[Editor’s Note: Do you have a new perspective or expertise you’d like to share with the WCI community as a guest post? We want to hear from you! Submit your article by June 10 to be considered for Summer 2020 publication. See our guest post policy for more details.]
Residents are busy folks. Their time is consumed with clinical work, clinical learning, and sleep. What extra time they have should be spent with their loved ones and on other activities that keep them sane. But at some point, there are a few financial chores that it would be foolish for a resident to ignore. This list originally had five items on it, but for our republication in 2020, I added a bonus item!
#1 Life Insurance
If someone depends on your income (AKA a spouse or children), you need life insurance, you need a lot of it, and you need it now.
#2 Disability Insurance
Not only is a resident uniquely exposed to the risk of disability since she has a low, or even negative, net worth, but she also has years of living ahead of her which will need to be paid for by either her career earnings or her disability insurance.
Remember that if she is disabled and has to declare bankruptcy, her student loans WON’T be discharged (erased) in the proceedings. She has to die to have her student loans discharged.
She can also often get disability insurance cheaper as a resident, since she is probably young and healthy AND often in a separate class of physicians than attendings in her specialty. (Some classes of doctors such as ophthalmologists or orthopedists actually have to pay more for disability insurance. Residents are often put into the same category as family docs and internists.)
Although she cannot qualify for, nor afford, as much disability insurance as she needs, every little bit helps, and she can get a future purchase option rider that will allow her to upgrade as her income grows.
- What You Need to Know About Disability Insurance
- How to Get Discounts on Disability Insurance
- Recommended Insurance Agents
#3 Roth IRA
Using a Roth IRA used to be a no-brainer for a resident who is probably in the 12-22% bracket and will likely spend the rest of her career in a bracket much higher. Beginning contributions in residency not only preserves that tax-advantaged space (if you don’t use it now that “space” is gone forever) but also gets the resident in the habit of saving.
If you cannot save anything as a resident, you probably won’t be able to do it later as an attending. Saving also keeps you from taking on new debt as a resident, including car loans, credit card loans, or even inappropriate mortgage loans. However, these days it is likely better for a resident going for PSLF or receiving a significant REPAYE subsidy to use a tax-deferred account in order to maximize those benefits.
Don’t flip out, you only need to take care of a few financial things as a resident
#4 Financial Education
Residency is a great time to begin your financial education. Knowing the difference between a 401a, a 529, and a LTC Rider will help you build wealth, reach your financial goals, and be able to focus your time and effort on family, wellness, and your patients.
Time is limited, but it only takes a few minutes to regularly read a financial blog like this one. Some, however, find it easier to fit in listening to The White Coat Investor Podcast or to ask questions and join discussions on our Facebook, Forum, or Reddit groups. I recommend that everyone carve out some time to read one good financial book each year. Also, consider taking the Fire Your Financial Advisor! online course to get a financial plan in place. We’ve tried to make it as simple as possible to find something effective that works for you.
#5 Billing/Coding Education
Most residency programs spend at least a little time teaching you the coding and billing specifics for your specialty. Pay extra attention to these sessions, realizing it will pay huge dividends down the road for you. Coding and billing is just as important to your future career as learning how to manage the clinical issues.
Specifically, discuss these issues with the community doctors that you work with. Your academic attendings are much more likely to be salaried and probably won’t be as well-versed in these details.
Also, consider taking the WCI partnered Medical Billing and Coding Course. It’s a high-yield way to increase your income by teaching you how to work smarter, not harder. [Use code WCI30 for an additional 30% discount until June 30].
#6 A Student Loan Plan
As I update this 2011 post for republication in 2020, I feel like we need to add a # 6 to the list, getting a student loan plan in place. This plan might involve refinancing your student loans early and often (remember Federal loans are 0% until September 30th, 2020), or it may entail going for Public Service Loan Forgiveness. Somewhere along the way, you are likely to spend some time in the Income-Driven Repayment programs. Over the last nine years since this post was written, student loan management has become a lot more complicated. If you are married to another earner, the beginning of residency is a great time to seek out student loan specific advice.
- Student Loan Refinancing and Consolidation Guide
- WCI Recommended Student Loan Advisors
- Ultimate Guide to Student Loan Debt Management for Doctors
Taking these steps as a resident will put you in good standing to begin your career on the right financial foot.
What do you think? What else should residents be concentrating on besides learning medicine? Comment below!