After many years of trial and error, I wondered what I could have done to avoid the pain. I realized that we’ve actually heard most of the useful advice to succeed, but sometimes the knowledge doesn’t process. It’s all about the timing, explanations, and triggers that make our brains tick. The following is a list of the most useful tips my trainees have found to be helpful:
The transition from medical school to internship is both an exciting and traumatic period for doctors. As a fully anointed “M.D.” (or D.O.), the new doctor has a well-deserved and distinguished title to her name. No more “student doctor” anymore. Most orders won’t have to be cosigned anymore. Want to place an order for 100mg of lasix? Prime those kidneys, and have at it. On the flip side, being a doctor is stressful. Becoming a new doctor for most of us was hair-pulling-out stressful. Those who have not gone through the process will never truly understand how traumatic the beginning of internship or residency is.
Binge-eating, crying in the bathroom, retail therapy…if you can think of any self-abusive punishment you can better bet that at least one newly anointed physician has tried.
New residents also neglect their financial health too. Going from no salary to some salary impacts one’s psyche. If you add in a stressful environment then it’s pretty easy to start making bad financial choices. Predatory businesses who want your credit score will lend you more than you should ever incur to your name.
Whenever I am mentoring a new trainee, I try to distill the financial aspects of their training to a few fundamental steps. No new doctor should be spending hours of her free time during residency mastering financial matters anyway—you need to be mastering your profession. Below are a few of the pointers I try to highlight:
Assess your 401k/403b options
Die hard savers will browbeat you into maximizing all of your tax-advantaged space no matter what. As a resident you technically should have enough income to fully contribute to your employer’s retirement program. Many non-physician middle class households have comparable incomes to medical residents, and many still do contribute to their retirement accounts. In practice what you should do may not be as clear-cut. Some of you are probably training in high cost of living cities where your trainee stipend will not get you far. Some of you will have certain family obligations that limit what you can squirrel away even though all objective financial advice tells you that the longer you have something invested into the market, the longer you can allow for it to grow.
I certainly did not maximize my 401k/403b options during my training, although I was not well-equipped to manage my finances either. My training program did not offer any matching options, so I figured that I would have been better off either keeping my earnings in a savings account as an emergency fund or using excess funds to repay my student loans. The interest rate in savings accounts were atrocious, but it allowed me to keep around emergency money.
The bottom line on whether to maximize your retirement accounts during your training ultimately depends on how much you can budget. Most medical residents are going to be in the lowest tax bracket ever in their training so the savings will come only in retirement when you start withdrawing.
Track your loans
It is not difficult to lose track of what you owe and when your payments are due. It is always easy to apply for deferral or forbearance, but eventually that will catch up to you as well. Update your mailing address if you have moved recently. I’ve lost count of the number of times that my mail was misplaced after changing addresses. Even though most transactions are conducted online now, it still is good practice to minimize the chance that you lose any important mail.
Watch out for credit card debt
When I started residency, I started receiving all sorts of flyers for credit applications. It’s as if someone knew that I suddenly came into a windfall with a real job. Perhaps the student loan companies sold my information to lenders. While lenders are generally more cautious about extending too much credit in recent years, it’s not difficult for most people to open too many lines of credit especially if you are in a stable profession.
You might think that credit card debt is something that only others would get caught up in. Think again. It’s just as easy for doctors to become deep in credit card debt as anyone else. The problem with doctors being too busy is that less important matters can become forgotten. I’ve embarrassingly forgotten to pay bills even though I had the funds to do so. I’ve had co-residents who set their payments only for the minimum amount due each month not realizing that they were paying interest rates up to 25%!
Don’t buy that house
No matter how you justify it, owning a condominium or house during your residency probably isn’t going to give you any financial brownie points. The biggest hassle with owning property at this stage in your life is that there isn’t any guarantee how long you will benefit from owning it.
There are plenty of residents who purchase condominiums during their training with the intention of renting the units out to future trainees. This could be lucrative only in a high cost of living area where the property value will actually appreciate. Sure, rental income is all about cash flow but there is a good chance that the work that you’d have to put into managing or outsourcing the maintenance will offset much of the financial gain.
Think about it. How much are you willing to put up with in taxes, maintenance issues, and heartburn for a rental that goes for $1000 a month? How about $1500 a month? $2000 a month? What if your day job as an attending physician paid you $300,000 while your residency rental was 1000 miles away?
What other suggestions do you have for residents in training?
Previously we discussed tips to supercharge your net worth during residency. The main aspect of your finances that you can truly control are your expenses. The following are some of the methods that helped me increase my net worth during rough times:
- I did not own a car. Fortunately I lived in a city where mass transit was somewhat reliable and I also lived close to my workplace. So I saved on car insurance, maintenance, and gas. In contrast, I did live in a high cost of living city, so rent was much more expensive than the average U.S. city. In retrospect, the higher cost of living area far exceeded what I saved by not owning a car. That being said, if I truly needed a car during residency, I would have sought out a 5+ year old used car on Craigslist, preferably from a grad student about to move out of the country and needing to sell immediately. High fuel efficiency would be emphasized, although one key component to saving is to minimize unnecessary driving trips.
- I maxed out my on-call allowances monthly. Our residency gave us approximately $10 for meals while on call. This was actually regulated through a meal card that contained roughly $100 a month. Maybe they assumed q3 call on a 30-day month. On days that I needed a meal, I would save on meal costs. Whatever was left over was used to purchase ancillary unhealthy snacks that I might have otherwise bought anyway. YMMV depending on how regulated your program is.
- I did not own any new furniture. My bed was given to me by a graduating medical student who bought it new but used it for less than one year (not sure why). My couch, desk, dining table, dresser, and corner table all came used via Craigslist. When I moved, I sold everything at a profit and more than doubled my initial investment after years of using the furniture (while maintaining it in good condition). I was quite fortunate in this regard—I doubt that I’d ever be able to replicate such bartering skills in the future.
- I found a Hispanic grocery store that sold dirt-cheap basic foods. Although I’m not sure how much pesticide I actually consumed from buying discount fruits and vegetables, it saved me a lot of money. Cuts of meats were also significantly cheaper than the average grocery store.
- I bought discounted food at Whole Paycheck. I discovered that said grocery store sold their blemished fruits at a deep discount and raided their selection every week. A bag of 6 fancy mangoes for $1.50! Or a 5lb bag of limes for $1.50! I once chatted with the fishmonger at the store and discovered that they discarded the fish heads and spines. I once bought 3 keta salmon heads/spines for $1. This is the same fish whose fillets sold for an obscene $28.99/lb. The fishmonger also did not fillet cleanly so the portions I purchased had significant amounts of meat. I used the bones to stew broth for ramen.
- I kept limited wardrobe. I don’t believe that I actually purchased any new clothing during residency, especially since I took care of my work clothes. This meant air drying dress shirts and ironing them myself.
- I cleaned my own apartment. That meant no housekeeper. Initially I thought that not having maid service as a resident was a no brainer, but it’s amazing how many of my colleagues were paying for a cleaner. It also helped that I did not have much furniture to begin with.
- I kept my restaurant tabs in check. I didn’t live in solitude but also kept a close eye on excess spending at fancy restaurants. Stressful jobs often lend themselves to retail therapy.
Any other suggestions? Sound out below!
- You will work more but have a stable (but low) income.
- 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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
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!
I wished that I cared more about finance during medical school. It always seemed like there was something else more important (i.e. USMLE, tests, clerkships…etc). Most students felt that way. Those who came from financially independent families surely didn’t care. It was also taboo to even discuss these matters. After all, we’re in the business of saving lives, right?
What I’ve realize from practicing medicine is that excelling in medicine only gets you so far in life. You still have to be able to translate the blood and tears we suffered through all these years into that German luxury auto that you’ve always wanted. And no one teaches you that.
The key advantage of being a young, poor, student is time. Time to gain experience. In finance, you get compound interest. As far as getting yourself there, learn to be financially competent. Take some time to study about finance. An hour a month, perhaps. Make time. When the financial advisors start preying on you during residency, you will be prepared. Learn the vocabulary. Read my high yield financial outline for the busy student. Every initiative you take to educate yourself in finance or business is an investment into your future self.