When physicians first enter a practice, their income increases substantially, leaving many to consider how much they should save and where they should invest.
Financial advisor Michael D. Paulus encounters many physicians entering practice who often ask him these two reoccurring questions:
1. How much money should I be saving, and where should I put that money?
2. How much should I spend on my house in relation to my finances?
In regard to how much physicals should save, Mr. Paulus advises physicians set aside 20 percent of their gross income, at minimum. Put these savings into an account outside of your local savings and checking account. A financial professional can help a physician decipher where to allocate that 20 percent savings rate.
A physician with a very high mortgage may find if challenging to have a 20 percent savings rate. Therefore, Mr. Paulus recommends buying a home between 1.5 times and two times your combined family income. A mortgage that surpasses this range will take away from other monthly funds, and will likely result in limited savings.
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