Financial Wellness: The Wellness Dimension Nobody is Talking About
Financial planning is rarely discussed as a strategy to improve overall physician wellness. Yet, for many early career cardiologists, financial issues have a disproportionately large impact in overall wellness as they make the toughest financial choices in their lives.
Professional decisions on work hours, salary and benefits must be made alongside personal decisions on marriage, children or buying a home – all of this frequently in the backdrop of repaying six figures of student debt.
During your early career, a sound financial plan is critical for achieving overall long-term wellness.
Fortunately, the early career is also an ideal time to cultivate "financial wellness" – a state where your financial life is a source of strength and empowerment, rather than stress or dread. Here are three steps to focus on in your early professional life that can help make financial wellness a reality.
Know Your Gap
No business can continually sustain itself without a positive gap between revenue and expenses, and your personal financial life is no different. Knowing your own personal income-spending gap is a necessary first step.
Figure out your average monthly spending and subtract it from your monthly after-tax income to calculate your monthly gap.
Not sure what your spending is? Add up your average monthly credit card bill, monthly housing costs and any other recurring bills (e.g. utilities, childcare, car payments, etc.) as a rough estimate.
Maximize Your Gap
To grow your gap, you must increase your income or decrease your expenses – or both.
Early career cardiologists are often able to increase their income by working extra days, moonlighting, or serving as expert witnesses or consultants. Taking more call to relieve more senior colleagues looking to scale back may potentially be a win-win strategy.
Relocating to an area where physician compensation is higher can also make a huge difference in the gap, especially if it also happens to be a lower cost-of-living area. Nonmedical endeavors such as real estate or short-term rentals may also be a rewarding way to generate significant income.
The downsides to increasing your income? Income and payroll taxes may take away anywhere from 20 to 50 cents of every additional dollar you make, cutting directly into your newly increased gap.
In addition, time spent generating more income means less time available for your health, family or hobbies. Sacrificing other pillars of personal wellness to make more money may be counterproductive to your goal of cultivating wellness.
The beauty of decreasing your expenses is that it not only grows your gap without incurring more taxes, it decreases your reliance on your job income. Having a lower-cost lifestyle may give you the flexibility to negotiate a more favorable call schedule or choose a lower-paying job in a more desirable location or practice setting, a move that could dramatically improve physician wellness.
The disadvantage is that most early career cardiologists can carve out less gap by cutting expenses than they can by taking extra shifts/calls. Becoming overly frugal can worsen your quality of life or strain relationships.
Involving your significant others or family members in budget discussions may go a long way to ensure that your overall wellness does not suffer.
Build an Income Stream With Your Gap
Using your gap to invest or paying off debt is the key to building wealth and its accompanying income stream. Becoming debt free eliminates negative cash flow and frees up your earnings.
Paying off a $100,000 loan at 5 percent interest would save you $5,000 in your first year alone – $5,000 you no longer need to carve out of your budget. By contrast, investing helps generate positive cash flow that can reduce your dependence on earned income.
Accumulating $100,000 in investments earning an average of 5 percent would earn you $5,000 in your first year alone – $5,000 you no longer need to earn from your job. Whether you focus on debt, investments or both, you will move one step closer to solid financial footing.
Your early career is an opportunity to set the stage for a lifetime of financial wellness. Make 2020 the year you begin building your income stream to live a more empowered and satisfying life.
This article is authored by Stanley S. Liu, MD, FACC, general cardiologist and assistant professor at the University of Maryland School of Medicine in Baltimore, MD. He is passionate about physician personal finance, but is not a financial professional. Please consult a financial professional before making changes to your financial plans.