Budgeting For Doctors

7 Ways to Get Financially Organized Without Wasting a Bunch of Time

As a physician, it’s hard to make progress toward your goals if you’re lost in a sea of accounts and paperwork. Dealing with the scattered bits and pieces of your financial life make it impossilbe to see whether or not you're really on track.

But if you can get financially organized, you create a clear path in front of you that makes it easier to build financial security for your family.

Ready to get started? These seven strategies will allow you clean up your finances right now.

1. Go Paperless

Start the organization process by cutting off what supplies the clutter: an endless array of paper statements sent by every company you work with each month.

Turn off paper statements and get documents electronically. This limits the amount of paper you physically have sitting around on your desk. It’s also safer, since things won’t get lost or stolen in the mail.

Next, set up a cloud-based storage system to keep your information in a single, easy-to-access place. Google Drive is a great (and free) option, and you’ve already got it if you’ve got Gmail.

You can log into your cloud storage from any device -- laptop, smartphone, iPad -- and access all the same information anywhere.

2. Keep Your Information Safe and Secure

Managing everything online and electronically is a great method for staying financially organized -- but it’s not without its own risks and challenges. The biggest? Keeping all that information safe.

Use strong passwords, and assign a different password to every account. You don’t want to write these down in a place where someone else could see or take your notes, either.

So use a tool like LastPass to generate encrypted logins for every financial account you have. The service “remembers” all that data and manages it in one place for you. If you go this route, turn on 2-factor authentication for added security.

3. Throw Out What You No Longer Need

Even after you make the effort to go paperless, you’ll likely receive some physical documents by mail. Do you need to keep all that stuff?

It is important to hang on to certain documents, but you want to make sure you’re not just accumulating clutter. Go through your existing financial information and make sure you’re only keeping what you actually need:

  • Annual tax returns (always keep the returns; you can toss supporting documentation for individual returns after 3 years)

  • Year-end statements from investment accounts (keep for 3 years, then you can toss)

  • Documents that contain records that relate to your home, for as long as you live in or own that home

  • Forms that show contributions and withdrawals from IRAs and 401(k)s, and any 8606 forms (you’ll have these if you reported nondeductible contributions to traditional IRAs)

You can throw out things like receipts and deposit slips after you receive your monthly account statements (and ensure all the charges match up to your records). And you don’t need to keep pay stubs after you receive your W-2 for the year.

4. Create a Process for Paperwork and Documents

Keep the physical paperwork you do need to hang onto nicely organized. Our simple 3-step process for managing it all can help:

  1. Get a large box and label it. Write “Financial Records,” and the year.

  2. As you receive all your paperwork throughout the year, you can put your documents into the box. You don’t even have to organize it neatly; just put it in as you receive it.

  3. At the end of the year, choose a spot where you can store the box. Place it there and then get yourself a new box. Write “Financial Records,” the new year, and repeat the process. After a couple of years go by, you can move older boxes to the attic or basement.

This ensures you keep what you need, you know where it’s at, and you don’t need to continuously sort through it. If you need to fetch documents for your financial planner or tax preparer, you’ll know where to find your box.

5. Choose the Right Credit Cards

Keep your credit in check by using it deliberately. Get 2 credit cards and use one for online purchases. Use the other for in-person transactions, so you always have a useable card if one becomes compromised. Some card issuers will even issue two cards on the same account, making things even easier.

Choose credit cards that offer cash back, not points or miles, like these:

  • Quicksilver® Rewards from CapitalOne: Earn unlimited 1.5% cash-back on every purchase.

  • Discover it® Card: Get 5% cash back in rotating categories (like gas stations, restaurants, and Amazon) that change each quarter, and unlimited 1% cash back on all other purchases.

6. Audit Your Accounts

When’s the last time you tracked down every financial account with your name on it? Make a list of all your bank accounts, credit cards, investment accounts, retirement plans (from past and present employers), and so on.

Consider closing accounts that you don’t use anymore. You could also consolidate accounts, whether it’s putting two savings accounts together or rolling over an old retirement plan into your current account.

Do the same with your service and subscription accounts. Make a list and then ask: do I use these? Do I need them? Close the ones you don’t want or need. More organization means more savings.

7. Refinance and/or Consolidate Student Loans

Refinancing your student debt can save money. It can also provide you with a more manageable financial situation if you consolidate multiple loans into one.

When you refinance, you get a new loan to pay of an old one (or a single new loan to pay off multiple existing debts).

Refinancing and consolidating may make sense if you can originate that new loan with better terms -- and without giving up benefits that came with the old debt, having to put up collateral, or getting co-signer on the new loan.

Use our guide to refinancing medical school debt to help you decide if this should be part of your financial organization process.

Building a solid financial foundation starts when you get financially organized and put your information in consolidated, easy-to-reach places.

Need help getting started? Get subscription-based financial advice to help you organize your financial life and then start taking action toward your goals.

How do I financially plan for a sabbatical?

If you've been in practice and "in production" for ten years or more and you haven't taken a sabbatical, you might want to add one to your long range plans. Today's reader question can help you get started.


My husband and I want to take a sabbatical, to show our sons parts of the world they've never seen, and to visit friends overseas. Since he's self-employed, we're not sure what all we need to do to get ready to go. What do you suggest?


From the standpoint of financial planning, you can think of your sabbatical like a very long vacation with one excetion that I'll get to shortly.

First, set a date, or at least pick a month and year. Next, think about how long you'll be gone, in weeks. Then, decide where you're going.

Next you can budget for the four basic expenses including:

  • Travel expense (air, ship, ground transport, car rental
  • Room: hotels or other lodging, including gifts to people who host you
  • Food & dining
  • Entertainment: things that make the sabbatical fun and interesting for everyone in your family

To estimate the cost, you can use sites like TripAdvisor or information provided by your travel agent.

For self-employed doctors, a sabbatical may come with one exceptional expense: the cost of lost earnings and office overhead during your absence. While you won't pay this "expense" directly, it will show up sooner or later in the form of reduced receivables that ultimately reduce your take home pay. This means you'll need to set aside money to cover your cost of living once you return from your trip. For example, if you live on $10,000 per month (after tax) and you're planning a 10-week sabbatical, you should set aside at least $25,000 to cover lost earnings, and maybe more if you have substantial overhead.

Don't put your vacation at risk. Money that you intend to use in the next five years, including your Vacation Fund and your Sabbatical Fund, belongs some place safe like a bank or credit union checking or high-yield savings account.

Four reasons for 5-year CD's in your Emergency Fund

Since the new normal set in a few years back, I've recommended you build reserves you can tap in the event of a real financial emergency. You should store your Emergency Fund in a safe place, like a credit union or a bank and keep it separate from checking and other accounts. Here are four reasons why I like five year certificates of deposit for the physician family's Emergency Fund:

  1. Five-year CD's beat the rates available on demand deposits, like checking and money market accounts. A quick peek of the top rates via BankRate.com  shows that today's top-yielding 5-year CD's have an annual percentage yield  (APY) of 1.99% while money markets with a $25K deposit yield 1.00% APY and checking yields a paltry 0.25% APY.
  2. The sting of the early withdrawal penalty is a good thing. The typical 5-year CD imposes a penalty equal to six months worth of interest, so the thought of "paying a penalty" is probably enough to help you use the fund only for emergencies.
  3. Don't let the penalty take your eyes off the prize They're still better than 1-year CD's for most doctors. For example, let's assume you hold $100K in a one-year CD versus that same amount in a five-year CD. And let's assume you have an honest-to-goodness emergency that wipes out the whole pile after only 12 months. With the best one-year CD available today, you'd earn about 1.15%. With the five-year CD, you'd earn 1.99% minus about 0.99% for penalties, leaving you with about 1% in yield. Does it look like you're giving up 0.15%? Not so fast. The chances of actually having an emergency are small if you're doing your financial planning the right way.
  4. You stand a chance to make twice as much in five-year CD's as in one-year CD's. If you don't have an emergency and you keep your five-year CD, you'll earn 1.99% every year (plus compounding) for five years, versus only 1.00% for your one year CD (and maybe more or less depending on what interest rates do in the future). Both of these options easily beat checking accounts.

Before you buy a five-year certificate of deposit read the find print. Many five-year CD's bear a six month prepayment penalty but some have a twelve month prepayment penalty, and most will charge that penalty regardless of how long you hold the CD. That means if you cash out the CD in the first three months, you may be forced to pay a portion of your principal as well as all your interest.

Remember, these are long term, emergency only instruments that won't earn much, but they'll help you stop worrying about money and sleep well knowing you're prepared for a financial emergency.

Wanna know the difference between investing and saving? Submit a comment and I'll tell you. J

A Spooky Spiel About Card-Wielding Doctor Zombies

You've got credit. But do you need those cards? Some physicians aren't certain.


"My husband and I have a total of five credit cards between the two of us, all with zero balances. Does it make any sense to keep this many accounts open?  I want to cut down to maybe two for simplicity's sake, but am wondering if there is some value in keeping those accounts open, even if we aren't using them?  Is it true that having more credit cards helps our credit score? How many credit cards should we carry?"


There is only one reason to keep so many credit cards accounts open: you don't have an Emergency Fund. And if you do have an Emergency Fund, there's no reason to carry more than one card per person.

But why stop there? Why not go all they way to zero?

You can't.

You're a credit card zombie and mad scientists are controlling your thoughts. Here are two tactics keeping you in their grasp"¦

Thought Control Tactic #1: Make doctors hope for rewards.

A five percent discount on restaurants. Saving fifteen cents a gallon of gas. Taking a "free" plane ride. Sounds alluring, doesn't it?

When you read the fine print, you'll see a bunch of do-this-to-get-that language. You may even begin to get a scary feeling in your gut, like someone's trying to control you. I'm not talking about the agreement the guys from H.R. asked you to sign when you went to work for the hospital. I'm talking about your credit card rules disclosure.

It reads like a recipe for a devious mind control experiment, and you might even begin to believe there's an evil corporation out there whose mad scientists have concocted a scheme to rob you of your financial freedom. In fact, you'd be right on the money. Credit card companies actually employ mad scientists. They're called industrial psychologists, and they're the ones who programmed you to seek rewards.

The problem here is that you're so tuned into their trickery that you don't believe me.

Right now, you're telling yourself, "I'm not a big spender. I'm very careful with my money, and I pay off my cards every month. I spend $7,000 per month, not counting my mortgage, and that earns me $840 a year in rewards. I'm way ahead of them."

Not so fast. Can you show me that check from the card company? You know, the one that reads...

Pay to the order of Dr. Credit Zombie: Eight-Hundred and Forty Dollars

Can't find your check? I didn't think so. You're spellbound.

You're not saving one percent of what you spend. Nope. You're not "saving" anything at all"¦ you're spending. And you're not spending one percent more, or five percent more, or twenty-five percent more. On certain purchases, you're spending twice as much as you would if you used cash.

Still don't believe me? I'm not making this stuff up. It came from this study from the M.I.T. Sloan School of Management. Spooky stuff, yes indeed.

Thought Control Tactic #2: Make doctors fear their credit scores.

Are you afraid that cancelling your credit cards will kill your credit score? Of course you are.

The truth is that bringing the guillotine to bear on your credit cards may slightly reduce your credit score, but not kill it altogether. According to the folks at FICO.com, the "Types of Credit Used" category accounts for only ten percent of your credit score. This means your car loans, mortgage, student loans and other borrowing counts in that category too. So more than ninety percent of your score is determined by other factors. For example, paying your bills on time accounts for thirty-five percent of your score, so it's way more important to use credit wisely than it is to have credit cards.

A zombie-like focus on credit score loses sight of the big picture question, "Can you get a loan if you need one?"

You're a physician family, right? You know that bankers will fall all over themselves to lend you money. I've seen young doctors of average creditworthiness get mid-sized six figure loans for doing little more than signing their namesno collateral required. So yes, you can get credit. And your credit score is only a small piece of the decision-making process that bankers use.

Do doctors really need so much credit?

You know the holidays are right around the corner and you'll be buying gifts. You know you're going to take a vacation some place nice. And you know that the car you'll be driving five or ten years from now is not the same one you're driving today. You also know that some day, before you die, you'll have to pay for those things one way or another, so forget about borrowing to buy them. Start saving now, and pay for them with cash.

"Wait a minute," you say. "what about my mortgage? If I need to refinance, I'll need credit for that won't I?"

Yes, you'll need credit. But having cash in the bank, zero balances on most loans, plus equity in your home and a six figure income is more than enough to convince lenders that you're worth the risk. If you can't get a mortgage, nobody can.

An Experiment Gone Horribly Wrong

Here in the United States, it's like we're on the set of Night of the Living Dead. We live with a culture of credit that has turned citizens into consumers, and consumers into credit zombies. I believe we have lost our ability to entertain the thought of first saving money, then spending that money on the things we want and need. No other mindset can explain how a surgeon with a decade of O.R. time under her belt and more than $100,000 in the bank believes she needs to take out a loan to buy a car. And no other thought explains how our country came to be so deeply indebted. The culture of credit is nothing more than a mindset, and you have the power to dispel the curse.

Lucky Seven Steps to Break the Curse of the Credit Card

  1. Get a debit card. Start using it to buy things "with cash" so you won't be using funny money anymore. You can see the impact of your purchase decisions immediately by logging into your bank account, and you'll have tighter control over spending. Learn how to protect your debit card.
  2. Take your cards out of your wallet and stop using them.
  3. Pay off your card debt, if you have a balance.
  4. Build an Emergency Fund. Set aside three to six months worth of living expenses some place safe and leave it there so that you can feel good about not havingor not usingcredit cards.
  5. Get your free credit report at www.annualcreditreport.com, (not freecreditreport.com, which will try to sell you something). Use it to identify all the cards in your name, including the ones you haven't seen in years.
  6. Cancel every credit card account except one. Keep your oldest card account open since it helps preserve the length of your credit history.
  7. Cross your fingers. If you're lucky, the one remaining card issuer will send you a letter a few years from now explaining their decision to cancel the card due to inactivity. I got one of those letters last year. It was awesome.

And now... a brief commercial from Physician Family Financial Advisors"¦

Two five pound bags of candy corn from Costco bought with a debit card... fourteen dollars.

Zany zombie costume kit bought over the internet with a debit card... seventy-three dollars.

Looking like a zombie but feeling like a financially secure physician family... priceless.

In life, there are some things money can't buy. And for everything else, there's a debit card.

Wishing you and your family my best for a safe and happy Halloween.

One doctor says, "I feel like I'm not spending enough."

Have you ever had the feeling that you were doing something wrong, even when everything seems to be right? You're not alone. In an annual update meeting this week, one of my clients - a medical specialist in one of the higher earning subspecialties - told me she "feels" like she's not spending enough money.

While I've helped plenty of people who have felt out of control with money, this was an issue I'd never heard before.

I asked, "Can you tell me more about what you mean when you say you feel like you're not spending enough money?"

She said she knows she's saving enough to send her three kids to a good college, she's certain she's on track for a solid retirement, and she has enough life insurance to take care of her kids if she or her husband die prematurely. And she's got a solid, well-managed practice. But she also said "I earn so much, I feel like I ought to be spending more."

"Are you happy with your house?" I asked.

"Yes," she said.

"Are you happy with your car?" I asked.

"Yes," she said. "I just bought a new (used) one."

"Do you feel like you're spending as much as you need to in your day-to-day life, or your 'standard of living'?" I asked.

"Yes," she said.

"So what do you feel like you should spend more money on?"

"Vacation," she said.

So I asked, "Tell me about your last vacation. Where did you go, how long did you stay, did you take your kids, how was the hotel?"

She told me they stayed at a beachfront home inMauifor about a week in December, and had an excellent time, and she felt rested after the vacation was over. No problem there.

Then I asked, "What do your kids think about the trip? Did they have a good time? Did you make any memories?"

She told me that the kids talk about theHawaiitrip all the time and had lots of excellent memories.

Then I asked, "If you had spent more money on the trip or stayed longer, do you think they would have had better memories?"

She said no.

So What Does It All Mean?

My take on this conversation is that she has a mild case of residimentia: the condition that doctors contract during their years as a resident. It comes from being so constrained for time, personal space, and money, that this feelingsomewhat like PTSDcan linger for years.

And then, when the stress and anxiety of life in residency subside, when the schedule begins to loosen up, and the money begins to be more plentiful, there's a natural tendency to try to re-create the emotional environment that existed before, kind of like a comfort zone.

How Feeling "OK" Feels

When you're certain about your personal financeswhen you're certain you have enough, and that you will have enough, and that you're on the right trackyou're going to feel differently than when things were "not OK." This is a natural part of making progress, and it's pretty normal.

If you're feeling like you're not spending enough, ask yourself one question, "Is my life good?" If the answer is yes, then smile and perish the thought. If the answer is "No, it's not," then ask yourself, "Will spending more money really make my life good?" If the answer is yes, then by all means measure your spending and see if you can spend more. But if you're not feeling good about your life, and money is not the issue, it might be time to seek some counseling or take a look at the bigger picture of where you are in your life.