*Disclaimer: This post is meant for educational purposes and should not be seen as financial advice. <\/em><\/p>\n\n\n\n Transitioning from a medical student who is living off of loans to a resident who is actually earning a paycheck can be thrilling! It can be tempting to spend your earnings on things that make you feel good, especially as you endure the tougher rotations in residency. However, while the resident salary is decent (on par with the U.S. median income<\/a>, which is approximately $70,000 in 2021), consider your salary within the context of student loan debt and other expenses, and adjust your spending accordingly.<\/p>\n\n\n\n Preventing lifestyle inflation is especially important during residency because you\u2019ve just started earning money. How you treat money now will pave the way for how you treat money in the future. <\/strong>Don\u2019t fall into a habit of spending beyond your means early in your career. Additionally, be careful accruing more credit card debt or loans, as borrowers are eager to lend money to physicians.<\/p>\n\n\n\n A straightforward way to be financially responsible is to <\/strong>understand your expenditures. Start by creating a budget and take a survey of what you generally spend in a month.<\/strong> How much total do you spend on the cost of living: rent, groceries, transportation, entertainment, or loans? <\/p>\n\n\n\n If you compare your expenses to your monthly income, are you net negative or net positive? If you\u2019re net negative, that will be untenable in the long run. You want to tackle your debt, not add to it! If you\u2019re net positive, do you have a large enough margin for savings? Are you happy with your numbers for now, for the future, for a potential family?\u00a0Consider your “income to expenses” ratio in the context of the future you’d like to have, and plan accordingly.<\/p>\n\n\n\n Moreover, having an understanding of where your money goes will allow you to hone in on what aspects of your spending could be modified. For example, are you paying too much for rent? A common guideline is that less than 30% of your gross monthly income should go towards rent. This may not be easy in a city with a high cost of living. Could getting a roommate be an option? Perhaps your program, like some programs on the East and West coasts, subsidizes housing or offers food or transportation vouchers. Take advantage of these perks as well to shave down some expenses.\u00a0<\/p>\n\n\n\n Of course, the priority during residency is your training, and going out of your way to pinch a penny is not worth it if it interferes with your ability to evolve as a physician. <\/strong>Most programs know this and will try to give you a reasonable salary considering the cost of living in your city. Nevertheless, it does not hurt to be at least somewhat conscientious of how you are spending.<\/p>\n\n\n\n If you are like most of us, then you\u2019ve got student loans. During the early years of your career, it pays to be financially proactive. Avoid “kicking the can down the road” during residency with the mindset that you\u2019ll take care of your loans with your attending salary.<\/p>\n\n\n\n Have the mindset that every dollar you put into your debt will save you more in future interest costs. <\/strong>You can likely make a dent with your residency earnings, which will prevent higher total payments in the long run. <\/p>\n\n\n\n Interest is ever-growing and ever-compounding (meaning interest grows and gets added to your principal loan amount, which causes the interest to grow even faster) during your residency. This sounds scary, but instead of sticking your head in the sand, get in the habit of paying off a reasonable amount of loans every month. Tackle higher-interest loans first.<\/strong><\/p>\n\n\n\n Remember debt isn’t just student loans. Credit card debt, hard money loans, and high-interest mortgage(s) can all be financially crippling if left alone for too long. Any debt with more than a 5% interest rate is considered high, so consider paying these off ASAP. Equate paying high-interest debt as the equivalent of getting a 5% guaranteed return, which is no easy task.<\/p>\n\n\n\n Refinancing your loans with a private financier is a potential option to decrease your interest rate and your monthly payment. Having a cosigner may help you get your interest rate even lower. This path does come with its own caveats, however. Refer to this post<\/a> to review your options for loan repayment during residency, including the pros and cons of refinancing.<\/p>\n\n\n\n Lastly, consider the different payment options in the context of your entire budget. How much are you able to part with without significantly affecting your ability to live and work? No one is asking you to subsist on ramen packets in order to scrimp and save a few extra dollars.\u00a0Make sure you’re still able to maintain a lifestyle you enjoy while making progress on your loans.<\/strong><\/p>\n\n\n\n Most of us rarely think about needing an emergency fund, but it\u2019s an unfortunate possibility that should be accounted for. As a rule of thumb, you should have three to six months of living expenses in a savings account <\/strong>that is readily available to you in the event of a rainy day, week, or month. It\u2019s not expected that you have the full amount right away when you start residency, but it\u2019s good to allocate some of your monthly income toward your fund with that end goal in mind.<\/p>\n\n\n\n There are various situations that could cause you to tap into an emergency fund. You may need to take a medical leave of absence during residency. Maybe your car breaks down and you have an unexpected expense. There have even been extreme cases when entire residency programs have closed down and displaced residents. It\u2019s also not uncommon to have unexpected delays when you\u2019re starting your job as an attending. All good reasons to keep some money stashed away, mitigate stress, and keep you afloat should something happen.<\/p>\n\n\n\n There is a common debate about whether you should aggressively pay off your student loans or invest in your future while still being in debt. Cases can be made for both options, but you would not be wrong to pursue a reasonable balance of both. If you have a high-interest credit card or personal loan debt, however, that would be a different story, and you should prioritize that debt.<\/p>\n\n\n\n At orientation, you\u2019ll likely learn about which benefit and retirement account options you have at your program. It’s wise to take advantage of these benefits and contribute consistently to them. <\/p>\n\n\n\n Contributing to your 403B not only allows your money to grow over time, it also decreases your total taxable income amount. This means that you’ll owe fewer taxes that year, and the money you contribute is not taxed at the time of contribution<\/strong>.<\/p>\n\n\n\n Some programs also offer a Roth 403B, which allows you to put post-tax money in, while growing tax-free with tax-free withdrawals. Certainly, something to consider, especially in your low earning AKA low tax bracket years.<\/p>\n\n\n\n If you\u2019re lucky, your program may provide a \u201cmatch\u201d for your retirement contributions.<\/strong> The industry standard is usually a 4% match but commonly ranges from 2-5%. <\/p>\n\n\n\n For example, if you contribute 4% of your paycheck (let\u2019s say $100 every pay period), then your program will contribute or \u201cmatch\u201d that same amount, up to 4% of your paycheck. It\u2019s usually worthwhile to take advantage of this match because essentially you are getting free money from your program.<\/p>\n\n\n\n Something to look out for regarding the 403B retirement account is a \u201cvesting period.\u201d <\/strong>This is the period of time you have to work for the company in order to keep the amount of money that they \u201cmatch.\u201d Additionally, though your money is not taxed at the time of contribution, it will be taxed as income tax at the time when you withdraw your money.<\/p>\n\n\n\n A good rule of thumb is to put away money so that you receive the maximum match from your employer as this is essentially extra money they are paying you, just saved for later.<\/p>\n\n\n\n You\u2019ve slimmed down your budget, built a reliable emergency fund, figured out a workable student loan repayment plan, and taken advantage of your program\u2019s 403B match. What\u2019s next?<\/p>\n\n\n\n A great account to consider is a Roth IRA.<\/strong> If you\u2019re one of the unlucky ones who does not have access to an employment-sponsored retirement plan, you still qualify for retirement savings via a Roth IRA.\u00a0<\/p>\n\n\n\n A Roth IRA is a tax-advantaged retirement savings account <\/strong>that you can contribute to if your income as a single filer is less than $144,000 in 2022 ($153,000 in 2023). If you are married and filing jointly, the income limit is $214,000 in 2022 and $228,000 in 2023. With a resident salary, you will most surely qualify, unless your spouse makes bank. <\/p>\n\n\n\n You contribute post-tax income, but at the time of withdrawal, you will not owe any taxes.<\/strong> The benefit from this is that as a resident, your tax bracket<\/a> should be at its lowest in your career, closer to ~20% as opposed to ~35% as an attending physician. Try to reach the maximum yearly contribution limit during your residency years,<\/strong> as it\u2019s likely you will no longer qualify as an attending physician (yes, I am aware of the backdoor Roth, but that\u2019s for another time)!<\/p>\n\n\n\n A good rule of thumb for investing is to first pay off high-interest debts and build your emergency fund. Then, invest in tax-advantaged accounts, especially those with an employer match, and finally, invest in a taxable brokerage account should you have any money left over.<\/p>\n\n\n\n You worked hard to obtain the coveted MD or DO degree, and having it will open many doors for you. Unfortunately, during residency, your time will be severely limited, as most residents work well over 40 hours per week. However, if you have the time, perhaps on an easy rotation or during a research year, consider using your time and skills to make a decent chunk of change.\u00a0<\/p>\n\n\n\n The most common route to make extra money during residency<\/a> is to moonlight. Moonlighting is a secondary job, a side gig.<\/strong> It may mean you are working as an independent contractor, outside the scope of your training program, so make sure you are properly insured against any possible malpractice. Most moonlighting gigs I\u2019ve seen pay in the range of $100 to $130 per hour, some even provide tail-end malpractice insurance. The lower-paying ones might have easier workloads, though this is not always the case. Ask around, especially classmates who have worked there previously.\u00a0<\/p>\n\n\n\n These opportunities are typically found at urgent cares, community clinics, or county clinics. There are a variety of side gigs available for physicians. However, be sure that you are in good standing with your program and realize it is a delicate balance to work extra shifts in residency.<\/p>\n\n\n\n There are plenty of great financial resources and communities for medical professionals.\u00a0A good place to start is The White Coat Investor<\/em> book. It might seem like just more to read, but knowing more about your finances will ultimately benefit you. Besides, it\u2019s an excellent break from reading medical textbooks and journals!<\/p>\n\n\n\n Finances are deeply personal and vary vastly depending on personal circumstances.\u00a0The recommendations above are merely building blocks and suggestions for creating a strong financial foundation. It does not mean that you cannot have fun and spend your money! The aim is to spend how you want and <\/em>save enough to meet your goals in the long run. Think about it like this: if you cover your financial bases, you can spend what\u2019s left over freely knowing that you\u2019ve already done the work to position yourself in a beneficial way.<\/p>\n\n\n\n Rosh Review is a\u00a0board review<\/a>\u00a0company providing Qbanks that boost your confidence for your boards and beyond.<\/em>\u00a0Get started with a\u00a0Rosh Review free trial<\/a>\u00a0to the Qbank of your choice (no credit card required!) and gain access to board-style practice questions,<\/em>\u00a0detailed explanations, beautiful medical images, and more.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"Manage Expenses<\/strong><\/h5>\n\n\n\n
Prevent lifestyle inflation<\/h6>\n\n\n\n
Know where your money is going<\/h6>\n\n\n\n
Adjust your budget<\/h6>\n\n\n\n
\n\n\n\nPay Off Debt<\/strong><\/h5>\n\n\n\n
Make payments early<\/h6>\n\n\n\n
Consider refinancing<\/h6>\n\n\n\n
Balance payments with your lifestyle<\/h6>\n\n\n\n
\n\n\n\nFortify Your Emergency Savings<\/strong><\/h5>\n\n\n\n
\n\n\n\nInvest\u00a0Wisely<\/strong><\/h5>\n\n\n\n
Contribute consistently to your retirement account<\/h6>\n\n\n\n
Take advantage of your program’s “match”<\/h6>\n\n\n\n
\n\n\n\nMax Out Your Roth\u00a0IRA<\/strong><\/h5>\n\n\n\n
What is a Roth IRA?<\/h6>\n\n\n\n
\n\n\n\nSeek Other Sources of Income<\/strong><\/h5>\n\n\n\n
\n\n\n\nNever Stop Learning\u00a0<\/strong><\/h5>\n\n\n\n
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