High Income, Late Start: Why Doctors Shouldn't Wait to Start Building Wealth

Thomas Rutter

Sep 15

5 min read

For many doctors, the early stages of a medical career are focused on almost everything except building wealth.

Years of study are followed by training, exams, long hours and often significant lifestyle changes. By the time income begins to increase substantially, it can be tempting to think there will be plenty of time to focus on investing later.

The challenge is that when it comes to building wealth, time can be just as valuable as income.

Starting earlier, even with smaller amounts, allows compounding to do more of the work and can reduce the amount you need to contribute later in your career.

A High Income Doesn't Automatically Create Wealth

Doctors generally have strong long-term earning potential, but earning a high income and building wealth are two different things.

As income increases, so too can:

Mortgages
School fees
Cars and lifestyle expenses
Practice or business commitments
Tax obligations

It is surprisingly easy for a significant income to become fully committed.

Building wealth requires intentionally directing part of that income towards assets that can grow independently of your ability to continue working.

Why Starting Early Makes Such a Difference

Compounding occurs when investment returns begin generating returns of their own.

Initially, the difference can seem insignificant. Over 20 or 30 years, it can become substantial.

As a simple illustration, $25,000 invested each year earning an assumed 7% per annum would grow to approximately:

$345,000 after 10 years
$1.02 million after 20 years
$2.36 million after 30 years

These figures are illustrative only and don't account for tax, fees or market movements, but they demonstrate an important point.

The longer money remains invested, the more opportunity it has to compound.

Waiting until later doesn't make building wealth impossible. It simply means more of the heavy lifting may need to come from your future contributions rather than investment growth.

Superannuation Can Easily Be Overlooked

Superannuation can be an effective part of a long-term wealth strategy, but for doctors it isn't always as straightforward as receiving regular employer contributions.

Many doctors work as contractors, locums or through private practice arrangements where super contributions may not occur in the same way they would for a traditional employee. As income increases and employment structures change, super can therefore become something that requires more active management.

Depending on individual circumstances, this might include:

Understanding whether super contributions are being made and by whom
Making personal or concessional contributions where appropriate
Reviewing super accounts accumulated across different hospitals and employers
Considering available contribution concessions and limits
Reviewing how super is invested
Ensuring the investment strategy reflects your timeframe and risk tolerance

For doctors who may spend decades earning a strong income, overlooking super in the earlier stages of their career can mean missing valuable years of tax-effective investing and compounding.

Don't Wait Until You Have a Large Amount to Invest

One of the misconceptions around investing is that you need significant capital before seeking advice or getting started.

For many doctors, establishing the structure early is more important than the initial amount invested.

Regular investing can allow wealth to build progressively as income increases.

Someone might start with a relatively modest monthly investment during training and increase it as they become a consultant or move into private practice.

The habit and strategy are already established, rather than starting from scratch later.

Where Going It Alone Can Become Difficult

There has never been more information available about investing.

ETFs, super funds and online investment platforms have also made it easier than ever to establish an investment portfolio yourself.

The difficult part is often not choosing an investment. It is understanding how everything should fit together.

Should additional cash go towards the mortgage, super or investments?
Should investments be held personally, jointly, through a trust or another structure?
How much risk is appropriate?
How should your investment strategy change as income and family circumstances evolve?

These decisions can have consequences well beyond which investment fund you select.

The Value of Advice Is in the Strategy

A financial adviser shouldn't simply tell you which investment to buy.

Good advice should bring together:

Investments
Superannuation
Tax considerations
Debt
Cash flow
Personal insurance
Long-term financial goals

For doctors, this can be particularly valuable because income and financial circumstances can change quickly throughout a medical career.

A strategy established during training may look very different once someone becomes a consultant, enters private practice, starts a family or purchases a practice.

Having an adviser involved provides an opportunity to adjust the strategy as those changes occur.

Avoiding Emotional Investment Decisions

Advice can also become particularly valuable when markets aren't performing well.

When markets fall, the natural reaction can be to stop investing, move to cash or wait until things feel safer.

Unfortunately, periods of uncertainty can also create some of the best long-term buying opportunities.

Having a documented strategy and someone to provide perspective can help prevent short-term emotion from disrupting a plan designed to run for decades.

You Don't Need to Get Everything Right on Day One

Building wealth is a long-term process.

Your first investment strategy doesn't need to be the strategy you use for the rest of your life.

What matters is getting started, establishing good habits and regularly reviewing the plan as circumstances change.

For doctors, strong future income provides a significant opportunity. Combining that income with time and compounding can make that opportunity considerably more powerful.

Key Takeaway

Doctors often spend the first part of their careers investing heavily in themselves and their profession. Once income begins to grow, it is important that some of that income starts working towards the future as well.

You don't need to wait until you have a large investment balance or reach a particular stage of your career.

Starting earlier gives compounding more time to work and provides an opportunity to build a financial strategy gradually as your income grows.

If you're earning well but aren't sure whether your next dollar should go towards debt, superannuation or investments, the BFD Financial Planning team can help you put a long-term strategy around it.

BFD Financial Planning is a specialist firm dedicated exclusively to Medical Professionals. If you would like to discuss your financial goals for the year ahead and beyond, you can book a meeting at a time that suits you (including outside standard hours) via our online calendar.

Book a meeting. https://calendly.com/thomasrutter-bfdfp

Contact us today. info@bfdfp.com

General Advice Disclaimer

The information contained on this website and in this blog-post is general in nature and does not take into account your personal situation or circumstance. It is recommended that you consider and use the information provided responsibly, and where appropriate, seek professional advice from a financial adviser.

Although, every effort has been made to verify the accuracy and correctness of information, BFD Financial Planning, together with our consultants, officers, agents, and employees, disclaim all liability for any loss or damage suffered by any persons directly or indirectly relying on this information.