Finishing residency marks the beginning of an exciting new chapter. But with that excitement often comes a wave of financial decisions, and, unfortunately, sometimes, a few critical missteps that can follow physicians for years.
What’s often overlooked is how financial uncertainty doesn’t just affect your bank account, it impacts your mental health, relationships, and overall well-being. According to FP Canada, 38% of Canadians say money is their greatest source of stress, and for physicians, those pressures are magnified by student debt, long hours, and major life transitions.
At Tall Oak Capital Advisors, we’ve worked with hundreds of residents as they transition to practice. While each physician’s situation is unique, we’ve consistently seen the same five mistakes surface time and time again—often with serious long-term consequences.
Here’s what to watch out for:
1. Incorporating Too Early (or Too Late)
There’s a common misconception that incorporation is the logical first step once you start earning independently. However, the reality is that incorporating at the wrong time can create more complexity than value.
Without a solid understanding of your tax situation, cash flow needs, and future goals, incorporating too early could lead to higher fees and inefficiencies. On the other hand, waiting too long might mean losing out on benefits like tax deferral or income splitting opportunities.
We detail incorporation timing with our resident clients, so the decision is made with intention, not just impulse. Clear guidance helps reduce uncertainty and avoid the mental toll of second-guessing major decisions.
2. Not Saving for Taxes in Your First Two Years
You’ve just gone from a ~$80,000 resident salary (with tax withheld at source) to a ~$400,000 income, and no one’s setting aside tax for you anymore.
One of the most common and dangerous mistakes we see is spending based on gross income instead of what’s available after taxes. Without a plan, physicians can end up facing tax bills in the hundreds of thousands, plus installment requirements for the next year, creating a financial hole that can take years to dig out of.
Financial stress is a leading contributor to physician burnout and anxiety. A proactive cash flow plan can significantly reduce the additional stress brought on by a major tax surprise.
3. Underestimating the Real Cost of Debt
Most residents graduate with $200,000–$300,000 of debt, thanks to rising education costs and generous bank lines of credit. But what often gets overlooked is the true cost of repaying that debt, especially when factoring in taxes.
In a simplified example, if you’re in a 50% marginal tax bracket, every $1 of debt requires $2 of billing to repay. That $300,000 line of credit? You’ll need to generate roughly $600,000 in gross billings just to break even, and that’s before you consider interest.
Understanding this multiplier effect helps our clients make more mindful decisions about borrowing, lifestyle choices, and repayment strategies.
4. Being Underinsured (or Choosing the Wrong Insurance)
Disability and critical illness can be uncomfortable topics but are essential for physicians.
Today, 30% of mental health-related disability claims come from physicians under 45. Yet too many still don’t carry adequate coverage, or buy policies unsuited to their specialty, income level, or long-term plans.
At Tall Oak, we believe insurance should do two things: protect your plan and preserve your earning potential. We help clients make informed choices, not rushed ones, about the type and timing of coverage that fits their lives and practices.
5. Not Building the Right Professional Team
Your financial life isn’t just about investments. It’s about having the right people in your corner and ensuring they’re working together.
Too often we see residents working with siloed professionals: an accountant who’s never seen the insurance policy, a lawyer who’s disconnected from the financial planner, or an advisor who pushes products without understanding the big picture.
We approach things differently – building relationships with your other professionals, asking questions, and collaborating openly to ensure that your financial goals are coordinated, and that we are all working together to best serve you.
Avoiding Mistakes Starts with a Plan
Avoiding mistakes starts with a plan, one that balances financial opportunity with emotional resilience. At Tall Oak Capital Advisors, we offer a free customized Five-Year Wealth Plan focused on transition planning for residents who want to get organized, reduce financial stress, and avoid the mistakes we’ve seen too many others make.
Click here to book a 30-minute consultation with us to get started.
The views expressed in this commentary are those of Tall Oak Capital Advisors as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Statistics, factual data and other information are from sources Tall Oak believes to be reliable but their accuracy cannot be guaranteed. This commentary is intended for distribution only in those jurisdictions where Tall Oak Capital Advisors are registered. Securities-related products and services are offered through Raymond James Correspondent Services Ltd., member Canadian Investor Protection Fund. Insurance products and services are offered through Gryphin Advantage Inc., which is not a member-Canadian Investor Protection Fund. This commentary may provide links to other Internet sites for the convenience of users. Tall Oak Capital Advisors is not responsible for the availability or content of these external sites, nor does Tall Oak Capital Advisors endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same Privacy Policy which Tall Oak Capital Advisors adheres to.
