As resident physicians, many of us are overworked, underpaid, and trying our best to make it through. While this time has its ups and downs, we can’t lose sight of the bigger picture. One of the best things we can do during residency is laying the foundation for the life and career we desire. This means doing a few things during our time in training to set ourselves up well financially. Here are 5 of the money goals I set when I started residency:
1. Figure out what’s going on with my student loans. When I graduated from medical school, I had a substantial amount of student loan debt. I remember being called into the financial counselor’s office and being told that I had over $200,000 in student loans. I don’t know about you, but I had never seen or made that much money in my life. I knew I needed a plan. I began to read about the different repayment options and tried to pick one that would give me the lowest monthly payments in residency, provide some government subsidies, and still qualify for loan forgiveness once I finished my training. I didn’t want to be stressed about student loans in residency, so I signed up for an income-driven repayment plan and had my residency coordinator sign the form needed for me to enroll in Public Service Loan Forgiveness.
2. Pay down my credit card debt. I had credit card debt before I started residency. Most of it was accumulated before I was a med student, back when I struggled to make ends meet as a post-grad student in Washington, DC. However, I had also racked up some debt when I was starting residency. Moving from one state to another, paying the deposit for a new apartment, and affording basic expenses like food while I was waiting weeks to get my first residency paycheck was tough. I didn’t have the benefit of a working spouse or cash from my parents to lighten the burden. I didn’t realize doctors could get low-interest personal loans, so I charged the expenses on my credit card instead. My goal was to pay off this debt within the first year of residency, so I set aside money from each paycheck to pay down this debt until it was gone.
3. Save money for vacations and emergencies. One of my goals as a resident is to take full advantage of my vacation time by traveling and visiting friends in other areas of the country. Before COVID, I had visited friends in Seattle and Chicago. In a few months, I’m planning to attend a destination wedding. I knew I needed to plan ahead to afford those trips without taking out additional debt or charging the expense on a credit card. Thus, I saved a few hundred bucks from each paycheck into a “vacation fund” so that I could afford to take nice trips during my time off. Along with saving money for vacations, I also wanted to make sure I had money in an emergency fund so that if an unexpected expense occurred, like needing new brakes for my car, a new phone, or a new laptop, I had the money to pay for them. So, in addition to my vacation fund, I used automatic savings to put a few hundred bucks from each check into a separate emergency fund.
4. Protect my income with disability insurance. As a resident physician, I know my income will increase when I become an attending. As I near the finish line of my training, I realize that a lot of the goals I have for my life—to buy a nice home, spend quality time with my family, have memorable international travel experiences, finance my [future] kids’ education, and build wealth for future generations—depend on my future attending income. Because the life I envision is so heavily dependent on my future high salary, I knew I needed to protect it by getting disability insurance. Having disability insurance means that if something unfortunate happens (like getting in a car accident, being diagnosed with a chronic medical illness, or suffering from a mental health disorder) I will still have an income high enough to help me reach my financial goals. Getting disability insurance as a healthy young resident allowed me to not only protect and insure my resident salary but also allowed me to lock in a lower rate with guaranteed coverage so that I would be insured as an attending physician as well.
5. Start investing money. Despite the goals above and an initial salary of $60,000 as an intern, I still decided to invest. I knew that I couldn’t save my way to wealth and that if I wanted to meet my financial goals sooner, I needed to start buying assets (things that increase in value over time). One of the best things about investing is that my money can make even more money via compound interest and compound interest is more effective the earlier I start investing. Because of the tax, student loan, and asset protection benefits, I invested in index mutual funds (like the Vanguard Total Stock Market Index) through retirement accounts (like a Roth IRA and my residency 403b). Because I wanted to prioritize paying off my credit card debt, I started investing only 3 percent of my income as an intern. I gradually increased the percentage every few months as I paid off my credit card debt and stacked up my emergency fund until I reached my target of investing 10 percent of my income.
The first step in becoming money savvy as a resident is to clearly define what you want and make some money goals that you can work toward while in training.
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