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Should Doctors Pay Off Their Debts or Invest the Money Into Their Practice?

Cypress Wealth Services

December 2021

If you’ve ever considered opening your own private medical practice, you probably know that the barriers to entry are sky-high, costing anywhere from $70,000 to over $100,000.(*1) But oftentimes the most rewarding things require an investment. In this case, the rewards are getting to be your own boss, running your practice how you want, and providing treatment based on your own standard of care.

But many doctors face an all-too-common dilemma when they have money left over at the end of the month—should they invest it in their practice or use it to pay off debt? Unfortunately, as with most financial questions, there’s no one right answer.

If you’re wondering whether you should invest or pay off debt, read on as we take a look at common scenarios that may help you make the right financial decision for your situation.

When to Pay Off Your Debts

The numbers are enough to take your breath away: as of 2021, 76-89% of medical school graduates have education debt, and the average total student loan debt is over $240,000.(*2)  Throw in an average of $8,640 in credit card debt, (*3) $208,185 in mortgage debt, (*4)  $19,865 in auto loan debt, (*5)  and ever-increasing inflation, and it’s no wonder doctors can make $200,000+ dollars a year and still carry education debt for over 10 years. (*6)

Here are some examples of when paying off debt first may make the most sense.

-  You have high-interest debt. Depending on the type of debt you have, interest rates can easily exceed 20%. If you have any debt with rates over 10%, we recommend paying them off first. Interest rates this high keep you buried in debt for the long haul.

-  You’re nearing retirement. Retirement is a time where you go from earning a paycheck to living off your savings. The less money you have to earmark for debt payments during your golden years, the better.

-  Your business is running like a well-oiled machine. If your practice is going well and you’re not currently hurting for a cash infusion, then chip away at your debt. Your personal financial health should be just as much a priority as your business’s health.

-  Your debt is all you can think about. Money is emotional. Some people can tolerate debt while others feel shackled to it no matter how small the interest rate may be. If your debt is adding unnecessary stress to your life, pay it off before you invest (even if it doesn’t make mathematical sense).

When to Invest in Your Practice

If you don’t have any high-interest debt (anything over 10%) or your practice needs the extra cash, it may make sense to invest first.

For example, if you know that updating your medical records software would free up enough time for you and your staff to see 10 extra patients a month, investing in your business could produce a greater return than paying off debt.

Or, if you know relocating your practice to a more desirable (read: more expensive) part of town would bring in an influx of patients, invest in your practice so you can make the transition.

When to Split the Difference and Do Both

Who says this has to be an either/or situation? If you’re on the fence about whether you should pay off debt or invest in your practice, split the difference and do both. For example, if you know you have an extra $3,000 a month to work with, invest $1,500 in your practice and throw $1,500 at your debt. You may not hit your individual goals as quickly as you would if you tackled them one by one, but you’ll still make substantial progress.

How We Help

Whether you just struck out on your own or have been in practice for years, it can be hard to know if you should use your extra cash to pay off debt or invest in your practice. If you need help choosing which route is best for you, we at Cypress Wealth Services are here to help you decide. But we don’t stop there. We can help you navigate every challenge and opportunity you face on your financial journey. To learn more about how we help doctors protect and grow their wealth, call our office today at 866.888.6563.


About Cypress Wealth Services

Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs, and their experience and expertise act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With financial advisors in Palm Desert, CA, Tustin, CA, and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit or call 760.834.7250.