After more than a decade of school and training, dermatologists just starting out receive a substantial pay bump. Yet, according to financial planner Corey Janoff, CFP, there are some financial pitfalls that early career dermatologists can easily fall into.
“Spending before saving. Buying the new ‘doctor’ house too soon. Not prioritizing saving for financial goals before upgrading their lifestyle to reflect their new income in practice,” said Janoff, a financial advisor with Finity Group, an independent financial planning firm that specializes in working with medical professionals.
Janoff, who also is a co-host of the Financial Clarity for Doctors podcast, said these pitfalls can have a long-lasting impact. “If you don’t get on a good financial trajectory early in your career, the latter part of your career will be a grueling uphill climb, further increasing the odds of burnout.”
So what are some key financial tips for early career dermatologists? In addition to Janoff’s perspective, I reached out to two dermatologists who have led storied careers to learn their top financial tips for the next generation.
Live below your means
“My parents were middle class responsible adults who showed me how to budget,” said Maritza Perez, MD, who has been a dermatologist for 37 years. “Until this day I still live within my means and we have been able to pay for our children’s education so that they can also start their lives without debt.”
Save early and regularly
“Achieving financial independence is quite simple on paper,” said Janoff. “Work hard, save a lot, spend less than you earn. Easier said than done, of course, but if you commit to saving at least 20 percent of your gross income for retirement, you should be on a healthy track.”
“Maximize your retirement and college education contributions,” advised Jeffrey Dover, MD, who has been a dermatologist for 35 years.
Establish a routine of paying toward student loans
“In training, start making income-driven payments to get used to paying something towards the loans,” Janoff said. “Once in practice, before upgrading your lifestyle, come up with a payment strategy to tackle the student loans while continuing to live like a resident for a few years.”
Dr. Perez also recommended paying off loans through regular payments. “I had taken a $10,000 federal guaranteed loan to cover the cost of books, and my husband and I paid that loan off over the next 10 years.”
Consider refinancing if loan forgiveness isn’t an option
While the Public Service Loan Forgiveness Program is an option for those employed by the government or a not-for-profit organization, Janoff conceded that this program isn’t an option for most dermatologists. Therefore, refinancing once in practice may make sense, “if you are 110 percent sure you won’t be working in an academic or non-profit/hospital setting and you can afford the minimum monthly payment required on the newly refinanced loans.”
Invest in what you like
“If you like to ski, buy a second home near a ski area so that you can enjoy your investment,” said Dr. Dover.
Seek expert advice
Janoff recommended finding an independent financial advisor. “If your financial advisor works for a company that has its own products, odds are the advisor is recommending his or her company’s stuff,” he said. “Not that it’s necessarily bad, but you aren’t getting the most objective advice.”
Janoff also suggested working with a financial advisor who has the Certified Financial Planner (CFP) certification. “This means they have at least a couple years of experience and have completed rigorous financial planning coursework and exam requirements.”
“You do have to pay for this expertise but it’s worth every penny if they are good,” said Dr. Dover.
Don’t be afraid to make a change
“If you don’t match well with the financial advisor you’ve chosen, do not hesitate to change,” said Dr. Dover. “It took a long time until we found the right financial advisors. We went through several and finally found a great team.”
Janoff said that if early career dermatologists implement only one financial strategy it should be this one: save. “Saving a lot means you don’t need to have the ‘best’ investment strategy to achieve your financial goals.”
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