxiety, though. That way a plan can be put in place to help alleviate some of these stressors.
Thanks for the thought provoking post,
TPP
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I chose saving for retirement. This is a self inflicted stressor. We are trying to get FI relatively early so this plays into all our big financial decisions. But I suppose if we weren’t going for FI then a different thing in this list would be at the top.
I chose none of the above. I MIGHT have chosen severe shock to the economy (ie. runaway inflation, depression, etc.) if it were an option.
You can plan for retirement all you want, but if the stock market dives or you get sick, there goes a big chunk of your nest egg! It’s hard to save enough to prepare for those two scenarios even if you have a well-paying job if you live in a city, own a home, and send kids to school. FIRE is a lot easier to achieve if you live in the middle of nowhere and home school your kids…
There are so many points that you made that I have experienced throughout my life but as I have approached financial independence they have lessened dramatically.
Radiology has been a target of financial reimbursement cuts lately by Medicare and I have seen some studies (such as MRI) get hit hard. If I was not financially independent this would have caused a lot of anxiety as I am on a “eat what you kill” type payment system.
The liability issues always weigh in the back of my mind as, like you mentioned, wearing a white coat can put a nice red target on your back. My divorce experience shows what happens when opposing counsel wants to sink their teeth in you and try and get their hands in your perceived deep pockets.
Becoming debt free and having money in the bank goes a long way towards relieving stress. Debt created stress I didn’t know I had until I was debt free. Let’s all stop managing our debt and start eliminating it. You can start with The Doctors Guide to Eliminating Debt.
Dr. Cory S. Fawcett
Prescription for Financial Success
I think Cory’s right. I have a mortgage, a very reasonable one, in fact, it’s less than I used to pay in rent! But I still hate it!
I could add one point about locum tenens that I had not realized in this context. As a physician, you never have to worry about job security because you always have it, even if you lose your job. The need for physicians to work locum tenens is very high, and there are always positions available, especially for anesthesiologists, family practice, general surgeons, internal medicine and psychiatrists. While losing your job (i.e., fired, quit) can be quite inconvenient, the availability of locums means you won’t starve, and if you don’t mind intermittent travel, you don’t have to relocate. Locums gives you plenty of time to find the right NEXT job by removing the urgency-you will have sufficient money in your pocket to continue your day-to-day life. (I researched the above for my new book, The Locum Life: A Physician’s Guide to Locum Tenens, available early 2019.) So there you go, one less anxiety!
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