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12 Why’s and How’s of Financial Freedom for Healthcare Professionals

Financial well-being leading to financial freedom is one of the most critical but also most often overlooked aspect of overall well-being for healthcare professionals. I have personally experienced this at the end of my 7-year training period as a reconstructive plastic surgeon. I found myself burned out and losing my passion for medicine. Deep reflection helped me to identify that my lack of financial well-being was playing a huge role in my feelings of burnout. As a result, my wife and I made an effort to improve our financial well-being. And I made my comeback. As I continue on this path towards financial freedom as a healthcare professional, I have seen my overall well-being improve drastically. Equally as important however is that I have re-discovered my passion for medicine and become a better physician in the process. This is something that we all can achieve.

financial freedom healthcare professionals

Until I began caring for my financial well-being, personal finance intimidated and scared me. I had >$500,000 in student debt, credit card debt, no savings or investments, and no financial education. Unfortunately, this is not uncommon for many healthcare professionals. As a result, I stuck my head into the sand and ignored my finances. I fell victim to the all-too-common taboo in medicine that “money doesn’t matter.” While it is true that we get into this field to help others, as I have discovered, money does matter. It matters because out financial well-being affects our ability to care for patients. And financial freedom makes us better providers. In fact, imagine a country where every healthcare professional is financially free – working because he or she wants to, not because they have to. This would change our healthcare landscape for the better in ways that we cannot even yet imagine!

Regardless, your reason for improving your financial and overall well-being is personal

And perhaps you would like to reach financial freedom to leave medicine. There is nothing wrong with that. However, I imagine many of you, despite feelings of burnout, moral injury, fatigue, and loss of autonomy, would love to rediscover your passion for medicine on your own terms. This is exactly what financial freedom affords.

While I hope we have now established why financial well-being is important for healthcare professionals, it is important to address the how

As I mentioned above, personal finance and investing can seem complex, risky, intimidating, and scary. That is because we receive no formal financial education in our years and years of education and training. This is also to the benefit of salespeople often masquerading as financial “advisors,” looking to take advantage of healthcare professionals. 

The reality, however, is that personal finance is straightforward and simple. In fact, the fear I felt prior to looking at all of my financial mistakes soon turned to empowerment once I realized that I could now start to make positive changes. Your training in healthcare is much more challenging. If you can get through that, you can learn how to reach financial freedom!

Before diving deeper into the how

There is one other common limiting belief that I would like to address.

All healthcare professionals, regardless of position or income, can achieve financial freedom. As I will show, your income level is just one of many variables in this equation. It is not the sole determinant. A family medicine doctor has the same ability as a plastic surgeon. A nurse has the same as a physician.

By following the simple personal finance principles herein, financial freedom is within your grasp!

12 Steps to Financial Freedom for Healthcare Professionals

Each step here will have a small description and link to additional resources to learn more!

1. Build your “why”

This is the most important step. It is the reason you want to achieve financial freedom and financial wellness. If there is no reason, then it will feel pointless when, and if, you get there. Any roadblock in the way will feel insurmountable. Your “why” is there to pull you through the hard times when you need it.

My “why” is that I want to gain financial well-being to enhance my overall well-being, to spend more time with my family and friends, and to pursue my passion on my own terms.

What Is Your Why?

2. Begin your financial education

Pick up a finance book. Start reading 10 pages each day, then try to read one financial book each year. It is minimal effort and will pay huge dividends in the long run. If you are not a fan of reading or want to get up to financial speed faster, I recommend podcasts or blogs.

Financial Education 101: How to Finally Get Started on the Path to Financial Well-Being

3. Pay off debt

This truly is the first step to financial freedom. You need to stop taking on new debt and get rid of any and all debt you currently have. When you are in a hole, the first step is to stop digging; then start climbing out. You can’t run until you get out of the hole. Each $1 you use to pay off debt is another $1 increase toward achieving a positive net worth.

How I Refinanced My Private Student Loans
Student Loan Refinancing

Watch Jordan’s Masterclass Webinar on The 12 Steps to Financial Freedom for Physicians here!

4. Get insurance

If you depend on your income to live (i.e., you are not financially independent), then you need disability insurance. Does someone (i.e., spouse, kids) depend on your income to live? If so, you need term life insurance (not whole life insurance). Additionally, if you are practicing medicine, then you need malpractice insurance.

Not having sufficient coverage in these areas could set you and your loved ones up for potential financial catastrophe.Consider the idea that it is better to have it and not need it, than to need it and not have it. 

Life/Disability Insurance
Is An Accelerated Benefit Rider on Term Life Insurance Right for You?

5. Optimize your contract (current or new)

Fair or not, contract negotiation is the time when you set the foundation for what you will make and how you will make it.

There is usually some wiggle room within the contract to make more or less over time. However, you largely set the scale of your income as soon as you sign on the dotted line. Therefore, if you are negotiating your first contract, take the time to make it as favorable as possible . If you already have a contract, go through it and see what you would change if you could. See how close you are to your renewal time and create a strategy to make the next contract the best it can be.

Top 10 Things to Know Before Signing Your Contract (The First or Tenth!)

6. Learn to keep score.

One of the biggest mistakes that high income earners like healthcare professionals make is that we confuse income with net worth. And a high income does not guarantee a high net worth, i.e. wealth. If one makes $300,000 each year and spends $300,000 million each year, their net worth and wealth is actually $0.

Net worth is calculated as the difference between your assets and your liabilities. Put simply, assets are things that put money in your pocket like stocks, bonds, and cash-flowing real estate. Liabilities meanwhile are things that take money out of your pocket like credit card debt, student debt, car loans, and personal home mortgages. This is why each $1 of debt paid off equals a $1 increase in your net worth.

Review your net worth at least every 2-3 months. See what actions are helping your net worth and which are hurting it. Then you can adjust your strategy.

5 Steps to Increase Your Net Worth Right Now
Net Worth Update: From -$400K to +$400K in 14 Months

7. Budget

Budgeting can seem quite restrictive. But in reality, it is the opposite. A budget allows us to track our spending to ensure that we can reach our financial goals.

The end goal of your budget is that you want to create a savings rate of at least 20% of your gross income. This savings rate is your margin, or the difference between what you earn and what you spend. And a simple formula to build wealth is to increase and invest your margin. Your budget helps you do exactly this.

I Screwed Up Our First Budget. But Don’t Worry, It’s All Permissive Baby!

8. Use the right strategy to invest your money

Once you have created a savings rate of at least 20% of your gross income, you need to invest that money. If you don’t invest it, you are losing money due to inflation. The question then becomes, what is the best way to invest your money?

If you save 20% of your gross income and invest wisely in index funds, as a high income earner, you will be able to retire and reach financial freedom on your own terms.

Stress Free Stock Market Investing Is Easier Than It Seems!
401k vs Real Estate: Which Is Best?
The 7 Step Basic Formula for Wealth for Healthcare Professionals

9. Invest in the right places

Once you have decided how to invest your savings, the next decision is where to invest your savings. You can invest in a regular taxable investment account. Money in this account is taxed when contributed (via income tax) and taxed again when it is withdrawn (via capital gains taxes). 

However, there are other investment accounts available that carry significant tax advantages. The best strategy is to maximize contributions to tax-advantaged accounts available to you before utilizing a taxable investment account. 

A Quick and Dirty Guide to All Types of Investment Accounts: Where Should You Put Your Money?

10. Spend intentionally

Intentional spending is the concept that one is intentional with the money that she or he spends. Meaning that any purchase is well thought out and carries an intended purpose. In contrast, unintentional spending is a reflex when money is spent without focusing on the joy, or lack thereof, it brings.

Unfortunately, research has shown that we are incredibly bad at predicting what will make us happy – especially with our purchases.

Money is simply a tool. A tool that I believe should be used for the betterment of yourself, your loved ones, and your world community. Spending money that you would is not bad. But at the same time, to spend that money unintentionally in a way that does not accomplish those goals would be wasteful. So, the key is to spend money intentionally.

The Simple Formula to Practice Intentional Spending

11. K.I.S.S.

We all know people in healthcare that are complexifiers. And we know those that are simplifiers. In general, it is the simplifiers who are able to break down difficult concepts into understandable and teachable components. Finance is no different.

Seek financial mentors who are able to simplify the concepts of wealth building. If you can understand and practice plastic surgery, you can understand and enact health financial strategies. If someone is explaining an investment that you cannot understand, it is best to avoid it.

The Simple Path to Wealth for Doctors: Back to Basics
The Simple Habits That Will Make You Financially Successful

12. Create a written personal financial plan

A written personal financial plan is a document that you create to guide your financial decisions based on your personal goals. With a financial plan, you can constantly refer back when faced with tempting or challenging financial decisions to ensure that you make the right ones – which will be completely personal to you. Creating a written personal financial plan is the culmination of each of the previously discussed steps.

To begin making your personal financial plan, list out your financial goals. Everyone’s goals should be different and unique to your own philosophy and circumstances. Once you have established these goals, create financial priorities or steps that will serve as signposts on your journey. Some examples:

Now you need guidelines for how you will invest to reach these goals. That way, you know exactly what you need to do. After this, all you need to do is follow the plan and you will reach financial freedom.

With a written financial plan, you have laid out your goals as well as general and specific directions for getting there. That’s the hard part. Now, all that you have to do is implement the plan in an emotionless and mindless fashion and you can rest assured that we will reach our goals.

My Written Financial Plan Update

In the end…

Personal finance is an important but all too overlooked component of personal well-being for healthcare professionals.

By enacting simple and reproducible strategies, like saving and investing, all healthcare professionals can improve their financial well-being, reach financial freedom, re-discover their passion for medicine, and work on their own terms!

What do you think? Is financial freedom attainable for all healthcare professionals? Should financial freedom be a goal for all healthcare professionals? Does money matter? Let me know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

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