Managing Money as a Medical Student and Resident

Financial issues are a source of intense stress for most students and residents.  It costs a lot to become a doctor and is costing more each year.   The goal is to finish your training without being handicapped by financial issues.    Doctors (including me) are not experts in financial issues (even if they think they are).   There are financial counselors at every medical school, or they will at least be able to refer you to someone.  It’s a really good idea to learn about this early.  Make an appointment and go talk to them about they best way for you to approach your own financial challenges.   There are some basic principles that will help get you started:

  • Limit your debt.  Pay off credit cards every month.  There is really no exception to this rule.  The interest on credit card debt is obscene.  You have to avoid it at all costs.  You have to make a conscious effort to live within your means.  It may be you have to have a car, apartment or clothes that aren’t what you would consider ideal.  But, in the long run, not running up the debt is far more important.  Make a budget, keep track and monitor your spending.    This is a really good resource from the AAMC to help you understand how to manage your money in medical school, including how to budget:  http://aamc.financialliteracy101.org/welcome.cfm

 

  • Your credit report is important.  Let me repeat that… Your credit report is important.  It doesn’t take much to have the score slide (a few late payments, missing a payment) and it will follow you a long time!  It takes about 7 years of perfect credit to get the score up to a level where you can buy a car or a house.   It is really easy to not pay attention to this during your training… and then pay the consequences after you finish.  http://aamc.financialliteracy101.org/graphics/factsheets/creditscore.pdf

 

  • Before you worry about investing, you should worry about protecting what you have (even if it’s not very much).   You should automatically have life insurance and disability insurance from your institution, but you need to check.  Unfortunately, if you are a resident, the “MD” behind your name makes you more vulnerable than the general public – and lawsuits can be against future earnings, not just current salary.  Many attorneys recommend that you spend the relatively small amount it costs to obtain an “umbrella” personal liability policy to help prevent a large lawsuit from someone if you are involved in an automobile accident or someone trips on your front porch.  When you are in training, these kinds of insurance policies seem like a waste of money.  But – they aren’t that expensive when you consider that all your money can be wiped out with a single disabling injury or personal lawsuit.  When you go to meet with the financial experts, this would be a good question to ask.

 

  • Once your insurance is covered, and you start having a salary (i.e. when you start your residency) invest a little on a regular basis through payroll deduction.  Having the money taken out before you see the check is key.  This is a habit that you want to start early.  This can be for a retirement account (pretax money) or another kind of investment account.  Again, talk to the financial counselors to learn about these options and decide which is best for you.  The pretax dollars are important….  If, for example you earn $1000, you will be taxed roughly 30% on that money i.e. $300, leaving you $700.  If you invest $100 dollars into your retirement fund, you will only be taxed on $900.  That means you will pay the government $270 instead of $300.  You will now have $630 to spend, instead of $700.  But – the $100 will compound incredibly.   Try it out.. http://www.econedlink.org/interactives/interest.html

Life Math: An Essay by Marion Bishop, MD – JAMA:298:266-268, 2007

This is a profound and wonderful essay about the “cost” of doing a residency…  by comparing medical training to Anne Bradsteet’s life – a 17th century American poet.     I encourage anyone who is discouraged about the years, the sleepless nights and the financial cost of medical training to read this.

” …..    life is not a zero-sum game. A gain in one column does not necessitate a loss in another, and winning does not correlate with being debt-free or having the fewest losses in the final tally at the end of life. Rather, all losses are gains. All gains have corresponding losses. This is not harsh or bleak or cruel. This is being human. This is life. Sometimes you are talented enough to write it down.  And sometimes you are lucky enough to read what a wiser writer had to say about it 329 years ago.”

http://jama.ama-assn.org/cgi/content/extract/298/3/266?ijkey=qkPqzdsvtf9369D&keytype=finite