Top 10 Tax & Money Mistakes to Avoid in Your Medical Career  

By Christopher Sassone, CFP®, CLTC®, Financial Consultant Investment Advisor

Starting your medical career is an exhilarating time filled with new responsibilities and opportunities. However, it also brings unique financial challenges that, if not managed well, can hinder your long-term success. Here are the top 10 financial mistakes that early-career medical professionals often make, along with strategies to avoid them. 

1. Not Utilizing Tax-Advantaged Retirement Accounts 

Many new medical professionals delay contributing to retirement accounts like 401(k)s or IRAs, missing out on significant tax benefits and compound interest. The best solution is to start contributing to these accounts as soon as possible. Maximize your contributions to take advantage of tax deferrals and any employer-matching contributions. Even small contributions early on can grow significantly over time. 

2. Overlooking Tax Deductions and Credits 

It’s common to miss out on valuable tax deductions and credits, such as those for student loan interest and continuing education expenses. Work with a tax professional who understands the specific deductions and credits available to medical professionals. This can help reduce your taxable income and save you money. 

3. Ignoring Student Loan Repayment Strategies 

Sticking with the default student loan repayment plan without exploring other options can lead to financial strain and prolong the repayment process. If your cash flow allows, consider making additional payments or pay amounts that are higher than the required minimum payment.   

4. Delayed Investment Planning 

Many new doctors postpone investing because they focus on repaying debt or lack financial knowledge. Start investing as early as possible to benefit from compound interest. Seek professional guidance from an advisor to build a robust portfolio that aligns with your long-term goals. 

5. Insufficient Insurance Coverage 

Neglecting to secure adequate disability and life insurance can leave you and your loved ones financially vulnerable. Ensure you have comprehensive disability insurance to cover your income if you cannot work due to illness or injury. Similarly, life insurance is essential to provide for your dependents and cover any outstanding debts in the event of your passing. 

6. Not Building an Emergency Fund 

Failing to set aside funds for unexpected expenses can lead to financial strain during emergencies. Aim to save three to six months’ worth of living expenses in an easily accessible emergency fund. This will provide a financial cushion to cover unforeseen expenses such as medical emergencies, car repairs, or sudden job changes. 

7. Poor Tax Planning 

Not considering the tax implications of income, investments, and retirement savings can result in higher tax liabilities. Engage in proactive tax planning to optimize tax efficiency. Strategies like tax-loss harvesting and contributing to a tax-optimized retirement plan can help reduce your taxable income. 

8. Inadequate Estate Planning 

Neglecting to create a will or establish an estate plan can risk the mismanagement of your assets. Develop a comprehensive estate plan to ensure your assets are distributed according to your wishes and to minimize estate taxes. This plan should include a will, power of attorney, and health care directives. 

9. Mismanaging Lifestyle Inflation 

Increasing spending as your income rises can hinder long-term wealth accumulation. Maintain a budget and prioritize saving and investing over lifestyle upgrades. This approach, along with working with an advisor to develop a financial plan, will help you as you work toward your financial goals. 

10. Lack of Professional Financial Advice 

Managing finances without professional guidance can lead to suboptimal decisions and missed opportunities. Speak with a financial advisor who specializes in working with medical professionals to help you create a tailored financial plan that addresses your unique needs and goals. 

Navigating the financial complexities of a medical career can be challenging, but by avoiding these common mistakes, you can set yourself up for long-term success. Start early, seek professional advice, and make informed decisions to build a solid financial foundation. Remember, a well-managed financial approach allows you to focus more on what you do best—providing excellent care to your patients. 

To learn how Davie Kaplan can help you work toward your financial goals, please contact us.