21 Jul The New Attending Salary: A Primer
Having been an attending for almost a decade, herein are some of the things I wish I knew earlier as an attending. These are starting points and they are meant to be taken and explored for further learning but should be acted on for a healthy financial outlook.
A few starting money pointers: as an attending you will make good money in the US. Money management is not something we are taught. However, it is crucial to making good decisions.
Here are some of things that I learned through trial and error:
- Attendings max out your 401k/ 457b. For those working for non-profit institutions, you have the option of also contributing to a 403b. I advise you to put money in both and max them out from day one as an attending. The money will come out pre-tax and you will never see it, so you won’t miss it. 403b has a slight element of risk to it you must be okay with. This includes not knowing the tax rate at the time of withdrawal (in future), and your investments in the 403b being subject to market changes. The preceding as stated are funded using pre-tax dollars meaning at withdrawal, you will be taxed. However, you also have the choice of Roth 401(k) plans at some institutions where you invest your funds post-tax dollars with the difference being that upon withdrawal no further taxes will be deducted.
- Fresh attendings: get life insurance policies. Term life policies. Get them while young so you lock in a good rate: 20 year terms, and even more preferably 30 year terms. E.g. at age 30, get a 30 year term then at age 40 get another 30 year term to take you to 70 years of age. After that, if you have invested well you don’t need life insurance. Also consider getting an umbrella policy that you can tack on to your vehicle insurance (covers potential damages that exceed limits of car/home insurance)
- Those with kids, start 529k contributions from the day the child is born. Get in the habit. Each state gives some form of state tax deduction when you contribute to 529k. Another option to saving for college is through Coverdell Education Savings Accounts (ESA) plans. However the ESAs have yearly limits and are only available to a specific income level.
- Get a disability policy over and above the one your job may give you. Carry your own policy for the length of your career.
- Once you establish where you want to live, buy a house. Renting is paying someone else’s mortgage. The American economy has home ownership as one of its mainstays. Start building equity in a home early.
- First time home buyers can take advantage of 3.5% down mortgages. Only negative is you will be stuck with Private Mortgage Insurance (PMI) for the life of the loan. However, you can refinance later, put 20% down and get out of the PMI. There are also programs that offer physicians mortgages with no PMI and low down payments. Consider consulting with your local lender, including banks, to explore these options. Of note, these loans are all dependent on having good credit.
- As a physician, as long as it doesn’t go against your contract consider forming your own practice: PC or PLLC and seek ways to earn some income no matter how small e.g. via chart reviews. With your own PC and working from home, your home becomes your office and you can expense various items within reason: e.g. your car note, your home utilities, gas for your car etc. You can also expense items if you own a different kind of business where you do some work from home and utilize e.g. your vehicle for business reasons.
- Work on a good credit score: to have a good score you do need credit. Don’t close credit cards. Pay them off, use a few here and there and pay off the balances within 30 days. E.g. don’t buy your monthly groceries using your debit card. Use a credit card that can give you cash back/points. Then pay off the card within 30 days. By the end of the year you will have earned enough points to buy a ticket to travel internationally.
- Travel. At least once a year take an international trip to a country you have never been to before. Once a year take a local trip to a state/ city you haven’t been to before: go to Vegas, go see Time Square, go see the Bean in Chicago. Do so economically.
- Figure out how you will replace your current income at the age of 65. That could be via 401k etc. At 65 or even earlier if you can, you want to maintain the lifestyle you have now without necessarily having to work.
- Don’t keep tens of thousands of dollars in your checking account or regular savings account as ‘savings’. You are losing money daily by doing that and giving your bank money to use. Instead put your emergency funds in a high interest earning account. 2% and change are the highest ones. Keep that money there and let it earn some interest.
- If you want to drive high end cars consider leasing instead of buying. You can lease for half the cost of buying the car. Long debate on buying versus leasing but don’t ignore it. If you buy a new car and don’t keep that car for at least ten years you have lost money on it. If it gave you problems in those ten years you have lost even more money on it.
- Decide on an additional investment vehicle for your money. You can decide to do additional stocks on your own over and above 401k/403b, or you can decide to go into business or real estate etc. Either way venture into something.
- Philanthropy: give back and do so with money. Allocate some of your money to a philanthropic project of your choice. Either start something in your home town in Kenya for example or identify a cause/NGO you can contribute to. Tithing falls here as well for those who tithe.
- If you have loans with high interest rates e.g 9%, pay those off aggressively. If you have loans with low rates e.g. 1.5% , you can take your time and use your money elsewhere to help you grow. Long discussion can be had on this, but consider the options.
- Not forgetting the residents! Residents, I encourage you to at least put some money away on 401k. See what you can do, don’t squeeze yourself but at least get in the habit. Once you are an attending, max it immediately.
In sum, be smart with your money. Enjoy it and be a good caretaker. The money goes fast hence the need to plan long term. See the basic budget below for a young family of four making 300k assuming one working parent (sample budget that will vary greatly depending on geographic location, personal circumstances).
Assume 300k salary
Tax bracket 35% tax
Your take home after 401k, also minus health, dental insurance: approximately 182k
Monthly take home: 15,000
Sample Basic budget monthly:
Car note: 400
Student Loan payment: 700
Car insurance: 200
Entertainment/dining : 500
Clothes/ house needs: 1000
Disability policy: 500
Life insurance: 300
Kids activities/ day care: 1000
Philanthropy/monies to Kenya: 200
Money left over – savings: $3900
(Keep in mind the above sample budget does not cover many items that still need to be accounted for: e.g. furniture for your home etc.)
As you can see, money goes fast so: plan well. Wishing you financial health.
Dr Ngugi Mukora Kinyungu, MD is an Assistant Professor in the Department of Anesthesiology at the Donald and Barbara Zucker School of Medicine at Hofstra/Northwell. He is also the founder of ITAV Pain Management Practice of New York.