Why Is Financial Literacy Critical for Physicians?

Doctors often earn more than the national average salary [1], even during residency [2]. But financial strain is still surprisingly common in this field.

Many reasons may contribute to this financial burden, which might eventually take a toll on a physician’s professional performance, potentially driving them to burnout.

64% of physicians express the need for financial assistance [3].

A quick scroll through public finance forums shows how many doctors seek financial advice from anyone willing to help.

So, it might be safe to assume that most of a physician’s financial problems might be rooted in a lack of financial knowledge.

In this article, we will talk about the importance of financial literacy for doctors. Read till the end as we finish off with some potentially helpful steps you might be able to take to gain some financial understanding.

Financial Illiteracy – A Menace Affecting Doctors

Financial skills are not something that we can develop naturally over time. It is something that we have to go out of our way for. And if we choose to neglect financial knowledge, our ignorance can come back to haunt us.

That’s what happens with many doctors.

Many doctors complete their medical education without any business or financial knowledge.

And no one can blame them.

Studying medicine is like drinking from a fire hose. There’s so much information to take in that you simply cannot imagine cramming more information into your brain.

So, naturally, financial knowledge can take the back seat.

And what happens as a result?

Doctors often end up in financial complexities, which can add to their economic pressure.

Following are some of the most common and avoidable financial problems that many doctors often face due to their lack of financial literacy:

Weak Money Management

Doctors are highly skilled professionals. But one thing they often struggle with is handling money.

They are known for their bad financial habits that are rooted in various reasons.

Doctors work hard to get that six-figure salary. And once they get to that point in their careers, most of the time, they don’t want to hold back.

They often buy themselves all the luxuries they “deserve,” sometimes disregarding other unavoidable expenses that should be higher in their priorities list.

Additionally, they have a certain lifestyle to maintain. People tend to expect a lot from doctors, and they have the pressure to meet these expectations.

But all these reasons often stem from one primary reason, i.e., lack of financial literacy.

Since many doctors often have limited knowledge on how to manage their money, they fall into the traps of their own whims, spending more than they can afford, building unnecessary financial pressure.

But weak money management is only one of the critical issues doctors face. Financial illiteracy might also lead to another financially-fatal problem.

Lack of Debt Management Education

According to a survey, 76 to 89% of medical students graduate with an average debt of $215,900 [4]. That’s an enormous amount, not including any debt doctors may have taken before or after their med school.

Such massive debt and a lack of debt management education can make the perfect recipe for a financial disaster.

Because doctors generally don’t have much time to pay attention to the financial side of things, they often have no idea how to go about paying such massive debt.

Many doctors often delay debt repayment during residency. As a result, the debt accrues interest, and the amount that needs to be paid back increases further.

Had doctors been given better financial guidance, they might have known of ways they could start paying their debts or might at least have an idea of what to do to get rid of the student loan quickly instead of just letting it sit untouched and accruing interest.

Bad Investment Decisions

Like athletes, doctors are often a prime target for scammers and Ponzi scheme owners [5].

There are many reasons why doctors tend to get scammed more often than others.

First, many doctors lack the financial insights to spot the strengths and weaknesses of an investment opportunity. They quickly transition from making five-figure to six-figure a year and hence have a lot of money they want to invest.

Secondly, they may be too busy to do background checks on someone who comes by, speaks eloquently, and promises high-return investment schemes [6].

Thirdly, they tend to trust professionals easily [7]. If a self-proclaimed “financial advisor” comes by, shares their investment idea, and appears to know what they are talking about, doctors are often inclined to trust them with their money.

In short, their lack of financial prowess often becomes the musk that attracts bad actors.

On top of that, a busy schedule and habit of trusting professionals quickly tend to foster the perfect environment for these bad actors to take advantage of a physician’s financial naivety.

As a result, doctors may end up losing their hard-earned money on scams and fake investment schemes.

These are only three of the many problems that plague this profession. And what’s unfortunate is the fact that all of these issues can be avoided with comprehensive and strategic financial knowledge.

How Can Financial Literacy Help?

Prioritizing financial education before it becomes necessary can help you better understand your current financial situation.

Once you know where you stand financially, you might be better positioned to make relatively sound financial decisions.

For example, gaining financial knowledge can help you see your future expenses more clearly.

Once you know the amount of tax you have to pay come April, the money you need to put towards debt, and the investment you may need to make for a more secure future, you might be less inclined towards spending on things that can wait, like a luxury car, frequent expensive holidays, or boats.

Financial literacy may also give you a keen eye for spotting fraudsters and scammers. When you know the jargon, nuances, and subtleties of investment, you could cross-question those scammers and potentially avoid falling into their traps.

Additionally, prioritizing financial knowledge before you are haunted by mounting debt may actually empower you to tackle the beast before it takes the best of you.

Weak financial acumen might make you vulnerable to dishonest and inept financial “advisors.”

Being a doctor, you might need the services of a financial professional at some point in your life.

Having financial knowledge may help you differentiate honest professionals from those who are in for their own good and eventually choose someone who might be able to help secure your financial future.

Seeing how many problems financial education leads to and how many issues it can resolve before they arise, you would think the medical industry would do something to empower young physicians with more financial literacy.

Unfortunately, that’s not true [8].

You are mostly on your own.

What Can You Do?

While turning to a public forum for financial advice appears to be the prevalent knee-jerk reaction of most doctors as they come across financial distress, that may not exactly be the best idea.

While often well-intentioned, the advice disseminated on these channels is mostly based on half-truth and might be sub-optimal at best.

Online blogs and books might be able to help give some baseline financial information. So, consider following financial advice blogs and invest in other such resources to build enough financial acumen to sift through the sea of financial professionals to select the right one.

Then, talk to a financial professional, discuss your situation, and try to implement the plan they build for you.

At Dayton and Sydney, we have a team of professional financial strategists who can work with you to develop a customized financial plan designed to help you avoid the financial cliches that many doctors fall victim to.


This information has been obtained from outside sources and is provided for general informational purposes only.



[1] “Average Salary in the US (2022)”, Jobted.

[2] What residents are getting paid in 2021”, The DO, July 28, 2021.

[3] “Financial Literacy and Its Role in Maintaining a Physician’s Desired Lifestyle”, Erin Finelli, Physicians Weekly, Sep 16, 2021.

[4] “Average Student Loan Debt for Medical School”, Emily Guy Birken, Credible, Jan 21, 2022.

[5] “Investment scams target busy physicians”, Medical Economics, March 25, 2011.

[6] “6 Reasons Why Doctors Get Scammed”, James M. Dahle, Medical Economics, April 1, 2016.

[7] “6 Reasons Why Doctors Get Scammed”, James M. Dahle, Medical Economics, April 1, 2016.

[8] “The Business of Medicine: A Course to Address the Deficit in Financial Knowledge of Fourth-Year Medical Students”, Jason S. Mizell, Carol R. Thrush, Susan Steelman, Physician Leadership, Jan 28, 2020.

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