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“While you may not know exactly what your transition period will look like ahead of time, you can do your best to prepare for this change. By having a plan in place, you can make sure you are ready for the time between training and your new career so that you have financial stability in this uncertain transitional period.”

Shane Tenny is managing partner, Spaugh Dameron Tenny, LLC, and host of The Prosperous Doc podcast.

He shares his story and discusses his KevinMD article, “Transition planning: financial moves for medical residents and fellows.”

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Hosted by Kevin Pho, MD, The Podcast by KevinMD shares the stories of the many who intersect with our health care system but are rarely heard from.

Transcript

Kevin Pho: Welcome to the show, where we share the stories of the many who intersect with our health care system but are rarely heard from. My name is Kevin Pho, founder and editor of KevinMD. Rate and review the show at KevinMD.com/rate. Subscribe at KevinMD.com/follow. Today we welcome back on the show Shane Tenny. He’s a certified financial planner. His latest KevinMD article is titled “Transition planning: financial moves for medical residents and fellows.” Shane, welcome back to the show.

Shane Tenny: Thanks, Kevin. Great to be here again.

Kevin Pho: Today we’ll get into the article a little bit, but for those who do get a chance to listen to our first episode together, just briefly share your story and journey to where you are today.

Shane Tenny: Yeah, for sure. I appreciate the chance to be here. So I am a certified financial planner professional. I’m also the managing partner at Spaugh Dameron Tenny, a financial planning firm working with physicians all over the country, based out of Charlotte, North Carolina. And for that matter, I’m also the host of The Prosperous Doc podcast, so I’ll give myself a shout-out here on your show, where we talk with folks doing pretty good work in the medical and dental community.

Kevin Pho: Wonderful. And tell us how you initially started working with clinicians and health professionals.

Shane Tenny: You know, that is a good question. About 25 years ago, my partners and I were just doing some analysis of our clientele. Our firm was started about 50 years ago by a much older gentleman, Herb Spaugh, and so over the decades we’d accumulated clients of all kinds of backgrounds. As we were working with some business coaches and looking at our own clientele and the relationships we had with a number of hospital systems, we realized that a really high percentage of our clients were physicians. So we realized that that was a market, or a niche, where we had some expertise, experience, and specialization, and certainly one that needs a lot of capable, thoughtful, diligent planning. That’s when we really began to double down on the branding in that area and focus. So today I think it’s somewhere around 80 percent of our clients each year who come from the medical or dental background, as well as another area we serve.

Kevin Pho: And just from your experience, the financial literacy of physicians and dentists and other health care professionals, how does that contrast with other professions?

Shane Tenny: Good question. I can’t say how well it contrasts, because I don’t work with many folks from other professions, but I think it reflects the general population as a whole. I mean, all of us, or I should say, there are some folks who grow up in homes where finances are talked about freely and openly. There are some folks who have an affinity or a proclivity for financial vocabulary and have an interest in it, and then there are folks who don’t. So even within the medical or dental fields, we find some folks who have pretty strong acumen, and a lot who don’t.

I think that’s an area where there’s a unique opportunity for those in medicine, because you spend a decade or more getting really specialized training that is all-consuming. So even if you have an interest, you may not have time to deal with some of the financial decisions. And because you’re in the field of medicine, you are among the top 1 percent of income earners, which means the opportunity and the magnitude of your financial decisions has a big ripple effect. You’re just dealing with more dollars, and so the impact of good decisions or bad decisions can be profound. That’s where we really want to come alongside and help our clients make smart decisions with their money, so they feel secure, free, and successful instead of stressed, anxious, and depressed.

Kevin Pho: All right, so let’s talk about your KevinMD article titled “Transition planning: financial moves for medical residents and fellows.” We’re talking toward the end of July, and of course, during the summer you have medical students going to internships and residents becoming fellows, big professional changes in their lives. And of course, there are also ramifications from a financial standpoint as well. Now, for those who do get a chance to read that article, just walk my audience through it and share the story of why you decided to write it.

Shane Tenny: For sure. So one of the things that we know from working with folks in the medical field is that not all doctors have a huge bank account and lots of income. In fact, I would venture to say that all doctors start out quite the opposite. So what we’re trying to highlight in this article is just the different stages that medical providers, physicians in particular, go through, from training all the way through retirement, or end of career, and that sort of thing.

The beginning, of course, is training in medical school and in residency, which is a really intense period, and a period with either no or little compensation: none if you’re in medical school, and relatively little while in residency or fellowship. What we’ve seen, and what we know, is that there is then a very short and focused period of time that we call the transition phase, or the transition plan, in between your training, whether it ends with residency or ends with fellowship, and starting in practice.

So for example, as you point out, we’re talking in the summer here, and a lot of folks have finished their training in June. They’ve got a contract, they’ve got a job lined up, and they’re planning to start presumably in August, but the first paycheck may not come until the end of August or the beginning of September, or something like that. So there’s a two-, three-, sometimes four-month gap where the surprises can happen. We want to call that out and draw folks’ attention to some of the planning that can be so helpful for you to have on the radar before you finish your training, your fellowship or residency.

Kevin Pho: All right, so go ahead and talk about some of those common surprises that these physicians may encounter.

Shane Tenny: Yeah, great question. I’d say there are five key things that we try to help folks have on the radar. I’ll rattle them off here.

One is health insurance. If you end your training in June, then generally your health insurance from your prior hospital or group or institution will end on the last day of June. With your new employer, assuming you start, say, August or September 1, health insurance generally doesn’t start until the first of the month following the month you start. So you can have a gap in health insurance for, say, July, August, maybe even September. It’s important that you are aware of that, certainly if you have any medical issues that you’re aware of. Occasionally we meet with clients who are pregnant during that period, so that’s important to be aware of. So health insurance is one.

Number two, you want to be aware of benefits that you currently have, or had while in your training program, that you may need to deal with or be able to maintain. One of the most common is the retirement plan that you had, the 401(k) from, say, residency or fellowship. What do we need to do with that? And then one of the other most common is disability insurance. A lot of training programs offer a really preferred or rich disability income protection plan to folks in training, and often that’s portable and can be maintained if you act before you leave. So we want to put that on the radar. If you don’t maintain it, then you end up having to go out into the private marketplace to look for supplemental coverage later.

The third thing is not only past benefits but future benefits. As you’re signing up with the new employer, new group, or new hospital system in July or August, what are the benefits that you need to avail yourself of there, based on your family situation or needs? What things are a waste of money for you? So we want to help with that, and that would include decisions around even just tax withholding, those pesky W-4 forms. What should I put? Married and four? Married and two? Single and zero? All of those questions.

The fourth thing is what to do with your student loans. I’ll call this out for just a minute here, because student loans are always a source of enormous confusion, and now even more than ever. As many folks know, individuals, physicians with federal student loans, have been under basically the COVID forbearance for over two years now. Loan payments have not been required, the interest rate is set at 0 percent, and yet despite that, individuals are getting credit toward their income-driven repayment plan or Public Service Loan Forgiveness. Right now, the opportunity is for individuals with federal student loans who have been under a grace period while they’re coming out of training to switch into forbearance. You want to move out of the grace period into forbearance so that you can start getting credit for basically not making payments. Currently, the forbearance period is scheduled to end at the end of August, we think, and a lot of folks seem to be aligning with the expectation that that forbearance will be extended again. So it leaves a big question there.

And then the fifth area that needs to be addressed during the transition period is really just cash flow expectations and expenses. What do I mean by that? Well, that’s kind of the obvious one, but you’ve got a couple of months coming with no income. Are you just planning to live off credit cards? It’s an important thing to realize, because sometimes there’s travel that takes place over the summer. Oftentimes there are wedding things, sometimes your own, but definitely friends’, and so traveling to weddings and buying the clothes for weddings is important. There are credentialing fees. There are down payments on an apartment if you’re moving to a new geographical location. So we see that cash flow requirement being somewhere between $5,000 and $40,000, which is not uncommon, again depending on a lot of factors.

So if somebody’s listening to this and maybe still has a year or two of their residency, this is great to have on the radar, because of course, accumulating $5,000 or $10,000 or $15,000 while you’re in residency isn’t easy. So having a long runway is helpful in that regard.

Kevin Pho: So walk us through a typical scenario that really illustrates some of these points that you talk about. It could be from medical student to internship, or it could be from resident to fellowship, but tell us a story. Walk us through a scenario where some of these things that you talk about are really illustrated.

Shane Tenny: Yeah, it’s a great question. So for example, I’ll try to give a really typical scenario. Somebody finishes their residency program at the end of June, maybe in one city, and they’ve got a contract that they signed several months prior to move to a new town and start a career. They think to themselves, “Well, I’ve been in training between medical school and residency for maybe eight or nine years, and I’m ready to take a breath, have a little free time, and go visit some friends. So I’m going to start my new job in September.” So you talk with HR, you talk with the hiring physician or the group, and they say, “Perfect. September is Labor Day. Why don’t you start on September 5?” OK.

So it’s a period that you’re just so looking forward to, for a little downtime and mental space. During this time, you want to go back home and see family. You need to load up your car. Maybe you need to plan to do your credentialing or board exams in Chicago, something like this. And you have a friend getting married. So we’ve got here now the month of July, the month of August, and the month of September. We’ve got two and a half months. Even though you’re starting September 5, it doesn’t dawn on you until August that your first paycheck won’t come until September 25. So you’ve got a period where you have no income coming in. You may have some residual credit card debt from your residency program, for example, and so we need money. So it’s just helpful to think through: OK, how much is it going to cost to drive home, or to load up my stuff? How much is it going to cost to fly down to Key West for my buddy’s wedding? How much will I have to pay for my suit if I’m in the wedding?

I’ll expand on health insurance for a minute. There’s a gap in health insurance. Most folks are healthy, so that’s not a big concern. I will say that COBRA, which is kind of the health insurance stopgap, can be elected retroactively. So you don’t always have to make that decision right as you’re leaving and walking out the door. But if you end up in an emergency department during this transition period, you can retroactively elect COBRA. It certainly is not without its challenges, but that can be done.

And so, to just pick up on all five of the topics I mentioned: Before you leave in June, you want to work with the HR department of the hospital and find out if there’s a disability insurance plan that’s discounted that you can maintain, and if so, complete that paperwork. You’ll want to identify with your new employer when you need to fill out benefits paperwork to start. Do you want the life insurance coverage? Do you want the dental coverage, disability insurance, health insurance? As I was kind of setting up in this scenario, health insurance generally starts the first day of the month following your employment. So if you’re starting the Tuesday after Labor Day, well, you’ve already missed the first of September. That means you don’t have health insurance for September, generally until October.

So that’s kind of the case study scenario of what comes in and why it can be so helpful for folks who are working long, intense weeks as they’re finishing their residency program to be able to have an article like the one we’ve written, or to be able to talk to a financial planner, to help guide them through some of these really important things. They can just help set them up for a great start, because what we want, and what everybody wants, is to get that first paycheck and feel like, “Great, this is the first day of the next chapter of my professional career,” and not feel like you’re coming in with a bunch of obstacles or headwinds or roadblocks or mistakes from a fumbled transition.

Kevin Pho: So speaking of mistakes in a fumbled transition, what would you say is the number one red flag or mistake that you see from these physicians in transition?

Shane Tenny: The number one mistake would be missing the opportunity to carry forward benefits from your residency program. You get so focused on crossing the finish line that you miss the opportunity to carry forward benefits. I can’t stop with number one, because there are a couple. The number two mistake, historically, would be not making the right student loan elections to maximize the credit, especially for those who hope to be pursuing Public Service Loan Forgiveness. And then the number three mistake, I would say, would be just missing the opportunity to plan and have a cushion of money to get them through. And so again, you navigate, credit cards work, but you end up in October, November, and December paying off your summer transition instead of building the next chapter.

Kevin Pho: We’re talking to Shane Tenny. He’s a certified financial planner. His latest KevinMD article is titled “Transition planning: financial moves for medical residents and fellows.” Shane, what are some of your take-home messages that you want to leave with the KevinMD audience?

Shane Tenny: Well, I’m a financial planner, Kevin, so I can never miss the opportunity to help encourage people. Message number one is plan, even if money isn’t your strength, even if it is an area of energy for you. If you can look ahead and anticipate what’s coming and try to make some thoughtful decisions, I believe the saying is, “An ounce of planning is worth a pound of cure.” So that is the key. Look forward and try to learn what will help you move forward, and if you don’t know, then ask for help, whether from a friend, a colleague, or a professional.

Kevin Pho: Great. Thanks again for coming back on the show and sharing your time and insight.

Shane Tenny: Absolutely, Kevin. Thanks for being here, and thanks for all you do for the community.