New Attending Physician Pay Jump: What to Do Next
As a new attending physician, you’re finally seeing a significant boost in your income. After years (a decade?!?) of hard work, long hours, and strict budgets as a resident, you’re stepping into what many consider the financial “big leagues.” While this pay jump is exciting, it also comes with crucial decisions about how to manage and allocate your money. From tackling student loans to saving for a home or planning for long-term investments, the key is finding the balance between your immediate needs and future goals.
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Why the Pay Increase Matters
Your transition from resident to attending physician likely triples or even quadruples your paycheck. It’s a huge change, and with it comes the temptation to upgrade your lifestyle. Fancy cars, a sprawling home, or luxury trips may beckon now that you’ve got more financial freedom. But don’t let lifestyle creep take over. Spending everything as your income rises will put you right back where you started—living paycheck to paycheck, just with more significant numbers.
This is one of the greatest opportunities to achieve long-term financial stability. By making smart choices early on, you can avoid unnecessary stress later.
Tackling Student Loans
Federal Loans: The PSLF Path
If you’re pursuing Public Service Loan Forgiveness (PSLF), it simplifies things. You’ll focus on income-driven repayment (IDR) plans for 120 qualifying monthly payments while working for a nonprofit employer. Ensure you’re in the correct repayment plan, certify your income each year, and verify payments on time. That’s your golden ticket to clearing those loans without overpaying.
Also, don’t throw extra money at PSLF-eligible loans. Uncle Sam doesn’t reward overpayments in this program. Stick with the minimum required payment and let the forgiveness clock run its course.
Private Loans: A Quick Payoff Plan
Got private loans? The strategy shifts. Without federal forgiveness as an option, you’ll want to knock those out as soon as possible. For most physicians, paying them off within 5 to 10 years is the sweet spot. If your household income is substantial and you’re not juggling huge expenses like childcare or a mortgage, aim closer to five years. For a busier financial situation—say you’re raising a family—ten years might make more sense.
Should You Refinance?
For private student loans, refinancing can cut your interest rate significantly—but only if the timing makes sense. Interest rates fluctuate, so monitor the market. If rates drop and refinancing brings substantial savings, go for it. Just don’t refinance federal loans if you’re considering PSLF; refinancing switches those loans to private, disqualifying you from forgiveness.
Investing for the Future
Build Your Financial Foundation
When it comes to investing, keep it simple to start. Max out your 401(k) or 403(b) account, taking full advantage of any employer match. Next, set up a Backdoor Roth IRA for tax-free growth. These two steps alone build a strong foundation for retirement. If you’re married, have your spouse do the same.
Don’t let the basics fool you—consistent contributions to these accounts can add up to millions by retirement, thanks to compounding interest. Starting early gives your money decades to grow.
When to Do More?
If you envision an earlier retirement or a lavish lifestyle, you’ll need more aggressive savings. Look beyond retirement accounts to taxable brokerage accounts. Unlike 401(k)s and IRAs, there are no limits on what you can contribute here, giving you flexibility to accumulate wealth faster.
The earlier you pursue financial independence, the more you’ll need to save. Therefore, tailor your strategy to your goals.
Buying a Home
Is Now the Right Time?
Many new attending physicians dream of settling into a home they can call their own. You’ve likely moved multiple times for college, medical school, residency, and fellowship—it makes sense to want stability. Yet, buying a home is a massive financial commitment. Before diving in, ask yourself: Does this fit into my long-term plan?
Physician Mortgages: Pros and Cons
Physician mortgages are a handy tool that lets you buy a home with little to no down payment. This can seem appealing, especially when cash flow is tight. However, be cautious. Just because it’s “designed for doctors” doesn’t mean it’s always the best option.
Weigh the cost of smaller down payments (potentially higher monthly payments) against waiting and saving for a more traditional mortgage. The goal is to buy a home that fits your budget—one that leaves you with flexibility for other goals.
Saving for a Down Payment
Set realistic savings goals for your down payment. If you’re aiming for $50,000 in two years, that’s about $2,000 saved monthly. Can you comfortably allocate that with your current expenses? If not, adjust your timeline or savings target. Consistency and a focused plan make all the difference.
Don’t Overspend on Your First Home
Avoid splurging on a dream home fresh out of training. A bigger mortgage limits your financial flexibility. Instead, focus on affordability—buy a home that meets your needs without draining your income. You’ll thank yourself if your family or career goals shift.
Preparing for Parenthood
The Baby Bucket Strategy
Planning for kids? Start saving into a “baby bucket,” a fund you’ll use for immediate child-related expenses. Begin socking away $250 to $1,000 a month, based on what fits your budget. This savings ensures you’re ready when costs like hospital bills, strollers, and daycare hit.
Major Costs to Account For
Childcare is often a family’s largest expense. Decide early on whether one parent will stay home or if you’ll need full-time daycare. Research costs in your area to prepare.
Long-term education costs loom. Start a 529 savings plan for tax-advantaged college savings. Even small contributions now can grow significantly over time.
Flexibility Matters
Raising kids often throws financial curveballs. By staying flexible with your budget pre-kids—avoiding luxury cars or unnecessarily large mortgages—you’ll have room to navigate new expenses without stress.
Handling Extra Cash
Pay Down Debt or Invest?
Let’s say you’ve got extra cash after covering your essential expenses. Should you pay down debt, invest, or both? The answer is almost always a mix.
Take high-interest debt, like a mortgage above 6%. Historically, long-term market returns should beat that rate. That said, paying extra might still make sense if carrying debt bothers you.
For example, a mortgage payment of $2,200 could be rounded to $2,500. You can use the added amount to reduce the principal without committing all your savings solely to debt.
Watch Interest Rates
Keep tabs on interest rates. If rates drop significantly, refinancing your mortgage or private student loans could free up extra money each month. It’s not a question of if you’ll have refinancing opportunities over 30 years, but when. Stay informed and act when the time is right.
Why Flexibility is Key
Financial plans aren’t set in stone. Life happens—kids, career changes, and unexpected events can alter your path. By sticking to flexible budgets and avoiding over-commitment, you’ll stay prepared for whatever comes your way.
Avoid locking yourself into high fixed costs early in your attending career. Instead, focus on preserving cash flow and keeping options open. This gives you room to adjust, whether it’s scaling back work hours or seizing a new opportunity.
Why You Should Work With a Planner
If this sounds overwhelming, you’re not alone. That’s why sitting down with a financial planner—even just once—can be transformative. A planner helps you organize your goals, create a roadmap, and avoid costly mistakes. It doesn’t need to be a long-term engagement. Even a single session can provide clarity.
With a financial blueprint, you can confidently prioritize between paying off loans, saving for a home, investing, and tackling future goals without second-guessing.
Achieving financial stability as a new attending physician boils down to balance. Pay off student loans strategically. Save for your future, but leave room for life’s surprises. Handle extra cash wisely. And don’t hesitate to seek professional advice when needed. You’ve worked hard to get here—now’s your chance to build the foundation for a secure, fulfilling future.
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