Top Money Mistakes Physicians and High-Income Earners Make
Making a high income doesn’t mean you’re immune to financial missteps. In fact, many physicians and other professionals earning six or seven figures grapple with the same money mistakes. Whether you’re burdened with student debt, unsure about investing, or intimidated by financial planning, you’re not alone.
This list of the top financial mistakes, inspired by Tyler Olson’s insights (my co-host on the Physician Cents Podcast!), breaks down the key slip-ups so you can avoid them. Let’s dive in, add some context, and leave you with actionable advice to better manage your money.
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Not Getting Disability Insurance Early
As a physician or high-income professional, your ability to earn money is your most valuable asset. So, what happens if an accident or illness prevents you from working? That’s where disability insurance comes in.
During residency or fellowship, many programs offer a Guaranteed Standard Issue (GSI) policy. This type of policy doesn’t ask invasive health questions and gives you automatic base coverage. The beauty of a GSI is that you can expand your policy over time as your income grows.
But wait too long, and you might not qualify. If you develop a medical issue, you could be denied coverage altogether. The lesson? Take advantage of these plans early in your career when you’re still insurable.
Avoiding Financial Literacy
Do you think personal finance is too complicated? You’re not alone. Many high earners avoid learning about money because it seems overwhelming. But here’s the thing: you’re smart. If you can survive medical school or excel in other high-pressure fields, you can handle basic financial concepts.
You don’t need to become an expert or a financial planner. Start small by reading trusted books, listening to podcasts, or checking out platforms like White Coat Investor and Physician Cents. Building a base of knowledge won’t just help you grow your wealth; it’ll save you from costly mistakes.
Remember, ignoring finances because they seem complex is like refusing to learn CPR because it’s “too hard.” At some point, you’ll wish you had the skills.
Ignoring Debt
Debt doesn’t disappear just because you don’t think about it. Whether it’s student loans, credit card balances, or a mortgage that’s too big for your lifestyle, avoiding it only makes things worse.
If you’re a physician considering Public Service Loan Forgiveness (PSLF), ensure you’re on track to qualify. In private practice? Focus on paying down your loans aggressively. The same goes for credit cards—look for ways to consolidate and tackle that high-interest debt.
The key is to take action. Build a realistic plan, stick with it, and don’t let flashy cars or overpriced homes tempt you into deeper debt.
Buying a House Too Soon
After years of training, it’s tempting to put down roots and buy a home. But diving into real estate before getting to know a new area or job can be risky.
What if you realize you hate the city? What if your future doesn’t pan out the way you expect? Buying a house locks you in and can lead to financial headaches if you’re forced to sell too soon.
Consider renting during your training or early career. It’s flexible and gives you the freedom to move when necessary. A home can wait—build a solid financial foundation first.
Falling for Insurance Sales Tactics
Have you ever been pitched an overpriced insurance policy by someone who spoke at your training program? You’re not alone. These presentations often result in residents signing up for whole life insurance policies they don’t need.
If there’s one thing to walk away with, it’s this: don’t buy financial products from someone whose sole motivation is commission. Work with an independent insurance broker. They’ll recommend options that fit your needs—not theirs.
And if you’ve already ended up in one of these expensive plans? Review it carefully. There’s a good chance you can adjust to a better policy.
Being Too Afraid to Invest
Are you letting fear keep you out of the stock market? It’s one of the biggest mistakes high earners make. Many professionals feel safer letting their money sit in a checking or low-interest savings account, thinking, “At least I can’t lose money.”
But here’s the reality: you are losing money. It’s called purchasing power, and inflation eats away at it. Even high-interest savings accounts won’t keep up.
Investing doesn’t mean taking risks you’re uncomfortable with. Create a financial “bucket” system:
- Short-term goals: Keep cash on hand for emergencies or plans within the next five years.
- Medium-term goals: Consider less risky investments like bonds.
- Long-term growth: Go for diversified index funds or ETFs.
With the right strategy, you’ll see your money grow while staying protected against market swings.
Misunderstanding Roth IRAs
Did you know that earning too much can disqualify you from contributing to a Roth IRA? If you’re married, filing jointly, and your income hits a certain threshold, you can no longer go the direct Roth route.
But don’t panic. A backdoor Roth IRA offers a way around these limits. This option requires converting a traditional IRA, but it’s worth the effort for high-income earners.
If you’re unsure about eligibility or how to set it up, consult a financial advisor. They’ll guide you through the process without breaking out the tax jargon.
Skipping Employment Contract Reviews
Imagine signing a contract only to find out later you’re locked into unfavorable terms. Think it can’t happen? It does—all the time.
Before you accept an offer, have the agreement reviewed by an attorney who specializes in physician contracts. They’ll point out things like:
- Potential non-negotiable clauses.
- Opportunities to ask for better compensation or perks.
- Restrictions that could hurt you later (e.g., non-compete clauses).
An attorney’s fee is a small price to pay to avoid career headaches down the road. Plus, you may walk away with some unexpected wins during negotiations.
Overlooking Estate Planning
If something were to happen to you tomorrow, would your loved ones be financially secure? Would they know what your wishes are?
Estate planning isn’t just for millionaires—it’s for anyone with family, assets, or medical preferences. At a minimum, make sure you have:
- A will.
- A revocable trust (often helpful for simplifying probate).
- Powers of attorney for healthcare and finances.
- A living will to clarify medical choices.
These documents protect your legacy and give you peace of mind. Don’t wait.
Struggling to Find a Work-Life Balance
Are you overworking yourself while barely spending the money you earn? Burnout affects many high-income earners, leaving them too drained to enjoy their success.
On the flip side, some spend recklessly without saving for the future. The key is striking a balance. Set aside funds for experiences that bring you joy—travel, hobbies, time with family—and save consistently for your long-term goals.
Money isn’t the goal; it’s the tool to live a fulfilling life.
Delaying Hiring a Financial Planner
You don’t have to manage your finances alone. Whether you need a one-off plan, hourly guidance, or full-on delegation, a good financial planner can help.
Working with a fee-only advisor ensures their focus stays on your goals, not commissions. And it doesn’t have to be permanent. Some may only need an annual check-in, while others benefit from a more hands-on approach.
It’s never too early—or too late—to get expert help.
Planning your finances as a physician or high-income earner doesn’t have to be overwhelming. Start with these lessons, adjust your habits, and reach out for guidance when needed. You’ve worked hard to earn your income—now make sure you’re managing it wisely.
Looking for a more thorough all-in-one spot for your financial life? Check out our free eBook: A Doctor’s Prescription to Comprehensive Financial Wellness [Yes, it will ask for your email 😉]