July 1st is here, which means it’s the start of a new residency year. For interns, things can be nerve-wracking and scary. You may wonder if you remember enough information from medical school and hope you arrive at the right place at the right time this week. For the senior residents like me, we are elated to be almost done with training, but we are also starting to focus on fellowship applications, research opportunities, and job openings for next year. No matter which group you’re in, it’s a busy time. Although there is a lot on your plate, you must realize a few basic monetary truths so that your finances don’t become another stressor during training.
1. You are not guaranteed to be rich. Just because you are a doctor and will have a high salary does not mean you don’t need a plan for your finances. Most people who make more money get into more debt. Your time as a resident is not an excuse for poor money management and credit card accumulation. Many doctors’ net worth is not nearly as high as it should be, considering how much they get paid. Make some financial goals for yourself now and try to avoid some common pitfalls. Learning a few finance basics as a resident can go a long way.
2. Spend less. Save more. Minimize debt. Things can be challenging during residency so try to live below your means or at least avoid living above your means. You don’t have to have a detailed budget, but creating a basic spending plan to prevent yourself from accumulating [more] debt during training might be helpful. Save money in an emergency fund so that small, unexpected expenses like a car repair, an urgent trip back home, or a new cell phone don’t derail your budget or financial goals. Vacations can serve as a much-needed break from the stress of residency, but try to pay for them in cash by saving a couple of hundred dollars from each paycheck. If you can, invest some money in index mutual funds via your work retirement plan or your own Roth IRA. The goal in residency is to keep your head above water financially and avoid getting into more debt.
3. Have a plan for your student loans. Choosing to “deal with it later” is not a plan. Read about the different student loan repayment options and choose one, likely an income-driven repayment plan, so that your payments are affordable in residency. Most residency programs qualify for public service loan forgiveness, so take a couple of minutes out of your day and sign up for this free program so that you have an option for your student loans to be forgiven after 10 years. When choosing a student loan plan, recognize that the optimal student loan plan for you as a resident may change when you become an attending. That’s OK. Just figure out the best federal repayment plan for you now, likely PAYE or Re-PAYE, and consider hiring a company like Student Loan Advice or Student Loan Tax Experts once you finish training so they can run the numbers for you and help you determine the best repayment plan for you as an attending.
4. You need insurance. As a resident physician, there’s a good chance you have health insurance from your employer that is either free or low cost, but health insurance isn’t all the insurance you need. Every resident physician needs long-term disability insurance. You may get a small amount through your residency program, but that is unlikely to provide enough coverage. Most residents and attendings will need to purchase an additional individual long-term disability insurance policy. If you have a spouse, kids, or family members that you support financially, you may also need to purchase term life insurance. If you have a side business, you may also need extra liability insurance coverage. Figure out all of the insurances you need and make sure you get them.
5. Think twice before you buy a house. Owning a home can be a major milestone and lifelong dream, but it may not be wise to do so in residency. You cannot just compare the monthly mortgage price to the monthly rent price and make your decision. There are additional fees and costs associated with homeownership that can be challenging to deal with as a resident. Do what is best for your family, but make sure you consider all of the pros/cons of buying a home before you make the decision to rent vs. buy.
Altelisha Taylor is a family medicine resident and can be reached at Career Money Moves.
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