The transition from medical school to internship is both an exciting and traumatic period for doctors.  As a fully anointed “MD” (or DO), 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 100 mg 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 401(k)/403(b) 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 contribute to your employer’s retirement program fully.  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 401(k)/403(b) 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 $1,000 a month? How about $1,500 a month? $2,000 a month? What if your day job as an attending physician paid you $300,000 while your residency rental was 1,000 miles away?

“Smart Money, MD” is an ophthalmologist who blogs at the self-titled site, Smart Money MD.

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