“Some of our physician clients have seen their income decrease by as much as 50%,” says Joel Greenwald, MD, CEO of Greenwald Wealth Management in St. Louis Park, Minnesota. “Many physicians had previously figured that whatever financial obligations they had wouldn’t be a problem because whatever amount they were making would continue, and if there were a decline it would be gradual.” However, assumption is now creating financial strain for many doctors.
Vikram Tarugu, MD, a gastroenterologist and CEO of Detox of South Florida in Okeechobee, Florida, says he has watched his budget for years, but has become even more careful with his spending in the past few months.
“It has helped me a lot to adjust to the new normal when it comes to the financial side of things,” Dr. Tarugu said. “Patients aren’t coming in as much as they used to, so my income has really been affected.”
Primary care physicians have seen a 55% decrease in revenue and a 20%-30% decrease in patient volume as a result of COVID-19. The impact has been even more severe for specialists. Even for physicians whose practices remain busy and whose family members haven’t lost their jobs or income, broader concerns about the economy may be reason enough for physicians to adopt cost-cutting measures.
In Medscape’s Physician Compensation Report 2020, we asked physicians to share their best cost-cutting tips. Many illustrate the lengths to which physicians are going to conserve money.
Here’s a look at some of the advice they shared, along with guidance from experts on how to make it work for you:
1. Create a written budget, even if you think it’s pointless.
Physicians said their most important piece of advice includes the following: “Use a formal budget to track progress,” “write out a budget,” “plan intermittent/large expenses in advance,” “Make sure all expenses are paid before you spend on leisure.”
Nearly 7 in 10 physicians say they have a budget for personal expenses, yet only one-quarter of those who do have a formal, written budget. Writing out a spending plan is key to being intentional about your spending, making sure that you’re living within your means, and identifying areas in which you may be able to cut back.
“Financial planning is all about cash flow, and everybody should know the amount of money coming in, how much is going out, and the difference between the two,” says Amy Guerich, a partner with Stepp & Rothwell, a Kansas City–based financial planning firm. “That’s important in good times, but it’s even more important now when we see physicians taking pay cuts.”
Many physicians have found that budget apps or software programs are easier to work with than anticipated; some even walk you through the process of creating a budget. To get the most out of the apps, you’ll need to check them regularly and make changes based on their data.
“Sometimes there’s this false belief that just by signing up, you are automatically going to be better at budgeting,” says Scott Snider, CFP, a certified financial planner and partner with Mellen Money Management in Ponte Vedra Beach, Florida. “Basically, these apps are a great way to identify problem areas of spending. We have a tendency as humans to underestimate how much we spend on things like Starbucks, dining out, and Amazon shopping.”
One of the doctors’ tips that requires the most willpower is to “pay all expenses before spending on leisure.” That’s because we live in an instant gratification world, and want everything right away, Ms. Guerich said.
“I also think there’s an element of ‘keeping up with the Joneses’ and pressure associated with this profession,” she said. “The stereotype is that physicians are high-income earners so ‘We should be able to do that’ or ‘Mom and dad are doctors, so they can afford it.’ “
Creating and then revisiting your budget progress on a monthly or quarterly basis can give you a feeling of accomplishment and keep you motivated to stay with it.
Keep in mind that budgeting is a continual process rather than a singular event, and you’ll likely adjust it over time as your income and goals change.