If you answered “next to nothing,” “next to nothing,” and “I learned from my own mistakes,” you’re in excellent company. That’s the route many of us have taken, and I think our financial education is in need of an overhaul.
The Physician Philosopher agrees with me, and he goes a step further to state that not only financial literacy, but also financial independence should be part of the curriculum. I’ve expressed my opinion that FI can be useful in fighting burnout, but that’s not the only reason to teach it, TPP argues.
I want to thank Dr. James Turner, author of The Physician Philosopher’s Guide to Personal Finance, for sharing this guest post with us. This is his second submission to the site. We didn’t exactly see eye to eye in “Got Student Loans? Alter Your Asset Allocation,” but we are in full agreement here.
Financial Independence Should Be Part of the Medical Trainee’s Curriculum
The road to physician burnout has been well documented on The Physician Philosopher. It has been covered on other sites as well. In January of 2018, Medscape released a survey that showed 42% of attending physicians were burned out. Despite being a burn out survey, personal finances came up multiple times.
It first showed up when participants were asked to list the top causes of physician depression. Financial problems were listed as the number two cause – only behind our jobs.
And, again, finances played a part when physicians were asked about solutions to burnout at work. This time an increase in pay was listed as the number 1 survey response.
The survey showed that physicians – who are typically in the top 1-5% of earners – felt that the most important answer to their burnout was being paid a higher wage. In my opinion, this is an example of the poor financial literacy that exists in the attending physician community. There is a very low likelihood any increase in pay would be used to build wealth, or to improve the lives of those who received it.
This isn’t just an attending physician problem, though. Residents in training have also shown a large gap in their personal finance knowledge. This knowledge gap likely exists in non-physician medical training programs, too.
For the reasons mentioned above, today’s guest post will detail the importance of teaching personal finance and financial independence in training. You might notice, however, that the RE of “FIRE” gets left out.
You’ll have to keep reading to find out why.
With ~75-80% of medical students graduating with student loan debt and the average debt burden sitting at just under $200,000, it doesn’t take a mathematician to understand the problem.
The issue gets compounded in residency training when physicians are forced into a job where the income provided often prevents them from covering even the interest that grows on their debt each month.
This explains why many medical trainees have financial difficulties constantly on their mind. Learning can be difficult when you aren’t sure if you can afford to pay for all of your expenses.
Add to the situation the fact that most physicians have a very low financial literacy, and the problem turns ugly fast. Physicians finish training with a lot of pent up delayed gratification and impending burnout, which leads to huge financial mistakes in the first year as an attending physician.
As a way of dealing with these issues, physicians try and buy their way to happiness. Enter the big house, expensive cars, private school for the kids, & designer clothes and gadgets. This is all on top of student loan and consumer debt. After the taxes and all of these monthly expenses are taken out, building wealth becomes very difficult.
There isn’t enough money left to accomplish smart financial goals. The reason? They were never shown a different way. So, they follow the examples provided by their peers.
All of this leads to one incontrovertible fact: teaching personal finance in training is paramount.
What might such a personal finance curriculum look like? Well, it would include – at a bare minimum – the following topics:
- Personal finance basics (budgeting, lifestyle inflation after training, managing consumer debt, emergency funds, etc).
- Wealth management (savings rates, the wealth and income myth, paying yourself first, net worth goals, etc.)
- Making a financial plan
- Conflicts of Interest in the Financial Industry (including where to get advice, if needed)
- Buying versus renting a house
- Investing in the market & market history
- Investing in Real Estate
- Student loan debt management
- Asset protection
- Private practice benefit models (buying into partnerships, profit sharing, defined benefit plans, etc).
A curriculum that is completely fleshed out would also include topics specific to practice management, such as contract negotiation, running a private practice, billing and coding, buying practice real estate, and business finance.
Great. Training programs need a personal finance curriculum. And we’ve discussed what it might look like, but what’s the focus? In my opinion, the focus should be placed squarely on achieving financial independence (FI).
Here are some reasons why:
- Autonomy at work is important, and being financially independent is the ultimate form of autonomy. The FI doctor might use their new found leverage to design a career that they would love.
- Going part time becomes an option. This allows for someone to optimize their work-life balance. People can consider pursuing new hobbies, passions, or projects.
- Part time work also allows people to focus on the aspects of the job that they enjoy – while they drop the portions that are problematic.
- Financial independence provides the freedom to give and to give generously, though I sincerely hope you’ve been giving along the way.
- The most important reason? Physicians who are on the path to FI are often better doctors. With a proper plan in place, concerns about debt burdens and the ability to realize a bright future become less of an issue. A financially independent physician can place their focus on taking good care of patients.
On a site focused on FIRE, you might wonder why I haven’t mentioned the “RE” (retiring early) yet.
The reason is that when I started teaching these financial topics to my trainees (and on my site), I realized something pretty quickly. Teaching early retirement while people are in training to do a job that they haven’t even started yet often isn’t helpful. And sometimes it can be harmful.
Heresy, you say!
Hold on. Hear me out.
Here are five reasons why preaching early retirement in training can actually be harmful.
Teaching trainees to get out of a job before they even start can be a depressing idea. The thought of leaving early might make some focus on the aspects of their job that they can’t stand and can’t wait to leave behind. Making them dread a job that they haven’t even started isn’t ideal.
Our goal is to reduce burnout, not to add fuel to the flame. Preaching financial independence alone allows people to reach their goals. It’s not really important to teach them early retirement at this stage.
As humans, we crave accomplishment and purpose. The timeline for retirement is often too far away for it to be helpful while people are in training. Remember, in the beginning, most medical professionals are usually hundreds of thousands of dollars upside down in debt.Focusing on early retirement from the onset may prevent them from digging in and learning their craft. In other words, if the plans are to leave the field from the onset, this might limit their drive to reach their full potential. I am not sure this is good for them or their patients.
Instead, a focus on FI alone will allow them to continue their drive while making smart financial decisions.
It took all of us years to get to become competent. Thousands of hours have been sacrificed learning our craft.
Yes, there is a burnout problem in medicine. However, retiring early is not the answer to many of the problems we face. In fact, cutting back and going part-time often helps many people rediscover the love they originally had for their profession.
Leaving medicine completely might not be the answer, and so it likely isn’t something that should be taught to everyone. Maybe the answer is going to 50-90% of an FTE? This can occur while someone is clearly on the road to financial independence. And it just might save their career.
There is a resistance among older generations, who currently run most hospitals and training programs, to let people teach personal finance to trainees. The reason why is often because they are afraid that early retirement will be the main message.
While I am a firm believer that people should be able to design the life that works for them, preaching early retirement often prevents this subject from being introduced to trainees. Leaving it out and letting people decide for themselves what they want to do with their financial freedom should be the goal.
This is one way to dodge the generational roadblock and make sure people get the stage to introduce personal finance topics at all.
There is something to be said about creating resilience in life.
If the first thing we teach people is that the answer to a less than ideal career is “getting out,” I am not sure this proves helpful to our personal or societal goals with medical training programs.
Medicine needs to change. It also needs people who are strong and resilient enough to stick around to change it. Preaching an early exit might not be helpful in this regard.
All that said, I have no problem with doctors retiring early if they decide it is the right thing for them. In fact, I’ve written in the defense of those who choose this path.
The need for teaching personal finance in training clearly exists. I am in favor of teaching with a slant towards financial independence and leaving out early retirement rhetoric. After people reach FI, they can choose what they want to do with it.
Instead, we should empower those we teach to make wise financial decisions so that they can “choose to practice medicine because they want to, and not because they have to.”
Do you agree that financial independence should be taught as a part of the medical curriculum? What are the most important topics that should be covered for young professionals about to start their careers?