Intro to Financial Literacy for Physicians
A simple, practical foundation for making confident money decisions throughout your medical career
February 2, 2026
A question for the doctors in the house: When you think back on the hours spent studying anatomy, biochem, microbiology, pathology, epidemiology, and the rest, how much instruction did you receive on the financial aspects of becoming a physician? As healthcare specialists, you face some of the most complex personal and corporate financial decisions in Canada — yet the financial basics rarely come up, not in medical school, not in residency, and not once you start earning real income.
Like the orthopedists among us might tell their patients with trick knees: This isn’t a personal failure; it’s a structural issue.
Medicine trains you to manage risk, uncertainty, and high-stakes outcomes — just not always when it comes to money. . This guide exists to remedy that. We can’t give you a brand new diploma to hang in the office, but we can offer you the essential foundations needed to feel confident and in control, no matter where you are in your career.
Why Financial Literacy Matters More for Physicians
Physicians don’t follow a typical financial path. The sequence is compressed, delayed, and then accelerated — often in rapid succession..
Most physicians experience:
- high student debt
- a late start to investing
- rapidly increasing income
- irregular pay structures
- contract variability
- the need for incorporation
- complex tax realities
- pressure to make big decisions quickly
Individually, these are manageable. Compounded , they create high stakes — and real opportunity — if properly navigated.
Consider this: A physician earning the same income as a corporate executive may face double the tax complexity with half the training in financial planning.
That’s why financial literacy matters more here. It’s not about optimization. It’s about avoiding friction — and using the system to your advantage instead of merely reacting to it.
Financial literacy is your edge. (That may be surprising to someone who wields a scalpel for a living. Just keep reading.)
The Six Pillars Every Physician Needs to Understand
Something you probably didn’t hear much in med school: You don’t need to know everything. You simply need to understand a small number of concepts that show up repeatedly across your career. These are the six that matter most:
1. Cash Flow & Budgeting (The Foundation)
Before investing, before tax strategy, before incorporation, you need clarity on where your money actually goes.
Even high-income physicians feel cash-flow pressure due to taxes, inconsistent pay, practice expenses, and lifestyle inflation. Without visibility, income increases don’t create relief, just more stress.
At a minimum, you need:
- a clear monthly spending plan
- automated savings
- margin for unexpected expenses
Cash flow isn’t restrictive. It’s stabilizing. And everything else depends on it.
2. Debt Strategy (Not All Debt Is Equal)
Physicians often carry significant student or consumer debt early in their careers. The issue isn’t the presence of debt; it’s misunderstanding how different types of debt behave.
You should understand:
- which debt to pay down first
- which debt can be held longer
- how to balance debt repayment with investing
- how high-interest debt quietly erodes wealth
Debt strategy isn’t about eliminating debt as fast as possible. It’s about sequencing decisions intelligently.
3. Tax Basics (Your Biggest Lifetime Expense)
For most physicians, taxes will be the single largest lifetime expense. (Followed closely by magazine subscriptions for the waiting room. OK, we made that up.) Understanding the basics can reduce lifetime taxes by hundreds of thousands of dollars.
Marginal Tax Brackets
Your marginal tax rate is the tax rate you pay on your next dollar of income, not on all of your income.
Simple example:
If your marginal rate is 47%, every extra $1 you earn is taxed at $0.47.
Why you should care
Understanding marginal tax rates is essential for:
- deciding salary vs. dividends
- RRSP contribution timing
- planning retirement withdrawals
Salary vs. Dividend Compensation
For incorporated physicians, income can be paid in two ways:
Salary
- Counted as earned income
- Creates RRSP room
- Requires payroll remittances
- Contributes to CPP
Dividends
- Paid from corporate after-tax profits
- No RRSP room created
- No CPP contributions
- Less administration and more flexibility
Why you should care
Choosing the wrong mix can lead to higher taxes, lost RRSP room, excessive RRSPs, or inflexible retirement income later.
RRSP vs. Corporate Investing
RRSP
- Tax deduction today
- Tax-deferred growth
- Fully taxable on withdrawal
- Mandatory RRIF withdrawals at 71
Corporate Investing
- Invest using retained earnings inside your professional corporation (PC)
- Lower tax rate on investment growth
- Greater withdrawal flexibility
- Can avoid large RRIF income spikes
Why you should care
The RRSP vs. corporate investing decision directly affects lifetime taxes and retirement income control.
Deductibility Rules
A cost is deductible if it is required to earn business income.
Examples of typically deductible expenses:
- Licensing fees
- Association dues
- Office rent
- EMR and software
- Medical equipment
- CME
- Staff salaries
Common non-deductible expenses:
- Personal meals
- Clothing (including those scrubs you find especially flattering)
- Vacations labelled as “conferences”
- Home gym equipment
- Family travel unless clearly business-related
Why you should care
Understanding deductibility reduces CRA risk and keeps more money inside your corporation.
OAS Clawbacks Later in Life
OAS (Old Age Security) is a government benefit paid to seniors. If your taxable income is too high, the government begins taking it back — known as the OAS clawback. (Yikes, fetch the iodine, right?)
How it works:
- Once income exceeds roughly ~$90k, $0.15 of every $1 above the limit is clawed back
- By approximately ~$150k, OAS is fully eliminated
Why you should care
Nobody likes to hear a doctor say “uh-oh.” Physicians often trigger clawbacks unintentionally due to:
- large RRIF withdrawals after age 71
- selling corporate investments
- rental income stacking on top of withdrawals
- lack of income smoothing
Planning ahead preserves benefits and reduces taxes.
4. Investing (Where Long-Term Wealth Comes From)
Again, it’s not about becoming an expert, just developing a framework that works even when you’re busy.
Index Investing
Index investing means owning a fund that tracks an entire market rather than selecting individual stocks.
Think: “Own the whole market, not one company.”
Why you should care
- minimal monitoring
- historically outperforms most stock-picking
- lower fees
- simple and scalable
Diversification
Diversification spreads investments across companies, industries, and countries.
Think: “Don’t let one decision determine your outcome.”
Why you should care
- reduces risk
- smooths volatility
- prevents emotional decision-making
- protects long-term goals
A diversified portfolio is a physician’s best defence against uncertainty.
Time in the Market vs. Timing the Market
Trying to time the market rarely works; even professionals fail at it. Staying invested and allowing compounding to work almost always wins.
Simple truth:
Missing just a few of the market’s best days significantly reduces long-term returns.
Why you should care
You’re busy enough monitoring vital signs. You might not have time to monitor the market too.Ultimately, consistency matters more.
Risk vs. Volatility
- Volatility: short-term fluctuations
- Risk: permanent loss of capital
Key idea:
Volatility ≠ danger.
Volatility is the cost of long-term growth.
The most important rule remains:
Start early. Invest regularly. Avoid speculation.
5. Incorporation (The Wealth Engine)
For many physicians, incorporation marks the point where wealth accumulation accelerates.
You should understand:
- when incorporation makes sense
- how income flows through a corporation
- how corporate investing works
- tax deferral vs. tax savings
- how to avoid “too much” RRSP
Incorporation isn’t just about tax deferral — it’s about flexibility and control.
6. Retirement Planning (It Starts Far Earlier Than You Think)
Retirement isn’t an age; it’s a math problem. And for physicians, it can also be a design problem.
Doctors with corporations, RRSPs, and TFSAs must plan:
- withdrawal order
- RRSP meltdown strategies
- PC wind-down
- tax at death
- CPP and OAS timing
Most physicians who retire later than expected do so not because they love work — but because they started planning too late.
Five Common Financial Mistakes Physicians Make
- Lifestyle inflation immediately after residency
- Over-contributing to RRSPs early in career
- Asset location not optimized for tax minimization, aka, holding the wrong investment type in the wrong account type
- Skipping insurance
- Not planning
Two or three course corrections can dramatically change long-term net worth.
The Financial Sequence for Physicians
A simple order of operations
- Build 3–6 months of emergency savings
- Pay off high-interest debt
- Maximize TFSA
- Incorporate (when appropriate)
- Start corporate investing
- Use RRSP strategically for tax smoothing
- Build a long-term retirement plan
This sequence protects cash flow while building scalable wealth.
How to Think About Money as a Physician
✔ Money is a tool — not a stressor
Clarity beats complexity.
✔ You don’t need to know everything
Just the essential foundations.
✔ Use your corporation wisely
It’s the closest thing physicians have to pension-style planning.
✔ You deserve a simple, reliable support system
You take care of everyone else. Your financial life should take care of you.
Meet With a Wealthsimple Advisor
Whether you're a resident, established physician, newly incorporated, or preparing for retirement, we’ll help you:
- simplify your financial picture
- reduce tax stress
- build a plan you understand
- coordinate the right accounts (PC, RRSP, TFSA, etc.)
- avoid common physician pitfalls
- feel confident about the future
You Do Health. We Do Wealth.
Book a session.
