Supercharge your net worth during residency

supercharge your net worth during residency smart moneyThere are two essential financial differences between a resident and a medical student:

  1. You will work more but have a stable (but low) income.
  2. Your expenses will likely be higher as a resident.

Think about it. As a medical resident, you are not swimming in money. A medical resident’s salary is in the mid five figures. If you take into account the number of hours you spend working, studying, and preparing for conferences, your hourly rate is in the mid-low single digits. I calculated mine to be around $4/hour before taxes. At this wage, you’d better be living close to a medical student lifestyle. Be smart about your money.

Your expenses are likely higher as a resident too. Maybe you’ve moved away and no longer have roommates to share you housing expenses. If you have a family with a non-working spouse, you have to feed more mouths. Maybe you also have to use a car to commute to the various hospitals on rotation. With a single digit hourly wage and higher expenses, it behooves you to be financially savvy.

While many principles for medical student finance remain valid, there are some nuances. The following are power tips to increase your net worth during residency:

  1. Try your best to minimize your furniture and material wealth. Downside more if you need to. Who knows where you might move to after residency for fellowship or a new job. My residency furniture consisted of Ikea products that were easily disposable via craigslist. I’ve actually kept a few of these items onward and used them until they broke.
  2. Keep track of conference expenses. While most training programs offer a stipend, you can still itemize and deduct the expenses that exceed your allocated budget. Now is the time to maximize itemized deductions to reduce your already low tax burden.
  3. Live below your means. The conservative approach is to continue this habit until you become financially independent. This means no new boats, no new cars, and avoid buying a home. You can’t go wrong with this approach.
  4. Adapt your lifestyle to what you are comfortable with. If you are single and don’t mind having roommates, you can save a ton on rent and utilities. Live close to your workplace to minimize travel time and maximize sleep.
  5. Roth IRA. The more you get into this tax shelter, the sooner it can grow. You can also contribute for your spouse too if there are enough funds.
  6. 401k/403b. If you really have extra money to squirrel away, you can consider contributing to your employers retirement accounts. I never had enough left over to contribute, but it can add to your nest egg. One caveat is that once you leave your program,  you cannot contribute more to this account. At this point, you can either leave the investments in the account (and track them) until you start withdrawing in retirement or transfer the sum to an IRA or your new employer’s 401k/403b.
  7. Watch your restaurant budget. You’re busy every day and want to unwind. Maybe have a few drinks on the weekends (or weeknights). Set a strict budget and try not to exceed it. Limit your latte habit.

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Remember, you’ve made it through medical school and are smart about medicine. Be smart about your money as well. Any other tips to add? Sound out below!

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