A Friendly Financial Guide for Fresh Medical Residents

9 min read
Olivia Kelly, MD
Updated May 09, 2021
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A Friendly Financial Guide for Fresh Medical Residents

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Residents are no stranger to the challenges (and woes) of budgeting. Anyone just off medical school may think that residency is the ‘key’ to solving this. On a positive note, you will be earning your first paycheck once you get into residency. However, it might not be enough (yet) to give you the kind of lifestyle you dreamed of—for now.

Just as challenging as a medical student’s journey is towards residency, you will also need to sort out your finances. Interns in the U.S earn roughly $60,000 a year before taxes. Despite your earnings, this will only be sufficient for your day-to-day expenses. By forming a budget plan, you would be able to keep track of your spending and savings even when there isn’t much wiggle room. Make the most of every penny spent to sustain you throughout the training.

Anticipated costs of medical residency

Residents should know and understand their income, especially where employer deductions and taxes are concerned. Putting together a realistic budget will keep you motivated and stay on the course.

Food and groceries

Food takes a significant portion of your budget—but it shouldn’t be eating away your income. With dizzying duty hours and clinical tasks, the convenience of frequently eating out could take a toll on your savings.

You should be vigilant with your spending on this one. Where and when you buy it can have an impact on your weekly and monthly savings. For groceries, you can jot down or memorize the prices of the recurring items you usually purchase. Then, compare these prices with other stores. Checking for the best buys and getting the most of your money’s worth will help you save more. Stock up on staple items when it goes on sale. When your usual choice of product is not available, choose alternative brands that offer the same quality at a low price.

Being organized keeps you on top of your game. Planning your meals ahead of time will help you prepare for weekly homemade ones. If you purchase discounted items, you can create meal plans based on those ingredients. This also keeps you from purchasing unnecessary items that will just spoil.

If you’re new to this and have no idea how to get started, you can look into online resources for healthy menu options. Ideally, you can create weekly meals to stock on the fridge or easily make after duty hours. Green leafy vegetable salads are also easy to create and make for a good hearty meal to power you through a busy day. As for leftover ingredients, you can create another meal plan to save money (and effort).

Collect grocery coupons from your favorite store by checking their weekly ads. If not, you can print, download or clip coupons from newspapers. Check out Groupon and other online deals like Amazon Local for discounted food products or dining.

Some hospitals give out free food for medical students and residents. Ask if the institution offers this service or at the very least given at a discounted rate. Though it may be a far cry from a Michelin star restaurant, you must take advantage of every opportunity to save.

Housing

Your accommodation expenses usually take a big chunk of your income. Be prudent in your choice of housing options during this time. Do your best to lower the amount for this one so you can save more money to allocate on other things needed for your training.

Considering that your income is already fixed and your residency predetermined, fresh interns need to anticipate the costs for housing to be higher than expected. Depending on the location, buying a house might be cheaper in some cities while it can be more expensive in others.

If you’re contemplating getting full-time employment or planning to settle down, purchasing a house might be appropriate. Ideally, taking a 15 percent cut from your gross income should be set aside for mortgage. Most residents may feel the brunt on this one—but not impossible to meet.

Most of the time, properties increase their value over time. Investing in a house lowers your mortgage while increasing your equity. This is a more practical approach if you’re planning to settle in that specific city for fellowship.

Renting on your own is ideal if you’re settling for a residency in less populated areas. Living by yourself will give you space to recharge and provide you all the creature comforts after a hard day’s work.

Some residents prefer to split the cost with other roommates. Living with one or two (or roommates is a viable option if you’re taking up residency in more expensive cities. You also get to split costs on amenities and still live comfortably throughout your training. Even if you’re living with strangers, you won’t be spending as much time in your apartment. Sharing rental costs also gives you more room to save for your emergency fund.

Internet

Throughout your training, you may be allowed to become part of a research. Make the most of your clinical experience to getting the material for your research. Most of the communication channel may also be done using apps—meaning, it will require the Internet. Unless you’re a hardcore gamer, looking for a cheap internet deal will provide you with all the essentials for the tasks ahead. Some of these networks offer promotional deals at a limited time offer. When it’s about to expire, you can ask for an extension of their promotional rate. Oftentimes these networks will grant your request so you don’t go to their competitor.

Logistics and travel

Some cities with heavily-dense populations, such as New York, usually have high apartment rental rates. If this is the case, settling further away from the metro could save you a lot of money. Taking a bus, train, and even driving your car is more practical. If you don’t have a car and plan of leasing or buying one, having a new vehicle will take a big cut on your savings.

Opt for used cars instead. Car rentals selling second-hand ones come at bargained prices. You can ask someone from your network about where to find quality cars that suit your budget. Try exploring forums offering advice on how to spot a good deal for used cars.

You should focus all your energy and time on the training. Don’t bother looking around for cheap gas. Unless it’s on the way, it would only cost you more. Go for gas stations that come across your path instead. As for car insurance, shop for the cheapest one in the market. When it’s time for renewal, you can look into additional insurance quotes to see if you can get it at a bargained price.

Step back and assess whether owning only one automobile will be sufficient to take care of all your transportation needs. Sharing a car with your partner can lower your expenses. Having two cars may not always be necessary. With two vehicles, it would mean double the insurance, maintenance, and registration costs—all of which can take a toll on your income.

Interns are allowed a few weeks of vacation every year. But with a limited budget, it’s not practical to splurge on luxurious getaways. As part of the residency program, you may be required to travel to a different city or state for conferences or research. Take advantage of this opportunity to network with attendings, program directors, advisors, or future colleagues and explore the city afterward. There’s also a chance that your specialty’s conference will be held at a favorable season. Frequent traveling may incur miles from all those travels too! You can use your credit card for this and start accumulating points. In the long run, this method saves you money for other important travels for your training.

Utilities and other expenses

Other bills such as water, electricity, and heat should also be considered as part of your training expenses. Try to negotiate with your landlord and ask if these could be included as part of your rent.

If you happen to have a 2-year contract for your phone, you won’t need a new one for the next 3 to 4 years throughout your training. Identify your current needs and avoid the temptation of keeping up with the trends.

You should also consider health insurance even at an early phase of your internship. Healthy individuals can look into high-deductible plans since it’s generally cheaper than other types in the market.

There’s also a student loan to take care of. Allocate a portion of your monthly income to pay off student debt. Most residents might be too concerned about paying student loans as soon as possible and tend to overpay. As counterintuitive as it may sound, you need to prioritize loans with the highest interest rates first such as car loans and mortgages. From your monthly income, set aside 15 percent for emergency funds.

However, if you’re taking up residency in a non-profit institution, look into Public Loan Service Forgiveness for this. If your income is not sufficient to meet minimum debt repayment, you can consider refinancing.

Allocate funds for miscellaneous expenses such as purchasing a pair of shoes at a discounted price. One-time purchases like these don’t usually happen every month but allow for some wiggle room to give yourself a treat (or two).

Student loans and going beyond residency

By this time, there could be a lot going through your mind. From clinical responsibilities to budgeting, your training may be paved with challenges today but comes with a very rewarding career in the future.

On average, a medical student may incur $100,000 to $200,000 on student debt loans. Students pursuing a procedure-based specialty usually earn more—even during residency compared to their low-paying counterparts such as internal medicine, pediatrics, and family medicine. Some institutions offer primary care programs for students to undergo a minimum of 6 years in training to lessen medical school debt and time in residency.

You can take advantage of grants, fellowships, and scholarships to minimize your student debt. Sticking with a plan will usually help you chip off some of that amount on time. As an intern, you should already plan out your repayment structure to help you live a more comfortable lifestyle later.

Don’t allow debt to be the reason to keep you from achieving your dreams. As future physicians, you will have an earning capacity of around $300,000 every year. Aspiring to become a specialty doctor may also have its steep turns and slopes—but it has its just rewards.

Location matters. Cities like Indiana, Oklahoma, Nevada, Wisconsin, and Connecticut tend to have an above-average salary mean for doctors. While this may look good on paper, it’s worth looking into the cost of living of that state. Avoid the tendency of spending according to your earning potential. Be prudent and spend only your current income. Understandably, you’re working hard to achieve a comfortable income. However, you must not incur more debt as early as your intern years. After residency, you will need to think about your student loan, children’s education, practice expenses, and yes, higher taxes that go with your income.

As a full-fledged physician, you will have the option of going for self-employed or employed. Self-employed physicians can go for solo practice or become part of a group practice. Whatever career path you choose, it’s good to weigh first the pros and cons to see which ones will suit your personality and lifestyle the best.


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