Nobody likes acknowledging mistakes—especially when it comes to finances. It can be painful to admit when we’ve made bad choices or have fallen short.
But financial well-being is like a central nervous system—it affects other critical processes in our lives. When we get things wrong with our money, we’re likely to have trouble elsewhere—in our relationships, and even with our health. As I’ve worked with my physician clients, I’ve observed five common—and stress-inducing—mistakes that we work together to eliminate:
Mistake #1: Spending Too Much
This is a problem for society as a whole—but especially for physicians. Coming out of residency, after many years of fiscal sacrifices, you relish the gushing levels of income finally flowing into your bank account. It feels heavenly. But you, your spouse and your kids need to know that having a high salary doesn’t mean you have a magic ATM machine that never runs out of cash. Overspending could shortchange your retirement savings and other financial goals, including debt reduction.
In my experience, the physicians who achieve the greatest long-term financial success continue to live like residents for several years following residency—gradually growing into their incomes as they save for the future. Let your family know that just because you can afford it, doesn’t mean that you need it. Set guidelines for spending and stick to them.
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Consider using a free app like Mint.com to establish budget goals. Set your 401(k) savings on auto-pilot at least at the level of the company match, if applicable, to make sure your retirement savings comes out first in every paycheck. You may also need to prioritize paying down student loan debt.
Your efforts to control spending won’t always be perfect—nothing is—but tempering excesses will help you and your family build good habits.
Mistake #2: Leaving Your Spouse In the Dark
In addition to all the other wonderful intangibles, marriage is the ultimate business partnership. That’s why it’s critical to share financial information so that both partners operate on the same page, and work toward the same goals. Not having a shared vision can lead directly to Mistake #1, in fact.
Sharing information helps you make better choices for your future. A spouse often can provide a helpful moderating influence should you get too aggressive in your investment mindset and can hold you accountable if you’re prone to procrastination.
A physician I work with kept putting off purchasing important insurance coverage. He didn’t see the need for it. But his wife persisted, and finally he acted. Not long afterward, he wound up in an accident that badly injured another motorist. And while the collision was not his fault, the complex case proved costly and would have been infinitely more expensive had his spouse not prodded him to obtain the coverage and the protection he needed.