With the onset of COVID-19, the financial situation in health care has lost its grip, often resulting in frightening and adverse outcomes for physicians. A California Medical Association survey found that 64% of physicians expressed a need for financial assistance, 47% of physicians needed temporary housing, and 95% of physician practices expressed concern about their financial well-being.
A study published in the International Journal of Medical Education found that medical residents and fellows have low levels of financial literacy and, therefore, high debt. Nearly 33% of respondents said they struggled to find funds for their monthly expenses, even though their median income was around the national average. The researchers concluded that education in budgeting, estate planning, investing, and retirement planning is essential to providing medical students (and physicians) with the ability to effectively manage their finances.
Emergency physician Jim Dahle, MD, suggests that a common and fundamental financial mistake that plagues doctors is simply not spending enough time on their finances. As a result, economies of scale are not realized. Dr. Dahle’s solution is for doctors to learn how to make their money work and save wisely. This can be achieved as long as physicians gain an understanding of How? ‘Or’ What invest, what risks could be involved and how to avoid negative results.
The increasing indebtedness of medical schools is a growing financial burden. According to data from the Association of American Medical Colleges, the amount of loans jumped 2.5% in just one year, from 2018 to 2019. Although doctors have high salaries, they still struggle to repay their debts. Solutions include applying for federal loan forgiveness or refinancing student loan debt. However, doctors need to understand their budgets and get lower interest rates.
A survey by the Medical Group Management Association found that the pandemic led to 97% of medical practices losing money and nearly 50% implementing furloughs by April 2020. Additionally, practices have seen their incomes drop by 55%, signaling that doctors lack knowledge of how to save and prepare for the unexpected.
Financial constraints also negatively affect physician well-being, often leading to burnout and working beyond retirement age. Having a reliable savings plan is a great way for doctors to limit the financial strains that come with insufficient compensation, low reimbursement, and burnout. A CompHealth study found that 50% of physicians continued to work past retirement age, enduring declining job satisfaction and burnout, in an effort to maintain their lifestyle. Additionally, 37% of physicians who chose to work beyond retirement age expressed concern about their own personal health.
An effective savings plan could help eliminate such situations. While it’s never too late to start planning, the earlier physicians learn about financial management, the more likely they are to achieve financial success, job satisfaction, and timely retirement.