Practical Advice About Money in Residency

Background: I went straight through with my education and while I’ve learned about science, humanities, and medicine; one topic that was rarely addressed for its importance was finance.

We are trained to be physicians, but we do not often get training in financial wellness.

This is especially true for the question of how to achieve financial wellness when you have close to nothing to begin with or if you are starting with a large net negative as most interns are.

In my experience, I felt like a lot of the information available is about “wealth management” which is not where most interns start—and let’s face it, money matters.

I’ve compiled a list of suggestions for saving money as a resident and “setting yourself up” for financial success. These are based on my personal experience, lectures I’ve attended, independent reading/research, and conversations with financial specialists. While these are my recommendations, everyone's situation is unique. Balance what your gut is telling you with sound financial advice and go from there. I sincerely hope this will be useful to you as you begin your career as a physician.

Full disclosure: I am still a resident as I write this. I’ve written this piece in very simple terms for those who are new to the concepts and cringe at finance vocabulary like I used to. My suggestions are mostly specific to unmarried female residents, and I acknowledge that I am not including family support or children as part of my advice. This topic would be a great addition in the future.

1. DISABILITY INSURANCE:

• Short Term Disability: Your residency program or hospital will likely offer affordable short-term disability insurance that can be deducted from your paycheck. This can be used if you have some kind of illness or surgery that takes you out of work for a brief period of time. These policies do not cover you if you have a long-term medical issue or disability that arises. If provided at no or truly minimal cost by your institution, then it might be reasonable to consider (ballpark cost: $20 or less per month). In general, insurance is meant to protect you in the case of major/catastrophic losses. Short term disability coverage is not for one of those situations and usually is not cost-effective for purchase on an individual basis. Your personal emergency fund should provide the necessary buffer in these situations.

• Long Term Disability: Long-term disability insurance is critical and you should consider independently applying for and purchasing a plan even if your program has some small policy or coverage.

There’s no surprise in knowing that there is an inequality in pricing for male versus female physicians, favoring males.

Mass Mutual is the last insurer to offer unisex (“equal-gender”) pricing. Mass Mutual was planning on ending unisex pricing by the end of the calendar year 2019. However, as of mid-2020, there are still a few states (NY and some others) that have required a continuation of equal-gender pricing, at least for now. This can save you thousands of dollars over time if you can secure your policy while equal-gender pricing is still available.

You may be young and healthy now, but that is why this is the perfect time to get started and get a good rate. Please note that many insurers will have physical or health reviews as part of your application. The last thing you want to do is try to apply for insurance after you have had a setback, serious or not. I’ve heard stories about residents who have suffered injuries outside of work that prevent them from being able to perform within their specialty and others who have developed debilitating chronic conditions and have had to forgo the remainder of their medical careers. Unfortunately, no one is immune to change.

In the interview/application process you will need to provide your current monthly income and answer questions about risk-taking habits and medical history. Any prescriptions you have received in the last couple of years are visible to the company and might be speculated about.

Of note, mental health diagnoses are factored into this and unfortunately, there may be riders placed on your contracts excluding coverage of your disability policy due to mental illness in some cases. This is yet another reason to obtain a policy early. Residency is stressful and you deserve the ability to speak to a mental health professional if you need it without fear of this harming your future career safety nets.

Your disability insurance should be specific to your specialty and exactly what you do. For example, as an Obstetrics & Gynecology resident I had to specifically include the obstetrics and the gynecologic surgery components of my job so that if I were unable to operate or perform that specific role due to a medical condition in the future, the earnings of that part of my career could in part be covered. You also have to define if disability to you means being unable to work full-time versus part-time, etc. It may sound trivial, but this is important because without those specifics, theoretically, an insurer could deem you might be able to ‘practice medicine’ to a different extent (e.g. general practice or office-only practice), which may result in you receiving only the difference between the reduced earning potential and your previous salary. The cost of coverage varies per specialty for a number of factors.

Critically important are the concepts that when you purchase a disability policy on your own, you own that policy individually, it is portable and you take it with you to any future jobs, and you do not have to re-qualify medically in the future to continue the policy. In addition, when the disability benefits come from a policy that is provided by your institution, any policy benefits are considered as income and are subject to personal income tax. On the other hand, if you buy/own the policy individually, any disability benefits you might receive are tax-free.

Usually, a combination of employer-provided long term disability and a self-purchased individual policy at a low amount ($4,000-5,000 benefit/month) is the optimal plan for training residents. The amount can be increased in the future as income and needs rise, but if you can lock in this policy early in training, you are virtually guaranteed to have this policy for as long as you need it in your career. It would then not be subject to premium changes or cancellation based on subsequent medical issues that might arise.

Some insurance brokers may be approved as reputable groups by the GME offices at your institution and could reach out to you, saving you from having to search for one. If the GME office does not offer a list, you can always inquire with more senior residents who may have explored local options. Please note though, that these individuals might not have your best interest in mind. You should only purchase this kind of insurance from an independent agent who has access to multiple products from multiple sources.

A perk of this process is that often these companies will host dinners at local restaurants to educate trainees about the process and their services (obviously they want your business). Enjoy the night out on the town and take notes.

If you wait to get this later in residency or as an attending you may face a more expensive rate for the same plan. Ballpark cost per month could be somewhere between $100-200 for an Ob/Gyn intern.

Here is a great summary for more details about purchasing disability insurance (https://www.kevinmd.com/blog/2019/06/9-things-i-learned-when-purchasing-disability-insurance.html).

Take home point: Long term disability insurance is the most critical insurance to protect your most important asset, which is your ability to generate future earnings. It seems particularly expensive during your training, and will likely cost in the ballpark of $1500-$2500 per year. However, I view this as one of the most important concepts to get right and to get right early on, in an appropriate financial plan.

2. LIFE INSURANCE: Life insurance is critically important only if you have others who depend upon your income. If you are single and without dependents, you simply do not need life insurance at this time. If you have someone else who depends upon your income for their livelihood or for their future, then life insurance is critically important.

Fortunately, life insurance is relatively inexpensive. Almost without exception, term life insurance is the only life-insurance you should consider. Anyone who tries to sell you a universal life insurance policy or whole life policy should be avoided. As with disability insurance, you should only purchase term life insurance from an independent agent, one who has access to multiple products from multiple sources.

Take-Home Point: You only need life insurance right now if you have dependents.

3. RETIREMENT: It is hard to think about retirement when you’re still in training and just starting to earn a reliable income for the first time in many cases. Consider retirement savings each month as a gift from your ‘current-self’ to your ‘future-self’ and pat yourself on the back. You’ll thank yourself later.

Retirement seems far off, but the younger you are when you start to contribute toward it, the more you will be able to gain in the long-run.

• “Compound Interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”― Albert Einstein. Compounding interest was a new concept for me as an MS4. Basically, it means you put in x-dollars and it will likely make x-percent each year. Over time, this grows exponentially because you are making x-percent on the whole of what is in the account each year (including the past interest or earnings you’ve made from having the account). Here is a link explaining this visually: https://www.fool.com/knowledge-center/compound-interest.aspx. Start saving for retirement ASAP. You will be able to put in less and get out more if you have money in the account earlier.

• Start a 401K or 403B through your hospital or employer. These plans are painstakingly monitored by career financial professionals hired by your employer and you can trust their knowledge to grow your account. Try to contribute what you reasonably can— again, compounding interest. I started residency by putting away $250 from my paycheck directly to my retirement account per month. It gained just over 20% in my 3rd year of residency!

• Retirement Matching: Many employers will match your contributions up to a particular amount or percentage of your contribution. Unfortunately, a significant number of residency programs don’t. At a minimum, you should contribute an amount sufficient to capture the maximal match from your employer. This is free money and you should always try to max out this benefit. It may take some work to find out if and how much your employer matches, but it is worth it.

• Open a Roth IRA as soon as possible and max out your contributions for as many years as possible in residency. Basically this is non-tax deductible money that you put into a retirement account where your earnings grow tax-free and can be accessed at the young age of 59 ½ years, tax-free.

Roth IRAs are a secure way to grow this money and the benefit is only available to you for a short time because there is a limit on how much you can earn each year in order to be eligible for a Roth.

You won’t be able to contribute to this as an attending given that your salary will most likely exceed the eligibility criteria.

You can set it up on your own fairly easily. I did it through Vanguard in a few minutes and have it directly transfer a set sum from my checking account each month after I get paid. Of course, there are other companies that offer Roth IRAs. Also check to see if it is offered in conjunction with your employer’s account.

https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020

• Side note: Phone apps are easily accessible tools to keep track of these accounts, auto-pay recurring bills, and make transfers. You can check in on your phone while waiting for a case to start or riding the elevator. That said, if you don’t notice the money, you won’t miss it.

Take-Home Point: You’re just starting your career as a physician, but start taking care of your future-self. She will thank you! There are tax-free and taxed ways to do this. Some will only be available to you as a trainee.

4. STUDENT LOANS: These are one of the biggest pain-points for physicians at all stages of their training and careers. While you are in training, apply for income-based loan repayment wherever you can (private lenders are unlikely to offer this, but the federal loans will). Some may argue to live restrictively and pay off your educational debt as fast as possible in order to avoid collecting interest.

This part really depends on your financial situation. If you’re starting from the bottom, like I did, I would recommend paying as little as you can now, so you can start putting money away for retirement. This will get you more bang for your buck in the long-run due to the magic of compounding interest and have you take advantage of the Roth. Yes, your educational debt will collect interest, but it will be easier to smash away at it after residency.

Remember that there are great loan repayment options like the National Health Service Corps and some employers help too! It’ll be easier to pay this king of a bill later in big chunks- residency is hard enough.

More about income-based repayment: https://studentaid.gov/manage-loans/repayment/plans/income-driven

Take-Home Point: Take advantage of income-based repayment options while in training. Consider loan-repayment or negotiate for it when seeking your first job.

5. INVESTING/STOCKS: When I was in medical school, my amazing dentist used to lecture me during every appointment about the stock market and introduced me to following the market. What can I say, I was a captive audience in the chair! His lessons were invaluable and while he explained everything very well, it still seemed daunting because of how quickly things ebb and flow. Also, as a resident, I barely have the bandwidth to keep up with my personal life most of the time, nevermind the ever changing business world. I am still not an expert in stocks/investing, but I’ve dabbled in some of the basics.

• A great place to begin is an app like Acorns or Robinhood. You can start small, cut out the physical middleman and formalities/calls/emails, and DIY. You can follow small investments to get a feel for things before contributing greater sums. For quick returns on investment, consider starting an Acorns account to help make some side money to pay for travel or necessities.

Take-Home Point: You likely can afford small stocks to make money and use a simple app to get started.

6. TREAT YO’SELF: It’s okay to spend money on your comfort and some ‘wants’. Residency is hard! A massage every once in a while, those Lululemon tights you loved, an online gym membership, or occasional dinner out are totally reasonable; just in moderation.

There are also ways to save money on these things that otherwise might be a splurge.

• Exercise: There are great free apps for exercise ideas, such as FitOn (https://fitonapp.com/). PopSugar (https://www.popsugar.com/Workouts) and YouTube also have tons of options. Make a playlist before you delve into residency so you can quickly reference workouts you like and have the tools for.

• Shopping: Try the Honey app (https://joinhoney.com/ref/hpx08jn). This is a browser extension that will automatically cross-check for promo codes to make sure you are getting the best deal; it can also show you the price history for an item on Amazon for example. Honey will also get your rewards cash. eBates is another helpful extension.

• Buying Flights: Use points as much as possible (see #11). Try the Hopper app (www.hopper.com) to track price estimates for timing purchasing of flights and buy them midweek in the middle of the night when you might have time on call (the prices are usually lower at low-traffic times, go figure…)

Take-Home Point: Everything in moderation, but enjoy life.

7. DON’T EAT YOUR DOLLARS: I’m a huge proponent of good food and by that I mean good quality ingredients and a whole food diet. This does not have to break the bank.

• My pre-med advisor told me a million times about the cost of coffee and to make our own coffee every day. During COVID times I’ve read so many panicked posts written by doctors who can’t go to their usual coffee shop and have had to learn to make basic drip/pour-over coffee or espresso drinks at home. It is really not that complicated.

A Bodum Pour Over is <$20 and has a reusable filter (https://www.bodum.com/us/en/11571-pour-over). If you’re picky like me about the filter you can add a compostable bamboo coffee filter to ease your worries about the environment. Affordable store-brand coffee tastes far better through a pour over.

Saving $2.10 on a Tall Pike Place from Starbucks per day throughout residency adds up to approximately $2,500 over four years! That doesn’t even account for the fancy drinks.

If that money were in an investment account earning even a small amount of interest it could add up significantly over the next few years; more than enough for a car or wedding down-payment.

• A night together doesn’t always have to be a night out. I’ve been to some places where the average margarita ranges anywhere from $14-30. Better yet, a single pint of a beer averages $7-9, but you can buy a 6-pack of the same craft beer for $12-14 at the store. Hello! There is a lot of pressure socially to “go out for drinks” or a bite, but you can have a great time in the comfort of your or a friend’s home/apartment for a fraction of the price. Plus, you can always go out, and just not purchase anything - the shared company is the highlight.

• Pack your own lunch. Lunch is rarely less than $9 anywhere these days and it adds up faster than the coffee example above. Leftovers for lunch or a PB&J can go a long way. Enough said.

• DIY for some of the little things. For example, I love to have granola in the morning. I learned to make my own healthier granola at home for a fraction of the price it would cost at the grocery stores. It takes 30 minutes to make it during which I can usually multitask or have a conversation. It’s also a great snack to bring to share on rounds. Remember, the little things add up big. Feel free to email me for my recipe.

• Buy your own groceries. In COVID-times I tried grocery delivery for the first time and my goodness, it adds up so much more! This is in part because of the service fees, but also, you can’t pick and choose based on discounts or what produce you physically would grab on your own. That $1.50-$2.00 per avocado can feel very different depending on which one you are handed.

The best way to save is to purchase your groceries from different stores, favoring the locations where you get certain items more affordably. Always price check while you roam. It may take a bit to sort out the best grocery route to get everything on your day off and sort out what you will buy and where, but it’s worth it. We have three stores where we usually buy our food and take reusable bags for a discount. Also, while I love certain things from the fancy grocery stores, I definitely prioritize going to the local hispanic grocery store for a lot of my produce because it’s often great quality and much more affordable. I remember seeing limes for $1 each at a ‘nicer’ grocery store and then seeing just as good a lime at the local hispanic store at 16 for $1.00! Spices are also great quality and much more affordable in the international aisle.

Word to the wise-- don’t ever grocery shop hungry or post-call.

• Try meal prepping. It helps you keep your kitchen in order for when you’re tired. It also helps prioritize your grocery purchasing so you don’t waste ingredients or buy something you won’t need for the next week or two.

Take-Home Point: Make it yourself. If you can’t make it, buy smart.

8. CUT RECURRING EXPENSES: My mom always said that the word “no” is the start of negotiation. It’s remarkable how much you can negotiate with a phone company or internet supplier if you’ve had some loyalty or found records of a promotion. It just takes time and patience to call.

Alternatively you can use the Trim App (https://www.asktrim.com/) to help save on your bills and not have to spend your time. You log into the accounts from the companies you want to get discounts from and it will sync in your bills (cell phone, internet, etc.) and with your permission, they will negotiate it for you and charge you a small portion of the savings. Worth it!

Don't underestimate your own power to negotiate for yourself. Most large corporations have a script that ‘Retention Managers’ use to keep hold of customers. Let them exhaust their script and get the best deal by not giving in too soon. Focus on your pain-points with their service and how they can make it better for you - that’s their job after all!

Scan your credit card bills for any recurring expenses you might not recall or subscriptions you no longer have time to use and trim away. Check your bank account to see if you’re being charged a monthly access fee. Also, some companies have rewards you can apply toward your bills. We use Verizon which offers VerizonUp and gives us a $5 gift card here and there for other merchants like the rare Starbucks treat.

Take-Home Point: Even small recurring fees add up over time and you might not know you are paying for them. Everything is negotiable - but you have to ask.

9. DIY YOUR WALLET: Financial advisors are lovely people, but they cost money to manage your money. You’re a smart person—you're a doctor! You can find so much information online to do this on your own. It just takes a bit of time and dedication, but ultimately, as you know from caring for patients, it is incredibly valuable to be well-informed, advocate for yourself, and use shared-decision making.

My favorite online/book references include: Ellevest, The Whitecoat Investor, and a book my best friend gave me called The Wealthy Barber, which is a brilliant “dummies” guide.

Take-Home Point: Manage your money how you want your patients to manage their health- be active, educate yourself, advocate for yourself, and consult the pros for shared-decision making only when “clinically” indicated.

10. TAXES: Same as #8. Learn to file your own taxes - especially if you don’t have any unique financial situations. Many of the online options walk you through the process by asking Yes-or-No questions and having you enter information where needed. Between W2s, minor investment accounts, and your standard expenses, you can usually do your taxes in a single afternoon. As soon as your end-of-year documents start arriving in the mail, keep them in a file and once they’re all ready, get to work. A great book for learning even more when you’re ready to kick things up a notch or your finances get more complicated is Taxes Made Simple by Mike Piper.

Take-Home Point: Learn to do your own taxes.

11. USE YOUR CREDIT: It’s hard to resist the temptation to spend now, counting on your future attending salary to pay it all off then. Remember that whatever you don’t pay off each cycle will accrue interest and interest rates are usually upwards of 15%. Credit cards can be dangerous if used carelessly and if you try to “keep up with the Joneses”. If you play your cards right (pun!), you can benefit greatly. For example, I have gotten at least two free flights per year through one of my cards.

• Pay for everything with your card: My dad always says not to spend money you don’t have. I agree, but I’ll add that you should earn the rewards that companies are willing to give you. The trick is to not exceed what you can spend in cash (unless there are extenuating circumstances). I use my points-based credit cards to pay for all of my out of pocket expenses and bills where I can so I collect miles and points for everything. Use common sense though; if you’re being up-charged specifically for using a card (e.g. ‘service fee’) then maybe pay that with cash/direct deposit. If you pay your credit card’s balance in full every month (just adding the credit card as a step between your bank account and the expense), you’re the one who is benefiting.

• Card Shopping: The Points Guy has a great summary of credit card promos and options currently available where you can compare and contrast. https://thepointsguy.com/cards/ Things to pay attention to: opening promotions, annual fee, benefits, likelihood of using benefits.

• Promotions: I staggered opening my credit cards so that I could fulfill the account-opening promotion on each one to get the most out of it. For example, some will have a 50,000 miles bonus if you spend x-many dollars in x-many months. Pick one that you reasonably can achieve the bonus with and rake in the rewards. Then you can consider opening another when you anticipate a big expense or there is a good promotion and focus all your expenses on that card for that time.

• Multiple Accounts: Contrary to popular belief, having a few lines of credit is healthy for your credit score as long as your overall utilization isn’t excessive.

• Hidden Benefits for those who find them, including rewards on random purchases and travel deals. Random purchases- Some credit cards have discounts or cash-back for certain purchases, BUT you have to go to the account to select and activate it—example: 15% cash back on purchase from J. Crew. You have to click on the promotion and it will be applied to my expense. It won’t do it automatically. Set a reminder in your phone to check the rewards whenever they refresh on your account.Travel- Some credit cards also offer insurance for rental cars etc, so read the fine print and don’t pay for it twice.

Take-Home Point: Credit cards can ‘pay you’ in the long run if used responsibly.

12. OLD CLOTHES / BOOKS / THINGS = $ MADE / $ SAVED: There is a big movement toward minimalism and clutter-free living to help enhance mindfulness and inner peace at home. Some argue that this helps enhance overall productivity and focus on all fronts. From personal experience, I can attest to this. In your efforts to minimize the excess in your space, you may be able to make back some money on the items you are parting with and at the same time, give them a new life. The effects may be remarkable both for you and your wallet.

Designer Vivienne Westwood said “Buy less, choose well, and make it last.”

• Shopping: As you venture into the professional world you may need to upgrade your wardrobe to “look the part” or maybe you’re bored of what you have and want to try something new. If you see something you like that is pricey and great quality (which you may have tried on at the store), you can save money by checking sites like Poshmark (www.poshmark.com) or eBay (www.eBay.com). Odds are that someone is selling a new or like-new piece in your size for a much lower price. One thing to keep in mind is to “buy right or buy twice.” That means, if you know what you want and can’t afford it at the moment, save up for it or find it at a bargain. Buying something that is cheaper in quality and price often means you’ll have to buy it again because it lacks the longevity of the superior product. The fast fashion industry is also terrible for the environment.

• Downsizing: You may also KonMari during the process of moving to your new home.

• Clothing: Admittedly, not everything we own is in great quality. Some things should be thrown away or may even be donated. However, pre-loved and wearable items can be consigned to clothing at stores like Plato’s Closet or Buffalo Exchange (other great local companies also exist) that will give you cash or credit on the spot. This also gives these items another life. Most of these businesses will give you a greater cash equivalent in store-credit that you may use to purchase a great pre-loved outfit. Alternatively, you can mail your items to ThredUp or the like and whatever they don’t purchase from you, they’ll donate for you. These usually pay out less than a site like Poshmark, but the benefit is that it is a minimal time investment so you can prioritize the other points listed above.

• Home items/ Devices: Check out Craigslist, Facebook Marketplace, your local ListServe, or good old eBay when you are thinking of parting with furniture or other items that might be able to be sold. I can’t tell you how much used sporting equipment I’ve bought and sold through these avenues.

• Books: The same concept goes for old books which you can sell to your local used book-store for credit toward a new-but-used read. I found that selling textbooks to underclassmen as I went up in years was a great way to “keep it local” and make back more money without the middleman. Also consider keeping track of your Amazon shipping credits when you opt for slower shipping, which could afford you a free Kindle read.

Take-Home Point: One woman’s pre-loved-but-no-longer-desired piece may be another’s treasure. Help it find a new home and potentially get some cash back while doing so.

13. REDUCE, REUSE, RECYCLE: As cliche as it sounds, it’s good for the planet, but it can also be good for your wallet. There is a famous anonymous quote that helps put this into perspective and may further entice you to minimize your consumption on a philosophical level: “We did not inherit the world from our ancestors, we borrow it from our children”. While recycling things like bottles may not be always as accessible at work as it is at home, we can circumvent that issue by bringing our own reusable bottles to work or adopting a hiker’s mentality of “carry in, carry out”. This also saves from purchasing often $2+ beverages. If you need some ideas about how to minimize your consumption and by extension, your spending, there are a lot of great sustainable home posts on Pinterest. Some of my favorite and easy examples at home include:

• Replacing paper towel use at home (wasteful, expensive) with reusable cloth napkins. We swapped our Brawny for CB2 napkins and have definitely saved money and a portion of the earth.

• Jars from your jam are great to make a home-made parfait for breakfast (with the aforementioned home-made granola, yum!) on your way out the door to rounds.

• After emptying a spray bottle, consider rinsing it and reusing it for a different purpose with a homemade cleaning agent. You can make a hospital-clog refreshing solution to leave by the door.

Take-Home Point: Re-use and re-purpose what you can to minimize recurring expenses and the burden of landfills.

After reading these tips and recommendations I hope you not only have better insight, but feel excited and empowered to get started on your next financial steps.

Residency is difficult enough, financial pressures shouldn’t be the reason you're staying up at night.

By taking your limited time and spending it on what will bring you the most value, you can certainly improve not only your quality of life but your ability to focus on what matters most. When you’re in the grind, it can be hard to be forward-thinking and sometimes limit simple pleasures.

Remember- this too shall pass. Look out for that woman in the future. She’ll be better off thanks to your efforts now.

Acknowledgments: Thank you to the Drs. Fleischer for your contributions and guidance!