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You have finally completed your training and are now practicing as a physician, dentist or veterinarian. Congratulations! Your years of hard work in school and training are finally paying off — literally.
Receiving a substantial paycheck after years of less income can be very exciting, but this significant jump in pay can come with challenges. Lifestyle creep is one of these challenges.
The term “lifestyle creep” refers to increased spending as a result of increased income. As one earns more money, there is a tendency to spend money on more or nicer things without realizing how these expenses add up.
This behavior can ramp up gradually until you are spending more than you can afford. Though spending your hard-earned money can feel rewarding, letting it become out of control can have detrimental effects on your financial health and long-term goals.
Doctors have unique financial life cycles because of their lengthy education and training. These are periods of low or no pay — the average medical resident pay was just over $59,000 in 2021 — but once completed, their income can increase by two or three times — the average physician salary was $208,000 in 2020.
Doctors spend years in training, yet often receive very little financial training. According to a study published by American Journal of Perinatology, more than 90% of resident physicians feel that they are unable to handle their finances.
This lack of knowledge means many doctors enter their careers with no idea what to do with their substantial paycheck. Young professionals with low financial literacy may put off saving for retirement or long-term goals because they feel these milestones are a long way off.
Despite the hindrances that lack of knowledge may bring, it is never too late to learn personal finance principles and strategies that can improve your quality of life.
Lifestyle creep can be an easy trap to fall into, especially as a new doctor, but that doesn’t mean it is inevitable. Creating a plan and sticking to it can help you spend more consciously. Here are some strategies that may work for you:
If you have found yourself spending more than you should, you are able to take control of your situation at any moment! Our recommended steps can help you get your spending under control, but a financial advisor can give you clear guidance that caters to your unique situation.
If a financial advisor could help you get on the right track, our Build Your Team program can get you connected to a trusted expert completely for free! Visit our Build Your Team page to learn more.
For other personal finance tips, visit our Resources page or check out one of our curated articles below:
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