As resident physicians, many of us are overworked and underpaid, yet we try our best to make it through. While this period of 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 to lay the foundation for the kind of life and career we desire. Here are five steps I took during residency to set myself up to do well financially:
1. Figure Out What’s Going on With 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 more than $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 different repayment options and tried to pick one that would give me the lowest monthly payments in residency, provide some government subsidies, and allow me to 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 a form to enroll me in public service loan forgiveness.
2. Pay Down Credit Card Debt
I had credit card debt before I started residency. Most of it I accumulated before I was a medical student, back when I was struggling to make ends meet as a postgraduate student in Washington, DC. I racked up some additional debt when I started residency. Moving from one state to another, paying the deposit for a new apartment, and affording basic expenses like food while 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 instead charged the expenses to my credit card. 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 has been to be able to take full advantage of my limited vacation time by traveling and visiting friends in other areas of the country. Before the COVID-19 pandemic, I visited friends in Seattle and Chicago. In a few months, I’m planning to attend a destination wedding. In order to afford those trips without taking out additional debt or charging the expense on a credit card, I knew I needed to plan ahead. Thus, I saved a few hundred bucks from each paycheck in 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 I incurred an unexpected expense like new brakes for my car, a new phone, or a new laptop, I had the money to pay for it. 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 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 income. Because the life I envision is so heavily dependent on a high future salary, I decided 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 not only to protect and insure my resident salary, but also to lock in a lower rate with guaranteed coverage even later on as an attending physician.
5. Invest Early
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 just save my way to wealth and that I needed to start buying assets if I wanted to meet my financial goals sooner. One of the best things about investing is that my money can make even more money via compounding interest. And compound interest is more effective the earlier it begins. Because of the tax, student loan, and asset protection benefits they provide, I invested in index mutual funds through retirement accounts (like a Roth IRA and my residency 403b). Because I wanted to prioritize paying off my credit card debt, I started off as an intern investing only 3% of my income. 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% of my income.
The first step in becoming money savvy as a resident is to clearly define what you want and make some financial goals that you can work toward while you are in training.
Dr. Altelisha Taylor is a family medicine resident at Emory University in Atlanta. She has a passion for primary care sports medicine and enjoys writing articles on personal finance and health policy, including for her blog (CareerMoneyMoves.com).
Illustration by Jennifer Bogartz