Dollars and sense

Money tips for residents

Here is a short guide to building good financial habits in residency, laid out by year in training.

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When you first start residency, the decision to put your finances on the back burner and focus instead on keeping your head above water is completely understandable. Luckily for you, there are more resources today than ever before to get you started on the right track, such as the White Coat Investor and our very own Money Matters column in The DO.

However, if you’re anything like me, you might find it frustrating that a lot of the information out there seems more geared towards early-career attendings than residents. From that perspective, here is a short guide to building good financial habits as a resident, written to be relatable to other residents and laid out by year in training.

Considerable thanks and appreciation to Jordan Frey, MD, of the Prudent Plastic Surgeon. Dr. Frey is a practicing plastic surgeon in Buffalo, New York. His blog covers many of these topics in more detail. To prepare this article, I read several of his blog posts for background research. Please note that neither I nor the AOA have a direct relationship with Prudent Plastic Surgeon and no financial incentive to link to any of the sites linked below.

Dr. Shumway provides a summary of this article in this short video.

Intern year: Money tips for residents from Day 1

1. It’s time to make a budget.

If you don’t have a budget, it is time to get one. This may seem super daunting, but it’s actually just a question of making a spreadsheet or using an existing template. Start with your gross income, list all your recurring monthly bills, the amount you would like to save and subtract to get your monthly allocatable income. Don’t get discouraged if there’s not a lot left; the discipline of consistently going through the exercise will yield dividends down the road when your salary increases.

2. Pay yourself first.

Money you never see is money you never miss. Dr. Frey calls this an “anti-budget.” I know it may be hard to save anything intern year, but commit at least to saving up to your employer match percent if one is offered. If you are able to save extra, prioritize saving in a Roth account during residency, as you can withdraw the money later tax-free and your initial tax rate will be low enough to contribute directly, as opposed to back door.

3. Start paying down debt, or make a plan for how you are going to do it.

Possible unpopular opinion here: you don’t have to rush to pay down debt as fast as possible, especially as a resident. In fact, depending on your debt repayment strategy, you may be hurting yourself in the long run by prioritizing paying down debt instead of buying a house or saving more in your IRA.

The key is not to rush to get that hand-drawn poster with your loan amount to post to Facebook, but to know what your plan to pay your debt is. For some of you, loan interest might not even be a consideration because you’ve got a real chance at reaching PSLF.

Or maybe you consolidate and re-finance to a low interest rate where the market can reliably grow faster than your debt and you make the payments every month while investing the rest. The key is to get a strategy and commit to it. If you do, that number won’t seem so scary anymore.

4. Learn the basics of investing, but don’t get sucked into the deep end. Your job right now is learning to be a good doctor.

There was a guy in my medical school class who spent more time listening to Dave Ramsey podcasts than he did studying medicine. This is not the route you want to go down. It’s important to learn the basics of finance, but don’t fall into an echo chamber of real estate investing, crypto margin bets and advanced or risky finance schemes that you likely can’t cover with a resident salary.

Focus on being a good doctor and allocate most of your brain power to that. However, if you can manage it, reading financial blogs, articles and books when you have time will serve you well.

5. Be careful with side hustles.

In the same vein, while it’s possible to build passive income as a resident, the best “physician side hustles” usually require board certification or at least an unrestricted medical license — things you will not have as an intern. Be absolutely sure you know your program and licensing board’s rules for side income, moonlighting, chart review, etc. And remember, if it sounds too good to be true, it probably is.

PGY-2/3: Finishing strong

1. Learn to live like a resident and avoid financial mistakes.

This is the time to get comfortable with the budget and standard of living that you set up during intern year, affording for modest increases with life events. If you can “live like a resident” for the first 10 years of your career, you will do much better in the long run. Don’t think of it as delayed gratification. Think of it as being happy with what you have. Your goal, if you can work up to it, should be to save at least 20% of your income. If you can get comfortable now, you can likely save a lot more when your income increases.

2. Be careful with credit cards,but don’t be afraid of them.

Here’s the deal on credit cards: you should have gotten at least one by now, and you absolutely should use them. If you don’t, you will be subsidizing rewards for the people who do, and missing out on building average account age, one of the most important long-term factors in your credit score. But you must pay them off every month or the interest will wipe away your gains really fast. It’s generally a good idea to avoid cards with annual fees.

3. If you are investing, you should be “dollar cost averaging” (DCA) into a low-cost index fund.

Again, at this stage don’t worry so much about investing compared with covering the bills and maxing your Roth retirement accounts. If you do invest, you should be “dollar cost averaging.” This means that you should commit to investing the same amount every month regardless of what the market is doing.

4. Moonlight if you can.

If your program allows moonlighting, you should be doing as much of it as you can squeeze in. Not only is moonlighting a good learning opportunity to handle things on your own and get used to being an attending, it’s also the best way to make real, substantial money in residency that you can use to beef up your savings and investment accounts.

Additionally, traditional on-site moonlighting shifts are not the only option available. Remote chart review, telemedicine and other asynchronous options exist, limited only by what is allowed by your program and licensing board. Just make sure you save enough to pay the taxes on the extra income.

5. Start thinking about the future.

Finally, try to use the last portion of your residency to learn as much as you can about the important attending stuff: contract negotiation, separation agreements, disability/malpractice insurance and the different types of employment models available to you. While you probably have a lot on your mind if applying to fellowship, if you’re about to be headed out to the job market, you’ll be much better prepared if you have some idea of what to expect rather than rushing into your first contract without much thought.

Final thoughts

Don’t feel discouraged or like everybody else is doing better than you. The path is slow and steady. The goal is to make solid foundations to carry throughout your career and avoid the mistakes that leave high earners living paycheck-to-paycheck later in their lives. It’s OK to not have it figured out yet. Measure your progress based on you, not the guy in your residency who put $1,000 into Tesla back in 2012 when he was in college and has been sitting on it ever since.

Related reading:

From intern to third year: Making the most of your residency training

Residency hacks: 3 ways to become more efficient every day

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