Working as a locum tenens physician can be financially rewarding when you consider that locums make more than their employed colleagues and do not have the business expenses of private practice. But with a higher paycheck comes more responsibility. It is not difficult for the unstructured locum lifestyle to lead to poor money management and the debt that comes with it.
Whether you are a new locum or a well-traveled doctor with years under your belt, the need for financial management doesn’t change. The most financially successful locums know all the secrets of good money management, secrets that enable them to live a comfortable lifestyle and save for retirement.
Secret #1: Maintain a Budget
Data supplied by the Debt.com website shows that just one-third of all American adults utilize a budget to control spending. More than 30% have less than $500 in emergency savings while an additional 19% have no savings at all. These are alarming statistics that shouldn’t apply to you.
As a locum, you will be exposed to constantly changing circumstances. A budget is very important for you, especially since so much change has the potential to upend your spending habits. The most helpful thing you can do to manage your money is establish a budget and stick to it.
Secret #2: Budget for Your Taxes
Financially successful locums understand that quarterly income taxes should be part of their budgets. They plan for taxes, they set the money aside, and they make the payments when due. The end result is a very manageable tax bill in April, if there’s a bill at all.
On the other hand, not budgeting for quarterly tax payments is an easy way to land yourself in financial trouble. And once you get behind on your taxes, getting caught up can be a lot of work. Don’t take the risk. Budget for your quarterly taxes.
Secret #3: Establish a Separate Business Account
As a locum, you are also a self-employed contractor. You should have a separate business account regardless of how your business operations are structured. A separate account allows you to keep business expenses separate from personal. It also facilitates direct deposits from employers. No worries though, you can pay yourself a salary from your business account.
Secret #4: Establish a Savings Plan
Your most important financial investment is in yourself. As such, establishing a savings plan is critical to financial success. Your plan should be based on a two-pronged approach: setting money aside to pay for emergencies and investing in your retirement. The services of an established financial planner are invaluable here. Look for a professional with experience in retirement planning.
Secret #5: Limit Your Use of Credit
One of the biggest financial traps for locum tenens professionals is the credit card trap. The transient nature of locum work is such that plastic becomes the primary method for paying for things. That is not necessarily bad, but it’s very easy to overextend yourself if you’re not paying attention. Therefore, limit your use of credit.
Credit card spending should be governed by the principle of never charging more than you can afford to repay at the end of the billing cycle. And whatever you do, don’t get into the habit of using a credit card to pay for consumables – unless you know you’ll have the money to cover the bill when due. There’s no point paying interest on things like groceries.
These five money management secrets are just the start of achieving financial success as a locum. Master them and you will be on your way to reaching your financial goals.