Fresh out of training, your income jumps, but so do your decisions about what to do with it. Without a game plan, it’s easy to fall into the classic “doctor trap” of overspending early and regretting it later. The good news? A few smart behavioral finance moves can help you stay grounded while still enjoying your new lifestyle.
These four strategies have proven especially helpful for me and my wife (an outpatient adult psychiatrist) in our first five years after training. We will get personal here and talk about our personal finances. Now obviously, we are not a financial advising firm and don’t take anything here as that, but simply some initial considerations as you make this transition from a couple that’s already in the trenches.
Book a Free Initial Evaluation
1. Max Out Tax-Advantaged Accounts Early
One of the simplest but most powerful financial habits is to take full advantage of every retirement account available to you. This might include:
- 401(k) or 403(b) plans ($23,500 cap in 2025)
- 457(b) deferred compensation plans ($23,500 cap in 2025)
- Health Savings Accounts (HSA) ($7,500 cap in 2025)
- Backdoor Roth IRA
Maxing out these accounts, including employer-side contributions, added up to around $80,000+ per year in our house. That money was automatically invested before it ever hit our checking accounts, making it almost impossible to avoid investing that amount. We didn’t even ‘feel’ it as an expense because we never saw it in our checking accounts. When also considering the massive bull market over the past several years, that is now over $500,000 in retirement accounts after only 5 years of work. I recommend you set up automatic contributions so that saving happens without any extra effort. The less you must think about it, the more consistent you’ll be.
The benefits go beyond saving for retirement. By lowering taxable income now, you keep more money invested and working for you instead of going to the IRS. This is one of the easiest ways to build long-term wealth without constantly thinking about it. You will also want to consider Roth v. Traditional, but it’s more important to set financial habits early instead of getting too bogged down in this.
Ally is going for PSLF, and this is a big piece of our financial plans. Lowering taxable income now means she pays a little less toward her loans while pursuing forgiveness. Every dollar invested in tax-deferred accounts means another 10%-15% of that dollar does not need to be paid toward her loans, which increases the amount of PSLF forgiveness she’s on track to receive. We essentially get another 10%-15% yield on everything we save in tax-deferred accounts.
Even if we stopped investing now and waited until we’re 70 to retire, that amount would probably quadruple. We are probably not too many years away from “Coast FI” at this speed (likely hitting that threshold sometime in our mid-40s), which means that we no longer need to make any retirement account contributions for the funds to last us indefinitely under reasonable investment and spending plans. We will likely keep going anyway, but it’s a fun thing to track and nice to know where things stand.
Depending on your income and expenses, you can certainly go beyond this. We have student loans and a couple of kids (and I’ve been building a law firm), so these investments are our primary wealth-generating activities for now. You can apply the same principles to brokerage accounts or whatever else you want to invest in. I like retirement accounts because the behavioral aspect is important – it’s super easy to automate and harder to get off track. However, there are certainly tons of opportunities to invest in other things and not focus so much here. Real estate is quite popular among physicians, especially if their spouse can reach Real Estate Professional Status (REPS) and benefit from the substantial tax implications. There are other ways that might create more yield faster.
Pro tip: Before you sign your first employment agreement, make sure you understand what retirement accounts you have access to, how soon you can start contributing (some require you to work for 1,000 hours or one year before you can start contributing), and how much the employer will be contributing to your accounts. If you’re going for PSLF, consider how reducing taxable income now will also contribute to lower loan payments and more forgiveness. These details can add up quickly over time.
2. Track Your Net Worth Regularly
Net worth is simply the total value of what you own minus what you owe. Tracking it every six months provides an instant snapshot of your overall financial health, and we have done this regularly. This process is not just about numbers. By reviewing spending and net worth together on a regular basis, you and your partner can stay aligned on your financial goals while still enjoying life.
It helps you:
- Stay aware of your spending patterns… lifestyle creep is real.
- Identify which expenses truly add value to your life. Cut things that cost more than the happiness they bring you, and add things that cost less than the happiness they bring you.
- Make intentional decisions about where your money goes.
Our favorite expense is our nanny/house manager. This is a major expense, but she helps us buy back a ton of time to spend on core values, like time in our relationship, family time, mental and physician health, and our careers. It might feel odd to have someone else do most of your grocery shopping, cooking, laundry, housekeeping/management, odd chores and errands, etc., but the time costs of these can add up quickly. It can be difficult to enjoy your bustling career and your hard-earned income when you spend the rest of your time doing low-value admin/housekeeping tasks that don’t bring you joy. We went all in for a full-time employed option, but you can also piecemeal this by starting to outsource on a part-time basis.
We also love having a rental cabin on a lake in northern Wisconsin. Although it’s another big splurge for us, we spend about 60+ nights per year there and have amazing family time associated with this expense.
On the flip side, we recently decided that frequent restaurant spending didn’t bring as much joy (and didn’t help our health and fitness), particularly at certain restaurants and on date nights. We are shifting that budget toward more meaningful date nights, including skiing, musical venues, and other shows.
Pro Tip: Make sure you understand the “Exit Strategy” costs associated with your physician employment agreement. Use that knowledge about your contract to develop an emergency fund that is healthy enough to avoid massive changes in your short-term finances if you want to change jobs. For example, if a change in jobs will mean selling houses, paying back signing bonuses, waiving bonuses you’re on track to earn, paying for malpractice tail expenses, or there will be a gap in earnings because of termination clause issues and you can’t mitigate any of this through moonlighting, it’s prudent to calculate these and set aside funds to address it. If your emergency fund matches your exit strategy, then you’ll feel more freedom to stand up for yourself at work and change jobs if the position does not match your career goals and life plans.
For example, we have three sources of income – Ally’s W2, Ally’s 1099 moonlighting, and my earnings from the law firm. When paired with our checking accounts, as long as we had at least one of these still coming in, we’d be fine for at least 6-9 months during any transition period. We might need to pause retirement account contributions and discretionary spending, but nothing too crazy. In a real, serious pinch, we could take a loan against our retirement accounts and/or a home equity line of credit against the gap between our mortgage and the actual value of our home. I hope we never have to do any of that, but it’s nice to have that financial stability to withstand the unexpected.
Bonus Tip: During these meetings, consider how much you are earning and how much you are working, and compare it to your financial health. Do you want to consider adding more income through adding more time or patients at work, or through outside moonlighting (if your contract allows)? Is now a good time to consider asking for a raise or exploring other job opportunities? Or is now a good time to consider slowing down a bit? If renegotiating compensation is on your mind, a great place to start is a Compensation Consult with the firm. We will look at your current earnings, current work volume, and compare it against compensation data and our experiences in the firm negotiating tons of these deals.
3. The “BIG ROCKS” Matter More Than a Latte
The two “Big Rock” expenses in my mind are housing and cars. Cutting out a couple of lattes or not going for the extra guac won’t move the needle much for most physicians.
It’s tempting to celebrate your first attending paycheck with a dream home and a sweet new ride. However, buying a high-priced house and/or an expensive, depreciating asset (no matter how fast it is) too soon can eat up your cash flow and slow down your ability to invest elsewhere. Many residents and fellows start making financial plans on the whole salary, which will get hammered by taxes. That $400,000 starting salary will often turn into $200,000 – $250,000 after considering income taxes and automated retirement account contributions. It’s wise to consider your housing budget on that post-tax and post-retirement contribution amount instead of the whole salary listed on your contract. It’s also wise to consider buying a used car with cash in the beginning, and then set financial goals for when it’s time to upgrade.
Consider the cost of living when considering your first post-training position. We live in suburban Milwaukee, and buying a reasonable and comfortable ‘non-doctor’ home under $500K is very doable. Our monthly mortgage is less than what we currently apply to:
- Maxing out retirement accounts.
- Hiring help at home to save time.
- Covering private school tuition for our kids.
- Student loan payments.
The point is not to deprive yourself, but to spend intentionally. It’s to maintain flexibility so you can put money toward the things that truly matter in your life.
Pro Tip: If a large portion of your monthly expenses is variable and can be adjusted quickly during a career transition, this is super helpful and can ease pressure on your Exit Strategy emergency costs. Big, fixed expenses, like housing and cars, can reduce your early-career flexibility. For example, our ‘somewhat required’ monthly expenses just expanded with private school tuition and caused us to reconsider our overall financial plans, significantly reducing our personal finance flexibility. However, having everything else under control allowed us to have the option, which is valuable. Especially if you have a spouse and kids in the mix, flexibility can go a long way.
4. Create a Realistic Student Loan Plan
It’s tempting for physicians with big student loans to feel like it’s impossible to resolve this big pink elephant in the room. For physicians with big student loans, let’s say, .75 to 1.5 times their expected total earnings, you really need a plan. In the firm, our experience is that we see physicians resolve their loans in one of three ways:
- Live Like a Resident: Get super aggressive right out of training. Give yourself a moderate raise in spending, but shovel a lot of money at it right away for the first 2-5 years. It’s easier to do this before you have become accustomed to higher spending, and much harder to do it when you’re required to cut back. Painful, but effective.
- PSLF: There’s a ton in the news right now about federal student loan programs and the future of PSLF for newer physicians, but generally speaking, things appear to still be on track for physicians already in the program. Your training may still count toward the 10-year non-profit service required for student loan forgiveness. However, this appears poised to change soon, so go check this out before you decide.
- Pay Slowly, For a Long Time: This option allows you to build financial security in other areas and may allow for more spending and lifestyle enjoyment early, but will result in a large interest expense.
We both have rough student loans! I went to private law school without a scholarship, which was the worst financial decision I ever made. Ally went to out-of-state medical school but is on track for PSLF in late 2026 or early 2027. We are working on mine while utilizing PSLF as our plan for Ally’s. We are very exposed to potential changes to PSLF. If it went away, we’d have to make some serious changes to our next financial strategy.
The math here can be staggering. Let’s say you expect to make $400,000 in total income per year and have a $300,000 student loan balance at 7.5% interest. If you plan on resolving this in the first 5 years post-training, you’ll need to apply $6,011 per month toward those loans over the next 5 years, totaling $360,683. Your $400,000 income turns into about $200,000 – $250,000 in post-tax and post-retirement net income. Your first $72,000 would be going toward student loans, leaving you with about $128,000 – $178,000 for the rest of your spending. This still sounds like a lot of money coming out of training, but it can be eaten up quickly if you spend a lot on the “Big Rocks” right away.
Note: If you pay this off over 20 years, you’d pay $2,416 per month and pay a total of $580,027.
However, here’s the good news. If you put $50,000 + into retirement accounts and pay off your $300,000 loans under your 5-year plan, you’ll likely find yourself turning your net worth positive to the tune of $600,000 or more during the first 5 years post-training. Starting off this way will relieve most of your financial anxiety early on, particularly as you consider growing a family.
Pro Tip: If you have big loans, you’ll likely need to have a financial plan in place before you start interviewing. If you’re looking at PSLF, that means you’ll need to focus on non-profit employers. Fortunately, most direct hospital employment and essentially all of academics would qualify, but private practice would not. Some, but not all, specialties pay a premium in private practice… but don’t assume that private practice options automatically mean a compensation premium that eclipses PSLF.
We have clients who realized this after a few years of being an attending, switching back to a PSLF-eligible position, and pursuing forgiveness. Use calculators, get help. We have personally benefited from consults with the Student Loan Planner. This is not a sponsored recommendation. It’s nice to get objective help here because the anxiety around this issue can cloud your judgment. It can be hard to stay objective when it’s your personal finances.
Why These Strategies Work
These tips work because they address both the numbers and the behavior behind them. By automating retirement savings and other investments, regularly reviewing your net worth, and keeping “Bog Rocks” costs reasonable, you remove much of the temptation to overspend and set yourself up for long-term success.
They also give you more freedom. When your fixed expenses are manageable and your investments are growing, you can make career decisions based on what’s best for your life, not just on what pays the most in the short term. If your employer decides to unilaterally change your compensation or work obligations in a way that’s unattractive to you (which happens regularly), you’ll be in a stronger position to push back or change jobs. I firmly believe a physician who is in a strong financial position will also be able to more effectively advocate at work and seek career opportunities that make them happier.
Want to see our family balance sheet? Email me at MEJ@MichaelJohnsonLegal.com.
Practical Tips for Implementing These Habits
- Start early: Set up retirement contributions before your first paycheck arrives. If your retirement account is unavailable until 1,000 hours or one year of work, automate a deduction from your checking account into a brokerage account for that same amount.
- Pick a tracking system: Use a spreadsheet or a free net worth tracking tool to stay consistent. I personally don’t like to see it every day on some tracking apps, and I enjoy the process of sitting down with Ally and looking at everything together. You should do what makes sense for you.
- Have regular money check-ins: Discuss spending priorities and goals with your partner every six months, or whatever regular timeline makes sense for you.
- Think lifestyle value, not status: Direct your money toward things that improve your life and bring you joy, not just your image. Some might think it’s odd for us to spend less on housing than we do on other things, but that’s been an intentional plan for us. You might have different goals and priorities, and that’s totally cool. You do you, boo!
- Understand your Exit Strategy: The details in your physician contract on Exit Strategy costs should match your financial plans, particularly your emergency fund. If your finances are built to withstand your contract, you’ll be in a better position to pursue your career goals and life plans. Evaluate and negotiate your first deal and get help!
