If used right, a signing bonus can be a significant asset for young physicians, a finance expert told the American Medical Association in a Nov. 17 article.
Jason Combs is the executive vice president of Millennium Brokerage Group and has worked with physicians on financial planning for more than a decade.
One way to optimize the use of signing bonuses — which are around $30,000 on average, according to Merrit Hawkins data cited by AMA — is to lower debt from medical school, which most physicians face. On average, physicians graduate medical school with $200,000 in student loan debt, according to the American Association of Medical Colleges.
"The first thing you'd want to do is take a look at the debt that you carry and see if you have favorable terms," Mr. Combs said. "There could be some programs out there that could help you refinance or restructure some of the debt that you have to some more advantageous terms."
To make refinancing terms more favorable, he recommended applying a portion of a signing bonus to student-loan debt. If pursuing certain loan forgiveness programs, however, making smaller payments is ideal.
"You pay what you are obligated to pay and aim to have the highest amount of your loan forgiven," Mr. Combs said.
Other financial considerations for physicians to make the most of a signing bonus include applying some of it to an individual retirement account, which would allow for that amount to be deducted from taxable income. Finally, "don't blow it," Mr. Combs said. Setting a budget can prevent overspending when income rises, he said.