Secondary Logo

Journal Logo

Financial management in a medical career

Borrelli, Mimi R; Farwana, Reem; Agha, Riaz

doi: 10.4103/ijssr.ijssr_11_17
Review Article

Medical students often graduate with substantial debt, receive low incomes early in their careers postgraduation, and commence work having had little or no training in financial management. Furthermore, medical trainees fail to budget, have poor debt management, and hold overexpectations of increased income. Poor financial management can be a source of stress and has a negative impact on the quality of life. This article addresses some of the strategies for improving personal financial management, focusing on tracking of finances, creating a budget, debt management, and savings.

School of Medical Education, King's College London, London, UK

School of Medical Education, University of Birmingham, Birmingham, UK

Department of Plastic Surgery, Guy's and St Thomas Hospital, London, UK

Address for correspondence:Mimi Borrelli, School of Medical Education, King's College London, London, UK

This is an open access journal, and articles are distributed under the terms of the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 License, which allows others to remix, tweak, and build upon the work non-commercially, as long as appropriate credit is given and the new creations are licensed under the identical terms.

Back to Top | Article Outline


Many individuals lack the financial literacy necessary to make important financial decisions in their own best interests.1,2 Medical graduates often leave medical school with substantial debt,3 receive low incomes early in their careers postgraduation, and commence work having had little or no training in financial management. Personal finance is not routinely taught in schools and is learned either from family members, friends, or individually.4 Compared to their age-matched nonphysician peers, medical trainees practice poor financial management principles and have greater debt and lower savings.5 Despite having the potential for dramatic earnings and possibly early retirement, physicians are some of the worst savers and budgeters among the working population.6 This behavior is most common among surgical trainees.7 Reasons for poor financial management in physicians may include a failure to budget, poor debt management, over expectation of increased income, or insufficient attention to personal financial management.8 This accumulates in a potentially significant financial burden to medical professionals, particularly in the early years.

Poor financial management can be a source of stress. A high debt-income ratio is correlated with poor physical and self-reported health.9 High levels of debt in medical trainees correlate with more severe self-reported burnout and depressive symptoms.10 Financial strain in radiology residents was significantly associated with lower self-reported quality of life, depersonalization symptoms, and emotional exhaustion.11 Medics with higher student debt are more likely to moonlight or work extra hours to increase their income.12 Educational debt contributes to the rise in number of medical students entering higher paying specialties and a decline in the number of medical students entering primary care over the last 3 years.13 Financial missteps early in a medical trainee's career, including failure to save or accumulation of debt, can extend the economic challenges facing young physicians.14

Medical students have the advantage of being offered financial support in times of hardships, through scholarships, and bursaries. Yet, on becoming doctors, this support is less readily available. This emphasizes the need to develop good financial management early on, regardless of financial status.15 A personal financial foundation can better prepare medical graduates to manage finances throughout their careers and later medical practice management. Hospitals and healthcare organizations are businesses and doctors will become managers.16 To run an effective healthcare business, proficiency in finance is a prerequisite.

This article address strategies for improving financial management under the categories, adopted from Thacker,15 of: tracking finances; creating a budget; debt management; and savings.

Back to Top | Article Outline

Tracking Finances

“If you are willing to do only what is easy, life will be hard. But if you are willing to do what is hard, life will be easy”

- Eker.

The fundamentals of personal finance begin with the tedious task of input and output evaluation. To manage finances, an analysis and understanding of what finances there are to manage is a critical initial step. Outlining the existing income and expenses over the previous year is a useful initial activity. This brings awareness into spending on different areas and highlights areas where spending is excessive or insufficient. It ensures that one is accumulating finances as opposed to accumulating debt, which is crucial for saving for pensions, personal investments, and emergencies.

It is useful to categorize inputs and outputs, which can be further split up as shown in Table 1.{Table 1}

Fixed expenses (student loans, car) can be distinguished from variable expenses (utilities, insurance, food, cosmetics) because the variable expenses are subject to change in the budget.15 Finances should be tracked regularly, in a way that is realistic and sustainable. Regular assessment is efficient but requires discipline. Regular tracking can help predict future patterns and can ensure that budgets are met and that money is being made as opposed to loss, as it is essential that expenditures are less than income.6

Back to Top | Article Outline

Creating a Budget

The next step is to allocate percentages of income into certain areas of desired outcomes for successful short- and long-term financial management. This involves analyzing the allocations of income and reorganizing them in terms of prioritization and allocation of greatest need and money. There are many models discussed in the literature to help with the allocation of funds. Eker in his book “Secrets of the Millionaire Mind”17recommends allocating funds into six buckets: 55% necessities; 10% long-term savings; 10% fun; 10% personal investment; 5% donations or charity; 10% financial freedom. Financial freedom is anything that can accumulate passive income including stocks, funds, and stocks in business, described as the concept of “paying yourself first.”6,18,19

This is one model for planning and budgeting and allocating money and arguably requires a prerequisite of having money which might not be available in the early phases of a career, and a model should be created suited to the personal situation. The financial cycle is a dynamic process that varies with marital status, health status, employment status, as well as age and economic outlook. The concept of allocation and tracking, however, are useful practices. Budgeting helps give the individual an idea of the ideal income to aim for in the short and long term. Expenditure can be checked against this budget for good personal financial management. Creating a budget can be liberating as opposed to restricting. Of the two means to make a budget balance or wealth accumulate, either increasing income or decreasing spending, the latter is often the easiest to execute.4 Discretionary expenses can be limited first, and necessary expenses can be reduced second. By reducing spending, more money is available to pay off educational debt and for savings.

Lifestyle issues should also be considered. Spending in certain areas should be avoided for a number of reasons. Spending money on smoking, gambling and excess alcohol, for example, can be expensive, addictive and unecessary. Mixing with the high achievers in similar health careers may positively influence spending patterns.6

Back to Top | Article Outline

Debt Management

The concept of financial freedom is living debt free (unless one's strategy is to make use of low-interest debt for investment with “free” capital in a growth environment). Within a budget, ensuring a percentage of income is always directed toward paying off debt is critical to meet the ultimate goal of financial freedom. The most important way to reach financial freedom is debt management. This is because medical professionals are already at a negative advantage before they receive their first substantial monthly income, after years of delaying reward, innumerable work hours, and seeing other nonphysician friends buying homes and starting families.15 A large percentage of medical trainees have educational and credit debt.7 Debt should be the first area addressed when formulating a financial plan. Reducing debt should be the first strategy, before contributing to retirement plans or investing in stocks or bonds.4 Debts are drains on potential earnings and savings, and it is therefore imperative to reduce or eliminate debt as quickly as possible, starting with the highest interest rate first, “bad-debt,” which usually constitutes credit card debt and/or revolving debt. “Good debt” includes low-rate, tax-deductible loans such as educational and home equity loans.

Back to Top | Article Outline


A key unifying factor across all budgeting models is saving money for the future. Savings should be started as early as possible in a medical career.20 Saving ensures debt is paid off and no longer accumulates, sets aside money for retirement and potential unpredictable emergencies and health problems. How much money is needed to provide security and freedom varies between individuals.15 Future expense savings is a hard concept to develop in today's society of instant gratification.15 Investments benefit in long term and cost in short term. Consequently, investments should be based on the amount of time until the money that is invested is anticipated to be needed. Saving can be divided into four areas, adopted from Thacker:15 retirement savings, emergency fund savings, savings for future purchases, and personal investment.

It makes sense for savings for retirement to be made through mutual funds as these funds invest in a variety of bonds, stocks, or both21 based on expert knowledge and understanding. Portfolio investment by discretionary fund managers for savers reduces risk and spreads returns across investments. Individuals investing in individual stocks or bonds will not have the necessary expert knowledge to understand market fluctuations, economic landscapes, and global markets. Medical professionals will simply not have time to track these fluctuations. In general, young investors are able to invest in the more aggressive mutual funds because they have many years of work ahead to withstand any major market fluctuations that affect their funds before retirement. A rough guide to the percent of a portfolio that should be invested in equity at any one time is 110 minus one's age, as a percentage.22

An emergency fund can cover costs during times of unexpected job loss (which can be covered by insurance) or unexpected large expenditures. It varies by the individual and who it is intended to cover, and emergency funds should be easily converted to cash.15

Saving money for future and/or aspirational purchases is key to achieving a total successful financial management planning. Future actual purchases will include, for example, the need to save for replacement cars, special holidays, upgrading housing, and bucket lists. Future aspirational purchases may include purchases that may never be realized but constitute dreams and give motivation and drive to succeed. Reserving a percentage of money for rewards and pleasure can help realize dreams even in a small way such as a break to the cinema or taking a friend out for drinks. However, income should match lifestyle and not the other way around.15

“The most important investment you can make is in yourself”

- Warren Buffett.

Personal investment is a critical category, especially in a medical career, often neglected. This includes seminars, books, training programs, or anything that allows career progression and development of skills. Knowledge of the foundation of personal investment is often inadequate in college students.23

Back to Top | Article Outline


Financial management is an important skill throughout the course of a career and into retirement. It should become habit and influence decisions made during personal and work life. Eliminating financial worries will lead to increased satisfaction. Research suggests that only lawyers seem to be worse at personal finance than medical professionals.21 A useful strategy has been outlined in this paper whose principles can be adopted by any medical professional working anywhere in the world at any time in his or her career. However, to further increase financial awareness, individuals can receive instruction by a financial management advisor, reading financial management literature, or attending financial management courses, to determine the best strategy to meet their financial goals.

Financial support and sponsorship


Conflicts of interest

There are no conflicts of interest.

1. Perry VG. Is ignorance bliss.Consumer accuracy in judgments about credit ratings? J Consum Aff. 2008;42:189–205
2. Braunstein S, Welch C. Financial literacy: An overview of practice, research, and policy Fed Res Bull. 2002;88:445
3. Steinbrook R. Medical student debt – Is there a limit? N Engl J Med. 2008;359:2629–32
4. Tyson E. Personal Finance for Dummies.Foster City, Calif : IDG Books Worldwide;. 7;: Personal Finance for Dummies Foster City, Calif: IDG Books Worldwide; 1997
5. Teichman JM, Bernheim BD, Espinosa EA, Cecconi PP, Meyer J, Pearle MS, et al How do urology residents manage personal finances? Urology. 2001;57:866–71
6. Stanley TJ, Danko WD. The millionaire next door: The surprising secrets of America's wealthy books.Atlanta: Longstreet Press . 6;: The millionaire next door: The surprising secrets of America's wealthy books Atlanta: Longstreet Press 1996
7. Teichman JM, Cecconi PP, Bernheim BD, Novarro NK, Monga M, DaRosa D, et al How do residents manage personal finances? Am J Surg. 2005;189:134–9
8. Burg B. Young doctors face a steep climb Med Econ. 2001;78:82
9. Drentea P, Lavrakas PJ. Over the limit: The association among health, race and debt Soc Sci Med. 2000;50:517–29
10. Collier VU, McCue JD, Markus A, Smith L. Stress in medical residency: Status quo after a decade of reform? Ann Intern Med. 2002;136:384–90
11. McNeeley MF, Perez FA, Chew FS. The emotional wellness of radiology trainees: Prevalence and predictors of burnout Acad Radiol. 2013;20:647–55
12. Li J, Tabor R, Martinez M. Survey of moonlighting practices and work requirements of emergency medicine residents Am J Emerg Med. 2000;18:147–51
13. Pugno PA, McPherson DS, Schmittling GT, Kahn NB Jr. Results of the 2000 National Resident Matching Program: Family practice Fam Med. 2000;32:543–50
14. Dhaliwal G, Chou CL. A brief educational intervention in personal finance for medical residents J Gen Intern Med. 2007;22:374–7
15. Thacker PG. Personal finance for the radiology resident: A primer J Am Coll Radiol. 2014;11:205–8
16. Atun RA. Improving the doctor-manager relationship.Doctors and managers need to speak a common language BMJ. 2003;326:655
17. Eker TH. Secrets of the millionaire mind: Mastering the inner game of wealth.New York: Harper Collins . 5;: Secrets of the millionaire mind: Mastering the inner game of wealth New York: Harper Collins 2005
18. Allvine MC, Larson C. The Family CFO: The Couple's Business Plan for Love and Money.New York: Rodale . 3;: The Family CFO: The Couple's Business Plan for Love and Money New York: Rodale 2003
19. Ramsey D. The Total Money Makeover: A Proven Plan for Financial Fitness.Tennessee: Thomas Nelson Inc.;: The Total Money Makeover: A Proven Plan for Financial Fitness Tennessee: Thomas Nelson Inc; 2003
20. Prabhakaran S, Cevasco M, Mouawad NJ. Financial planning for residents Bull Am Coll Surg. 2011;96:23–7
21. Greene AK, Puder M. A resident's guide to personal finance Curr Surg. 2002;59:423–5
22. Read , C . Get Your Money for Nothing and Your Kicks for Free.In Global Financial Meltdown London: Palgrave Macmillan UK.;: Get Your Money for Nothing and Your Kicks for Free In Global Financial Meltdown London: Palgrave Macmillan UK 2009 p 38-44
23. Volpe RP, Chen H, Pavlicko JJ. Personal investment literacy among college students: A survey Financ Pract Educ. 1996;6:86–94
24. . .;:

    Career; debt; financial; investment; management; medical; saving

    © 2017 President and Fellows of Harvard College