Physician Debt Management

Thoughtware Article Published: Jun 19, 2020
Wealth advisor assisting in the health care field.

Debt management is a big topic for physicians. We are often asked about whether paying down debt aggressively is better than investing for the future. Both actions increase net worth (assets minus debts), so the answer can be complicated.  

Debt causes people to react differently. When we work with physicians, we approach the question of paying down debt from two angles: math and personality.


As with most things in finance, there are calculations that can help determine whether a debt should be paid down. The rule of thumb is based on the relationship between the loan rate (interest rate on the debt) and the expected return on investments (return earned if the money were invested). The rule is:

  • If the loan rate > return on investment, pay down the debt. This is especially true for very high interest debts, like credit cards. High interest rates can trap borrowers in a never-ending cycle of debt. 
  • If the loan rate < return on investment, invest excess cash. If debts have a low interest rate, using excess cash to invest will allow compound interest to work in your favor.
  • If the loan rate = return on investment, it is a personal choice. See the Personality section below for more information.


More important than the math aspect is the personality assessment. Understanding how you view and manage debt is imperative for your financial success. We have found that personality can often derail the math answers. Earning a high income does not protect you from common financial mistakes.  

  • Spender – This personality type focuses on cash flow and tends to spend whatever is left over at the end of the month. For this personality type, having debt can help manage cash flow, since payments are scheduled. In addition, we have seen this personality type pay down debts only to incur more in the subsequent months.
  • Saver – This personality type focuses on savings and will tend to operate on a budget regardless of income. For this personality, having debt can seem like an undue burden, and they may lose sleep if the debt load is high. We have seen these physicians pay cash for items when zero percent financing is available due to preference.

Overall, physicians should consider placing more emphasis on personality than math. Understanding your relationship with debt and money can help you understand the best next steps. Having a trusted team of professionals to answer questions and guide your decisions also can be important. Increasing net worth is not brain surgery—we leave that to the professionals.

For more information, reach out to your BKD Trusted Advisor™ or use the Contact Us form below.

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