As a resident physician, you are at an exciting and difficult time in your life. You’re finally putting into practice what you spent all those years learning, and it isn't easy. From a financial standpoint, you’re earning an income, but if you’re like most residents, you’re also coming out of medical school with a sizable student loan balance. From a financial standpoint, you’re earning an income, but if you’re like most residents, you’re also coming out of medical school with a sizable student loan balance. These financial tips should help you get through your residency while laying the groundwork for a lifetime of smart financial decisions. 1. When it comes to your finances, remember that you’re not an attending physician yet. Of course you’re reminded of this every time you get paid, but it bears repeating. Too many residents tend to want to live like they’re already earning an attending physician’s salary. That big, beautiful house will also come with a big, not-so-beautiful mortgage, and that flashy car isn’t free either. If you’re shouldering so much debt that you’re just barely getting by as a resident, you’ll not only likely be miserable for the duration of your residency; you’re also shooting yourself in the foot financially because you’re not able to set anything aside for the future. All of that debt you’re incurring on top of your student loan debt adds up. When you factor in the interest you’re paying with the opportunity cost, the true cost of living like an attending physician when you’re still a resident simply isn’t worth it. 2. Face debt head-on. Don’t be tempted to request a forbearance on your student loans simply because you are trying to get by on your resident’s salary. There are a number of income-based repayment programs you can use to start attacking your debt as early as possible, so you can pay it off as early as possible. Deferring your payments entirely might seem attractive now; however, you’ll probably regret that decision later in life. Residency is also not the time to take on unnecessary debt. Don't be tempted by "doctor's loans" for things you don't really need now. Remember that it's not free money and adding on more debt now just means you'll be repaying the amount borrowed plus interest later. 3. Protect what's important. You buy auto insurance for your car and renter’s insurance or homeowner’s insurance for your home, but have you bought insurance to protect what’s most important? Your residency is the often the best time to purchase life insurance and disability insurance so your family will be protected in the event you die prematurely, or are unable to earn an income because of a covered physical or mental disability. That’s because premiums are based, in large part, on your attained age and health at the time you apply. You will never be younger than you are now, and nobody knows what’s in store for your future health. 4. Plan for the future. You may feel like you don’t have any assets at this point to justify worrying about financial planning, but this is the perfect time to begin working with a financial planner who has experience working with doctors and physicians. While you may feel like you’re barely scraping by with your resident’s income, you know that there is a light at the end of the tunnel and your financial situation will change when you finish your residency. You also have financial goals, and now is the time to plan for them. A financial planner can help position you to meet those goals, analyzing the “what-if” scenarios so you can make smart choices with your income now, and in the future. 5. Begin saving for retirement. For most resident physicians, retirement seems like it’s a million years away, but the reality is that it is coming, so you need to start saving for it now. Take advantage of the opportunity to participate in employer-sponsored retirement plans so the funds you set aside will have time to grow, tax-deferred, until you need them. This is especially true for any retirement plans that come with an employer “match,” as that’s essentially free money you can set aside to help you reach your retirement savings goals that much faster. Saving for retirement can be confusing; there are a lot of similar-sounding retirement savings vehicles that may actually be quite different. This is an area where your financial professional can help you sort out your options and help you make sound decisions. 6. Create, and stick to, a budget. In order to have the funds to pay for life and disability insurance, make your student loan payments and set aside funds for your golden years, you’ll need to create a monthly budget. Budgeting will give you a clear picture of your assets and your fixed and discretionary monthly spending. This, in turn, gives you an opportunity to make adjustments. If you feel like there’s too much month and not enough money, your budget will show you where you can make adjustments. Maybe that means cutting down on extras or lowering fixed, monthly expenses. Sticking to a reasonable budget will lay the groundwork for your financial future, through your residency and beyond. Lean on Your Financial Professional Residency is an exciting as well as trying time. While finances may seem tight right now because you're living on a resident's wages, remember that this is just a stepping stone on your way to your chosen career. When you make smart financial decisions during residency, you'll be well-positioned to meet your financial goals later. If you’re not already working with a professional who specializes in financial planning for doctors, now is the time to start. By starting during your residency, you’ll be able to see the value a financial planning professional can bring you over your entire career. Source
