The decisions you make in the first three years of your practice will dominate the financial trajectory of your life for decades to come. We’ve written a book about early-career financial decisions called Pay Yourself First: A Financial Guide for Doctors Entering Practice. Here are some of the best moves you can make when starting out.

1. Reward yourself … carefully. New doctors experience deferred gratification like few other professionals. After the long hours and low pay of residency and fellowship, you probably crave a lifestyle upgrade — and you deserve one. But instead of spending on everything at once (home, cars, vacations, wardrobe, dining out), consider adopting a gradual approach. For example, you might choose to limit your first rewards to a great vacation with your significant other, right before starting your first job as an attending, a new midprice automobile, and a starter home.

2. Protect your most valuable assets — your life and ability to earn a living as a physician. All physicians need good disability insurance coverage, for two reasons. First, during your early- and mid-career, you’re much more likely to be disabled temporarily or permanently than you are to die. Second, if disabled, you must still cover your living expenses, whereas if you die, those expenses disappear. Disability coverage is expensive. Good options are often available through medical associations.

Life insurance protects other persons against the loss of your life and earning power in the unlikely event of your premature death; if you have no spouse and no mortgage, you may have no need for life insurance beyond that included as an employee benefit. We recommend term life insurance with a 15- or 20-year level premium, which should be quite inexpensive. Cash-value life insurance, also called permanent insurance or whole life insurance, is a decision best delayed for five years or more from the beginning of your career.

1. Work with a student loan expert. Rules around student loans are complex and ever-changing. Small mistakes can have big consequences. For some, Public Service Loan Forgiveness (PSLF) can be a huge benefit, while others are unlikely to qualify. A loan consultant can help you choose the most effective student loan elimination strategy for your unique circumstances, using the right combination of income-driven repayment options, PSLF, federal loan consolidation, and/or private sector refinance at lower rates.

2. Maximize your pretax savings. It’s likely that you have the option of saving money pretax to an employer retirement savings plan, usually a 401(k) or a 403(b), depending on whether your employer is for-profit or not-for-profit. Make sure to save the maximum possible pretax dollars from the very beginning of your career. Keep your investment strategy simple, broadly diversified, and focused on high-quality U.S. and foreign stocks. For most young physicians, an S&P 500 Index fund is an excellent core holding.

3. Don’t buy too much house. Low-interest rates and fast-rising real estate prices are a dangerous combination. In the long run, a house is an expense, not an asset. Real estate prices tend to follow a boom-or-bust price cycle over time, and during booms, it can appear that you have to buy right now or be priced out of the housing market forever. Temporarily rising prices can obscure the fact that the long-term return on most residential real estate has historically been only a fraction of the return on stocks. It is perfectly sensible to buy a starter home now, and plan to upgrade in five or 10 years as your career matures.

A term we share often with our young physician clients is “optionality.” Early in your career, we believe strongly that you should preserve your future career and life flexibility by carefully choosing a prudent set of limited lifestyle enhancements rather than jumping with both feet into the full range of expensive spending options.

Don’t exchange the stress of residency for a new, lifelong condition of financial stress driven by debt and living expenses. Your goal in the early years of your career should be to reward yourself appropriately but to do so in a way that preserves your financial options in the future.

Jim presents financial workshops for physicians and speaks at physician conferences. He is the co-author of two books: Pay Yourself First: A Financial Guide for Doctors Entering Practice and Changing Outcomes: A Financial Recovery Strategy for Peak-Career Physicians.

TriageMD by TGS Financial Advisors offers programs designed to improve the financial trajectories of physicians and their families.

This article originally appeared in the Winter 2021 addition of Keystone Physician Magazine. Keystone Physician is the official quarterly journal of the Pennsylvania Academy of Family Physicians (PAFP).