Beau Hill
July 26, 2019

Typically, experience is something you don’t get until just after you need it. We, LongView Planning Partners, asked Dr. Paul Hill to reflect on his experience, as it relates to finances, transitioning from medical school, to residency, and ultimately into practice. Dr. Hill has 3 bits of advice for young physicians at this juncture:

#1: Start Lowering Your Debt and Be Careful About Accepting More Debt

As an educator, Dr. Hill believes “the greatest financial headwind residents are facing today is debt. Many young physicians have student debt and borrow money for living expenses.” His experience with debt during and shortly after his training years is summarized below:

Did you own a home or rent during your time in residency?

“Rented an apartment after I sold a house I bought during my internship year.”

When did you purchase your first home and how did you go about paying for it?

“I bought my second house with my first job out of residency.”

What were your thoughts/views on debt after residency?

“Since I bought a reasonable house, I was able to pay it off in 5 years. The interest rates were pretty high in 1989. I never bought a car without have the cash to pay for the car. My attitude was to keep the debt low and avoid credit card debt.”

What mistakes have you seen young physicians make coming out of residency?

“Increasing debt. Delaying addressing student loan debt issues.”

LongView Planning Partners believes the first thing you need to do is establish a plan for debt as it relates to your situation. By knowing what your options are, you can make decisions today that could positively affect your long-term financial success.

#2: Be Sure You Have Appropriate Life and Disability Insurance

Dr. Hill was issued a disability policy during his first year with the University. He also bought a private disability policy and has kept it for 20+ years.

At LongView, we believe is it important to consider insuring your risk now for the following reasons:

• Your health may change which could impact the coverage amount you are eligible for

• You could die or become disabled

• The cost of coverage will rise the longer you wait

• The amount of coverage you can buy may decrease over time

Additionally, LongView has identified four areas we think are important to consider:

• Contract

• Company

• Agent

• Price

Educating yourself is a good place to start to help you reduce your own personal risk.

#3: Start Saving for Retirement and Deferring Income, If Possible

LongView agrees with Dr. Hill’s last bit of advice because unfortunately, as a society we are not very good savers. Indicated by the chart below, the household savings rate in this country has been on a steady decline.

Source: U.S. Bureau of Economic Analysis fred.stlouisfed.org (March 12, 2019)

So, while over the last fifty years we have been living longer and longer (increasing the need to save for retirement) we have been saving less and less.  

The biggest asset you have in planning is time. At this point in your lives, as young professionals, you have ample time to reach your goals. Dr. Hill share’s his experience:

When did you start saving for an emergency fund and how many months expenses do you typically keep?

“Immediately, I saved money that will be easily available. I believe I had 3 months of savings and put it in a saving account set up at the same bank I did my checking. I wanted it to be easily accessible. I never needed it, but it was a good way to get a saving plan in place.”

When/how did you start saving for retirement?

“IRA from my first month. My state employee placed money in my TIAA-Cref account. Every year, I placed the maximum amount in my retirement in the years following.”

Finally, we asked Dr. Hill if there was anything he wished he had done differently financially when he finished residency. His response was simple:

"Nothing".

Again, experience is something you don’t get until just after you need it. We greatly appreciate Dr. Hill sharing his experience with us.

The views and opinions expressed by Paul Hill are his own and may not reflect those of MML Investors Services, or its affiliated companies. CRN202106-245981