Personal financial foundations for early-career dermatologists
Starting your career in dermatology is an exciting milestone, but it also brings many financial responsibilities. Building strong financial habits can create a stable foundation for long-term success, reduced stress, and focus on providing exceptional patient care. Use this guide to support your journey to personal and professional financial success.
Understand income and expenses
Financial awareness starts with understanding your earnings and spending. Dermatologists often face variable income and complex expenses, so tracking both personal and professional costs and managing cash flow supports stability and informed decision-making.
Build financial literacy
A strong foundation in financial basics is key to long-term stability, both personally and professionally. Understanding how interest, credit, taxes, and budgeting work will help you make informed choices about loans, savings, and investments. Knowing the difference between good debt (like strategic business or education loans) and bad debt (like high interest credit cards) can guide smarter borrowing decisions. Similarly, understanding how credit scores affect your ability to secure favorable financing can help you plan ahead for future practice investments or personal goals.
Access financial literacy resources offered by our preferred partner CareCredit.
Review your employment contract carefully
Your employment contract lays the foundation for your financial future. It’s important to understand how your salary, bonuses, benefits, and other compensation elements are structured, as well as any obligations such as non-compete clauses or loan repayments. Reviewing these details with a financial advisor or attorney can help you negotiate terms that align with your financial goals and avoid surprises that impact your cash flow and career flexibility.
Learn more about employment contracts and questions to ask potential dermatology employers.
Understand your actual income
Your salary may not reflect what you actually take home. After taxes, health insurance premiums, retirement contributions, and student loan payments, your net income may not go as far as you had expected. Be sure you understand the various deductions. Also track any additional income, such as moonlighting or consulting. Building a budget starts with understanding your income.
Track both personal and professional expenses
Create a comprehensive list of your fixed monthly costs, including rent or mortgage, utilities, loan payments, insurance, and professional dues. Variable expenses might include continuing medical education (CME), travel to conferences, journals, clinical supplies, and subscriptions. By tracking these expenses, you gain insight into where your money goes and can identify areas to adjust if needed. There are many free apps that can help you do this.
Understand tax obligations by practice type
Tax obligations differ based on whether you are employed by a hospital, work in private practice, or are an independent contractor. If you have supplemental income through consulting or cosmetic procedures, you may need to make quarterly estimated tax payments. Consult with a financial professional experienced in physician finances to help you maximize deductions and plan effectively.
Visit the AAD’s preferred partner Bank of America for customized financial help for your practice.
Manage cash flow mindfully
Because dermatology combines medical, surgical, and cosmetic services, reimbursement can vary and payment delays are common. For example, cosmetic procedures may be paid out-of-pocket and on a different schedule than insurance reimbursements. Maintaining a cash reserve to cover expenses during these fluctuations ensures smooth operations and peace of mind.
Manage savings and debt
Building financial security requires balance. By prioritizing savings, managing debt strategically, and protecting your ability to practice, you can reduce financial stress and create flexibility for future opportunities.
Prioritize savings and retirement early
Start saving as soon as possible by automating contributions to your emergency fund and retirement accounts. Aim to build an emergency fund that covers three to six months of living expenses plus any practice-related costs. Regular contributions to retirement plans, like a 401(k) or IRA, compound over time and provide financial security in the future.
DermWorld recently tackled the topic of retirement planning, with a special emphasis on the tradeoffs between paying down debt and building a nest egg for the future. Read “Retirement planning 101” to learn more.
Develop a strategic debt repayment plan
Many dermatologists just out of residency carry significant student loan balances alongside other debts. You should prioritize paying off high-interest debt, such as credit cards, but student loans also require attention. Explore physician-friendly repayment options, including repayment plans that adjust payments to your income, loan forgiveness programs for qualifying employers, and refinancing after your income increases. Reassess your strategy as your practice develops and income grows. Consult with a professional financial advisor familiar with physician finances for personalized guidance.
Protect your ability to practice with insurance
Manual dexterity is crucial in dermatology. Disability insurance with an “own occupation” clause can protect your income if a hand or wrist injury limits your ability to perform procedures. Early-career dermatologists should consider this coverage to safeguard their livelihood and reduce financial risk.
Get quotes on insurance from the AAD’s preferred vendor AoN Affinity Insurance Service Inc.
Consider other forms of insurance that may be helpful to protect you and your practice. Learn more in the DermWorld feature “Peace of mind.”
Build good credit
Establishing and maintaining good credit is a vital part of your overall financial health.
Dermatologists face unusual financial challenges because they spend many years on education and residency, during which income is modest. As a result, it’s common for dermatologists to enter practice with significant student loan debt as well as other obligations such as credit cards, car loans, or training-related expenses. This financial imbalance reflects the delayed earning timeline of medical training rather than financial mismanagement.
While this debt can feel substantial, it does not have to limit your ability to achieve other financial goals. By building and maintaining a strong credit profile early in your career, you can position yourself to take advantage of your future high earning potential.
Strong credit can make it easier to qualify for financing for both personal and professional needs, including purchasing a home, refinancing student loans or other existing debt, securing a business or practice loan, or obtaining favorable terms for equipment or office space. Lenders often consider a physician’s anticipated income when evaluating loan applications, so maintaining good credit now can help you access better financing options when your dermatology career is well established.
Understand the importance of credit history
Your credit score reflects how responsibly you manage debt, and it is a key factor used by lenders, landlords, and sometimes employers to assess financial reliability. For dermatologists, establishing good credit habits early while carrying student loans and other training-related expenses can help you access lower interest rates and more favorable financing options in the future. Strong credit positions you to take advantage of the higher earning years that typically follow residency and fellowship.
Build and maintain credit wisely
Use credit cards or small loans responsibly by making payments on time and keeping balances low relative to your credit limit. Avoid opening multiple new accounts at once as this can temporarily lower your score. Consistent on-time payments are one of the most effective ways to strengthen your credit profile. Maintaining good credit can be especially important for dermatologists when applying for practice loans, financing equipment, or negotiating office lease terms.
Monitor your credit regularly
At a minimum, review your credit reports from the three major bureaus (Equifax, Experian, and TransUnion) at least once a year. Dermatologists may benefit from checking more frequently, such as every 3-6 months, because of high student loan balances, delayed earning periods, and practice-related loans or co-signed obligations. Frequent monitoring helps early detection of errors, unusual activity, or potential identity theft and ensures your credit accurately reflects both personal and practice-related accounts. Many banks and online services offer free credit monitoring tools and alerts for significant changes.
Visit Annualcreditreport.com to access free annual reports from the three credit bureaus.
Use credit strategically for your practice
As your career progresses, good credit can support your professional growth. It can help you qualify for better rates on business loans, lines of credit, or equipment financing allowing you to invest in technology, staff, or office upgrades. Maintaining healthy personal and business credit also demonstrates financial reliability to partners and investors.
Invest in professional growth
Investing in your skills, education, and practice equipment is essential for building a successful dermatology career and providing high-quality patient care. Many professional expenses, such as continuing education, certifications, professional memberships, and certain equipment, may be tax-deductible or eligible for depreciation, which allows you to use the deduction for larger items over several years. Keep thorough records and plan purchases strategically to ensure these investments support both your career growth and long-term financial goals.
Plan for dermatology-specific costs
Dermatology requires specialty equipment and supplies that can be costly, such as dermatoscopes, biopsy kits, cryotherapy devices, cosmetic injectables, and digital imaging systems. Even if you work in a setting where major equipment is provided, smaller tools and supplies may be your responsibility. Budgeting for these expenses helps avoid unexpected financial strain.
Be sure to visit the AAD Member Buying Program to find low cost medical and office supplies.
Allocate funds for ongoing professional development
Continued learning is essential in dermatology. Budget annually for CME courses, AAD meetings, board certification, and specialty workshops. These investments not only maintain your licensure and certification but also improve your skills and expand your professional network.
Take advantage of robust educational offerings from the AAD, including in-person and on-demand CME opportunities.
Monitor your procedure mix and its impact
Track how medical, surgical, and cosmetic procedures contribute to your income and job satisfaction. This information can help you decide whether to pursue additional training, invest in equipment, or adjust your practice focus to align with your professional goals.
Align financial health with your professional mission
Strong financial management enables you to focus on patient care, innovate in your practice, and contribute to the dermatology community through mentorship, volunteer work, and advocacy. Financial stability supports the values of professionalism, excellence, and service that are central to the AAD’s mission.
Building strong financial habits early in your career will provide the foundation you need to thrive as a dermatologist. Thoughtful planning and management of your resources allow you to focus on what matters most: Taking care of your patients.
Related AAD resources
Preferred finance vendors: These AAD partners can help you strengthen your financial literacy and build a solid foundation for your future.
Maximize your retirement health: Learn from a DermWorld financial advisor how you can better prepare for retirement.
Life insurance: See options and considerations around life insurance.
Protect your ability to practice: Learn more about the different kinds of disability insurance and why they can be a wise investment.
Long-term care planning: Read a DermWorld article on why you consider preparing for long-term care.
This content was created with the particular needs of early-career dermatologists in mind. See the rest of our Career Launch resources for young physicians.
