Author: SurgeonJourney

Why You Need Disability Insurance, ASAP

Look, you’ve worked your butt off and now you’re in residency. The last thing you want to think about is whether something could happen that jeopardizes your ability to practice medicine. This could even be something minor, but would keep you from your medical specialty of choice.

Luckily, there’s a way you can help have some extra peace of mind and it’s also additional coverage above what (meager policy) your employer likely offers. Today, we’re going to review Disability Insurance – and specifically, why you need it NOW.

What is Disability Insurance?

Great Question! It’s an insurance policy you can purchase that provides coverage for you to guarantee a percentage of your monthly income should something unforeseen occur.

Why Do I Need Disability Insurance?

Whether you have loans (education or mortgage or something else) to pay, a partner or spouse – particularly children – all these factors should be taken into consideration when determining if you need disability insurance. Generally, the recommendation is that unless you are what is considered “Financially Independent“, as in you don’t need a job to support your lifestyle or debt (for the rest of your life), then you should have a disability policy.

While most consider extreme catastrophic situations when thinking of disability insurance, that’s not the usual case. Relatively less catastrophic things can occur in your life that can leave you able to work, but otherwise unable to perform your medical job functions. Things like:

  • Car accident or other accident
  • Severe illness
  • Developing chronic illness
  • Addiction
  • Mental illness

Many of these are treatable, manageable, and possibly curable. However, depending on the severity of the treatment, you might not be able to practice your specialty of choice. If this happens, disability insurance can provide additional income for you to support yourself, and potentially your family, while you’re still working in medicine.

Great – Do You Have an Example?

For example, perhaps as a surgeon, you are involved in a minor car accident in which you recover, but sustain nerve damage in your dominant hand. This may prevent you from practicing in your surgical specialty, but you can still practice medicine in a more general setting.

If you had a disability insurance policy prior to the accident, and you have the appropriate riders, you’ll be able to file a claim to augment your income while still working in medicine. This protects your income prior to the accident and allows you to keep working – supporting yourself and your family.

Photo by Matthew Waring on Unsplash

How Do I Get Disability Insurance?

There are reams of information on the web for physicians to secure disability insurance. The important thing is to do your homework and make sure you secure “own occupation & specialty specific” insurance. I’ve provided a few links below you should definitely read to get a deeper understanding of the importance of disability insurance.

The resources below also have vetted references for reputable insurance providers that can help you secure disability insurance. The younger and healthier you are when you first get insurance, the cheaper your policy will be.

Does The Surgeon Have Disability Insurance?

She does indeed! We worked with a local insurance agent, though were we to do it again, I would shop around more online before making a final decision. Either way, we both have a little more peace of mind having disability coverage.

Her policy is from Mass Mutual and provides $3750/month should she qualify for 100% disability now. (Given that she’s a resident, that’s a little less than what her monthly income is now, anyway). The policy is $164/month with the ability to upgrade the coverage once she graduates from residency.

Wrapping Up…

I get it, another monthly payment when you’re already likely cash strapped. From my perspective, as (possibly resident) physicians, you’ve put in years of work to get where you are. At the very least, secure your income so that if something does happen, you’ll have a larger safety net that can provide you stability while you transition to a different medical role or to another field entirely.

The goal here isn’t that you have to have disability insurance, the point is to make sure you have a plan for the unlikely event that something does occur. Perhaps you will rely on your spouse’s income, or have family you can fall back on – just don’t be left hanging when you might qualify for a disability claim!

Resources for Disability Insurance from the Web:

When Should a Doctor Get Disability Insurance?
Great resource from the Physician Philosopher covering what can go wrong when getting Disability Insurance
What You Need to Know About Disability Insurance
Everything you need to know about Disability Insurance from the OG himself, The White Coat Investor

Physician on FIRE’s Posts on Disability Insurance

Passive Income MD’s Disability Insurance Collection

Policy Genius on Why Physicians Need Disability Insurance

Thanks for stopping by! Questions about disability insurance? Check the links above and drop your question in the comments below!

-SurgeonJourney

The Amazing Leverage Residents Have That No One Realizes

Alright, so you’re working at least 80 hours a week and get four days off a month, woohoo! Doesn’t sound like a whole lot of leverage, does it?

What I want to talk about today is the Physician Mortgage, and why it’s such a great tool, not only to allow flexible purchase of a home, but also to help newly minted MDs have a shot at the American Dream before they become attendings a decade later (again, looking at you, general surgery & IM residents with future fellowships).

What’s a Physician Mortgage and How Does it Work?

There are a few key differences from a Physician Mortgage vs. traditional mortgages. Namely:

  • Can have a very high (up to 100%) loan to value ratio. This is the amount borrowed over the cost of the home. If you finance 100% of a purchase, you have the potential for zero down on your home.
  • Typically, banks charge borrowers PMI (an additional monthly fee called Private Mortgage Insurance) to protect the bank in case a borrower defaults when the loan to value ratio is above 80%. This is why you often hear of “20% down” when purchasing a home. With a Physician Mortgage, there isn’t any PMI payment, even if you bring less than 20% of the cost of the home to the transaction.
  • Borrowers are evaluated based on a number of factors, from credit score to employment, and in particular, what’s their monthly income to debt ratio. Since many residents graduate from medical school with large loans – these loans would normally be considered when determining a borrower’s income to debt ratio. For Physician Mortgages, student debt isn’t typically included in the calculation, making it easier to qualify for a home loan.

That’s the list! In short, a Physician Mortgage allows residents to leverage their future (hopefully high) income and secure a loan for a home mortgage at rates quite similar to a conventional (non-physician) 30 year term loan with little to nothing down. You can use your meager residency income (and high student debt) to get banks to give you a loan with favorable rates – how’s that for a physician benefit?

If you’re curious, the other loan product that’s quite similar to physician mortgages are VA Home Loans – available to those that have served in the armed forces. They’re very similar to physician loans, and they also have good refinance terms – I haven’t found a refinance product for physicians that avoids paying PMI. If you’re a veteran, check out this option as well. The WSJ (paywalled, sorry) recently published an article about VA Loans no longer having loan limits – good for high cost of living areas.

This Sounds Great, How do I Get a Physician Mortgage?

There are a number of banks that offer this specific product – The White Coat Investor has a great resource to find physician mortgage providers in your state. Make sure you shop around and get a few different quotes – it doesn’t take a terribly long time, and getting the lowest interest rate you can will help you save over the life of the loan.

From the experience The Surgeon & The SurgeonSpouse had with the physician mortgage, it worked quite well for helping us to purchase a home. We ended up putting 0% down and keeping our savings in our investment accounts. What I haven’t mentioned but also is critical – what’s the cost of living where your residency is?

Photo by Scott Webb on Unsplash – If the white picket fence is your thing…

I Live in a High Cost of Living Area – Help!

I hate to break it to you, but you might be SOL in this case. There are a number of factors to consider when evaluating whether it makes sense to buy a home while in residency.

  1. How long is your residency?
  2. How expensive is your area?
  3. Do you want to own a home?

The New York Times has a great tool that can help you compare the cost of renting vs. the cost of buying to see which makes the most financial sense. Of course, if you want to buy a house and you’re dead set on it – use the physician mortgage to help you out!

We were fortunate that The Surgeon’s residency is in a relatively affordable market, and could purchase a home within a year of The Surgeon starting her residency. My plan is to live in the house through residency and then ideally rent the home out in fellowship and beyond, turning our first home into an income generating investment.

With Great Power Comes Great (Financial) Responsibility

There are some great benefits at your disposal, like the Physician Mortgage, now that you’re a resident. Before you buy a house, you’ll want to make sure you get your financial house in order. There are a number of great tools that can help you get a holistic view of your financial health. If you have a lot of credit card debt, for example, you’ll likely want to address that first before making the plunge and buying a home, which adds another large monthly outlay to your balance sheet.

Use the physician mortgage to buy a home and build equity while also being able to deploy your funds to other areas with higher potential return – like a retirement account!

Did you buy a house while in residency? How did it go? Drop a note or ask a question in the comments!

-SurgeonJourney

What’s a ROTH Account and Why Does it Matter?

There are few inevitabilities in this world, certainly death and taxes. We’re going to skip the former and talk about the latter: Taxes, and why it matters when decided which type of retirement account to choose.

A Tale of Two…Accounts

In the world of tax advantaged retirement accounts, there are two main types that you can have: Traditional or ROTH. The big differences between the two are when taxes are recognized on the accounts. The great feature that both types of accounts share is that earnings recognized (dividends, capital gains) in the account aren’t taxed.

What’s the Deal with Traditional 401k’s or IRAs?

For a Traditional Retirement Account, contributions made to the account are pre-tax dollars, which means that these contributions aren’t taxed and also reduce your tax exposure for the tax year in which they are made. You can’t avoid taxes forever – when you do take a withdrawal from a Traditional Retirement Account, you will pay taxes on that as income.

Most suggest that when you are in your higher income earning years, you should contribute to a Traditional retirement account to defer taxes until withdrawal. This is based on the theory that you’ll have a lower overall tax burden in retirement than when you are working. For example, say you make $300,000 – your effective tax rate (taxes paid/gross income) will be higher than when you take withdrawals in retirement from your various accounts. This is very much based on your personal situation, but it can be used as a general guide.

How about a ROTH 401k or IRA?

ROTH account contributions are made with post-tax dollars, meaning that you’ve already paid federal taxes for that income. Because of this, the money in a ROTH account is never taxed again – however there’s always an outside chance that Congress might change the rules, though most consider this outcome unlikely. For ROTH IRAs, there are additional income limits – once you make a certain amount annually, ROTH IRA contributions aren’t allowed. (I have some suggestions for those who are above or near the income limits). For ROTH 401k and other employer sponsored plans, these income limits don’t exist.

It’s worth noting that there are two main ways to have a retirement account, through employer sponsored plans (401k, 403b, 457b/f) or opened yourself (IRA – Individual Retirement Account). The big difference between an IRA and employer sponsored retirement accounts are the contribution limits. An IRA is limited to $6,000 annually while an employee sponsored plan allows up to $19,500 of employee contributions annually. There is a big advantage to having access to an employer sponsored plan for the higher contribution limits. However, this is only valuable for those that make enough to comfortably contribute the full amount to their employer plans. The ideal situation is to make the max contribution to both your IRA and employer plan, to maximize tax advantages.

I Want to Start Investing, Which Retirement Account Should I Pick?

Though very much an individual decision based on your circumstances, I would generally suggest that if you are in your residency, fellowship, or early in your career, choose the ROTH option to maximize your tax-free account growth over decades. It’s the option that I choose for my 401k and I make contributions to The Surgeon’s and my (the SurgeonSpouse) ROTH IRA annually.

For some real numbers to understand the potential saving and investing opportunity, here’s how much The Surgeon and me can potentially save in tax-advantaged accounts annually:

Surgeon’s ROTH IRA$6,000
SurgeonSpouse’s ROTH IRA$6,000
SurgeonSpouse’s ROTH 401k + Employer Match ($6k)$25,500
Total in retirement accounts for tax year 2020:$37,500

If we take that $37,500 and invest it in the market for the next 30 years, (even if we don’t add any more to the initial investment) and account for an 7% annual increase in the market (not including inflation), this will be worth $285,000. If you make consistent annual max contributions (of $37,500 in this scenario), this could potentially grow to $3.8 million in 30 years.

Given the recent tax cuts and overall tax environment in the US currently, many speculate that this is the lowest tax rates we might see in our lifetimes (as a card carrying millennial here). If we’re basing our investment decisions on this theory, then it’s definitely a wise choice to pay taxes now and invest in a ROTH account.

What’s the TL,DR?

In summary, choose ROTH accounts (if available) early in your career to put away as much money as you can post-tax into tax advantaged retirement accounts. If you don’t earn enough to comfortably make maximum contributions to all accounts (don’t worry! life is a marathon, not a sprint), contribute what you can to your ROTH IRA first.

I know I just threw a ton of information at you – what questions do you have? Leave a note about your retirement account investing strategies in the comments! Whether you’re just starting out, or a seasoned investor, taxes are always an important component to consider when saving and investing.

-SurgeonJourney

How To Save Money When Your Program Doesn’t Offer a 401k or 403b Match

Working like a dog, Eight days a week?

You’re working those 80 hour weeks (at least), and stoked to be putting some money on the positive side of the ledger after years of studying and taking out loans. Hooray!

Talking with your non-medical friends, you hear about employee sponsored retirement plans like a 401k or 403b (for tax-exempt organizations) and are looking forward to getting a match on your hard earned contributions – BUT WAIT.

NO SOUP MATCH FOR YOU!

In most cases, residency programs do not offer a match for retirement contributions. While conducting research for this post, I reluctantly stowed my righteous indignation (for all residents) after learning more about the regulatory process for 401k and 403b programs.

These employer sponsored investment options are means-tested, specifically meaning that there are onerous regulatory requirements to ensure that an adequate distribution of employees across income ranges are taking advantage of the programs. If there are a disproportionate amount of high-wage earners using employer sponsored retirement program relative to the rest of the workers, the employer can be penalized.

If your employer doesn’t offer a match, particularly for a 403b, it’s likely this is because there will be less administrative fees associated for the plan as it doesn’t need to be means-tested. In this case, you won’t get a match, but you also aren’t hit with more management fees.

For comparison, at the SurgeonSpouse’s non-medical employer, I pay $12/quarter in management and regulatory fees to Fidelity – not that bad, really. The company also shoulders some of the fees, and the choices I have for investment are not amazing – more target funds and less passive-indexing ETFs. Nevertheless, I do get up to 6% salary match on my contributions, so not complaining.

I Don’t Get a Contribution Match, What Should I Do?

While in residency, take a look at you income holistically – I’m going to take an educated guess that (if you’re a resident) you’re in the $55,000 to $70,000 range, depending on your Post Grad-Year. Based on this, you’re going to want to be thoughtful about how you deploy your income from housing to food to entertainment to savings. I get it, you gotta eat – and you should.

Here’s my recommendation – focus on personal retirement plan options, specifically the Individual Retirement Account, or IRA, as it’s usually known. This plan is similar to a 401k/403b in that it provides pre-tax (traditional) or post-tax (ROTH) contribution options, though that’s where many of the similarities end.

The contribution limits for an IRA are lower ($6,000 in tax year 2020) than an employer sponsored plan ($19,000 in tax year 2020) – but you have more flexibility for investment options. Nearly all well-known brokerage houses offer IRA accounts. I use Vanguard and recommend them for their low fee ETFs. Fidelity, TDAmeritrade, and others offer IRAs as well.

How Much Should I Contribute?

This is a very personal question and very much depends on your situation. Say you’re making $60,000 a year. If you do make the maximum IRA contribution, that’s 10% of your pre-tax income – and we haven’t even talked about taxes, housing, loan payments, and living costs.

My advice is that it’s important to begin saving and investing as soon as you can, but don’t eat less so you can save more – you can be thoughtful about how often you choose to eat out and take more affordable vacations, for example.

If you’re looking for a specifically number, set a goal per year and break that up into a contribution each month. Perhaps you want to save $2,000 or $4,000 a year – that’s $167 or $333 a month – not bad! Every year that you save, even something, will grow for the decades to come. Over the long run, the US market grows roughly 8% per year.

Why Contribute at All?

With a high-income on the horizon, it can be tempting to delay saving, but the power of time and compound interest is potent – even Warren Buffett noted it. There’s an apocryphal tale of Einstein & compound interest as well, either way – it’s not wrong. Basically, the more time your money has to grow, the more you will have years from now – with less work. Remember, IRAs don’t allow non-penalized withdrawals until you’re 59 and 1/2 – this is putting money away for the long term.

Image result for einstein compound interest

Additionally, getting into the habit of saving now will help set you and your family up for a comfortable, less-stressful future – particularly as you get closer to retirement.

Questions?

While a seemingly simple question, there are lots of things to consider between employer sponsored and employee retirement accounts. Let me know what questions you have in the comments!

White House Budget Proposals and Loan Forgiveness, What’s the Deal?

Budgets and Bills and Politics…

Loan forgiveness. It’s a big deal, not only for those trying to qualify for PSLF, but it’s also a hot topic on the campaign trail for the Democrat Presidential Primaries. Various candidates have offered different terms on loan forgiveness for both graduate and undergraduate education.

The current administration has offered proposals to limit or eliminate Loan Forgiveness, particularly with their current budget proposal for the 2021 fiscal year. Here’s why this isn’t that big of a deal (yet) and why you, dear reader, shouldn’t be overly concerned:

  1. White House budgets are pure politics – this is their idealized version of what the budget will look like.
  2. Congress – the House and Senate respectively, are the ultimate bodies that create and pass budget legislation. The White House can influence the budget, but that really depends on party composition in the House & Senate, and also how much political capital the White House wants to spend to get what they want.
  3. Since budgets start in the House, and the House is currently Democrat controlled, it is less likely that Loan Forgiveness Programs will be dramatically altered.
  4. There have been Loan Forgiveness modification proposals over the past decade, but they haven’t ever become a part of a voted upon bill. Notably, there have been proposals to both expand and decrease the scope and coverage of loan forgiveness for medical professionals.

If you’re curious, here’s the exact text of the Fiscal Year 2021 White House Budget that refers to Loan Forgiveness (page 41). It’s really pretty vague in reality. Take a look at the last sentence, which ostensibly, is referring to doctors.

Protects Students and Taxpayers from Growing Student Loan Burden. The Budget protects students by eliminating default for impoverished borrowers and providing expedited loan forgiveness for undergraduate borrowers who make 15 years of responsible payments. In addition, the Budget protects graduate and parent borrowers from racking up crushing debt, often never repaid to taxpayers, by instituting sensible annual and lifetime loan limits. In addition, the Budget closes loopholes currently allowing high-earning graduate-degree holding borrowers to avoid repaying their student loans, leaving taxpayers holding the bag.

Now if you take a look at the actual budget line items at the end of the budget document (page 114), there is an actual PSLF call out. Note that figures are in millions:

screenshot of budget snippet from White House proposal

In Conclusion…

In my opinion, given the current composition of Congress, I don’t see a dramatic change in Loan Forgiveness ocurring. While there can be changes made through the executive branch, drastic changes really need to be passed into law via bills from the House and Senate making their way to the desk of the President.

What is on the horizon, however, is a much larger population of medical professionals with large Federal Loan balances that will begin to qualify for PSLF. Record keeping has improved since the program was first implemented and I believe that this will be the first real test of whether the PSLF program will live on. As larger and larger sums will be forgiven, there will be increased scrutiny of the forgiveness programs.

Have questions or want to leave some thoughts? Drop a note in the comments!

-SurgeonJourney

How The Surgeon and The SurgeonSpouse Managed Medical School

This originally was included inside the post about how to manage loans and finances while in medical school. Though the summary advice of that particular post is: don’t spend too much, get a roommate, and manage your finances closely – perhaps some of you were looking for more salient advice. Given that, I wanted to break out what we did into it’s own post for more detail.

What Did YOU Do During Medical School?

Before Med School

For some personal background about the SurgeonSpouse (tm) here at SurgeonJourney, I worked for a healthcare software company (with a solid 401k & benefits) right after undergrad. Though I had great benefits, I totally didn’t know it at the time. Knowing what I know now, I was lucky I decided to throw a bunch of money into my 401k – I didn’t know about suggested investment strategies and I didn’t know what resources to use on the web.

While I was working at the healthcare company – The Surgeon was doing research and preparing for medical school. At this time we lived in different cities and correspondingly kept our finances separate. To her immense credit, the Surgeon is a frugal BOSS and knows how to stretch the dollars when she needs to.

Med School – The First Year

Fast forward a year or two and the Surgeon is in her first year of medical school. We’re still in separate cities and I visited with my hard earned consulting airline miles (I’ll have to do a post about some frugal travel tips in the future. Would certainly help for residency interviews). The Surgeon, being the frugal badass that she is, lived with a fellow grad student and had a carefully planned weekly food budget and menu. She packed all her own lunches and cooked dinner at home.

Much of this meal planning and living arrangement takes discipline and a healthy amount of delayed gratification. Skills that apply not only to finances, but to a variety of things in life – like staying the course to becoming a doctor. Luckily, the Surgeon has an abundance of both! If you’re reading this blog and have made it this far, you, too, likely have these attributes.

Second Year and Beyond

Through her first year, The Surgeon kept to her budget and did a really good job of limiting expenses. At the start of second year of med school, I left my healthcare consulting job and moved to be in the same city as The Surgeon. We looked around and found an affordable apartment near the school and made the big decision to move in together!

Moving In with a Partner?

There are a lot of practical decisions to make when moving in together, it’s a great step in a relationship. We had to talk about and make decisions on things like:

  • Who’s paying for groceries?
  • Are we splitting rent? If so, how are we going to do that – evenly or based on income?
  • Are we putting both our names on the lease?
  • Which name(s) are we going to use for utilities?
  • Are we sharing streaming accounts?
  • What do we do with our furniture?
  • Which way does the toilet paper face? (FACT: there’s only one right answer to this and I’m sticking to it)

Sure, the questions can go from the more practical and reasonable to slightly more esoteric – but you’ll encounter every aspect of a partner when living together. It’s important to have these discussions upfront – especially about the TP.

Some of the financial conversations can get sticky if not broached early, by talking about them ahead of time, it can save a lot of angst down the road. Alas, I digress, back to financial advice.

Being a Partner of a Med Student

I found a job in the same city as The Surgeon, which worked out well while she was in school. We were fortunate that her med school was in a larger metropolitan area but still relatively affordable – in the Southeast, I’m sure you can guess which city. There’s a vibrant startup community and I was able to get a great job while The Surgeon finished the remaining three years of med school.

Having an income really helped out our financial situation while The Surgeon was in school. Since we lived together, I tried to pick up expenses where I could to minimize loans. It should also be noted that we had been together for four years at this point (since senior year of undergrad), so sharing expenses and living together was the next ideal step for us.

Photo by Volkan Olmez on Unsplash

Fourth Year!

Until forth year, spending is fairly predictable. It is worth noting, amusingly, that generally med school tuition goes up for third and fourth year. Of course this is when you’re done with your didactic years and moving to clinical rotations. You’ll have sparing classroom time once clinicals start, though it was always strange to me that tuition goes up for your final years when you’re not really in a classroom.

What throws a wrench in finances for your forth year is residency interviews. Once you choose a specialty, you’ll start picking out residency programs based on your scores and aspirations. Depending on what you choose, you may end up applying to a few dozen programs. For every program that extends an interview, that travel is on your dime.

We also got married, which isn’t exactly cheap endeavor – but still file taxes separately! #PSLF.

Residency Interviews – Unavoidable Travel Expenses

For The Surgeon’s residency interviews, we used a combination of airline miles, low cost carriers, and creativity to keep costs low. But when you don’t have a lot of scheduling flexibility nor advance notice – flights can get expensive. To save on hotels when she could, the Surgeon would find a friend who lived in the interview city, if possible. Otherwise, it was AirBnB and hotels.

You might end up spending a few thousand dollars on interviews once you’re done. Between all the travel, and also the interview attire, it adds up. In the future, I’ll do a post on some credit cards I’d recommend to take advantage of all that travel spend, something I wish I thought of sooner.

Final Thoughts on Med School Finances

Overall, you’ll make it through! We did it with a combination of saving and careful planning, coming out with federal loans just shy of $200,000 (that interest was already adding up) – hooray! I made some loan mistakes that I definitely will cover in the rest of the loan and PSLF series.

What questions do you have about finances during med school? Questions for The Surgeon and The SurgeonSpouse?

-SurgeonJourney

During Medical School: Managing Debt and Living Costs

So you’ve chosen a medical school, enrolled, and are happily studying through first year and loving anatomy lab. How do you manage your expenses and loans while in school? Excellent question, dear reader, and this builds on the previous post in the series that provides a high level summary of securing student loans.

Every person has a unique financial and life situation – perhaps you have a partner and are sharing living expenses. Are they in school? Are they working? Do they make a comfortable amount and are you close enough such that they can support you while you’re in school?

What kind of loans do you have, private or public?

From the perspective of managing loans while in school, both private and public loans generally allow you to defer making payments while you’re a full time student. Note however, that your loans will continue to accrue interest whether or not you’re making payments. Because you’re fully focused on school, it doesn’t make sense to make payments until after you’ve graduated. I’ll go into detail about ways to manage your public and private loans once you’ve graduated from medical school in a future post.

Managing Expenses – Find a Roommate!

Here’s where having the discipline to focus on keeping a budget will save you in the long run. By using one (or more) of these tools, you can get a perfect picture of your monthly income and expenditure, and carefully plan out what you’ll need each semester.

If you don’t have a partner that you’d consider sharing expenses with, there are additional options you have to save on housing costs. Check with your fellow classmates to see if they’re looking for roommates – do make sure you’re compatible living together. If the idea of living with a fellow med student is like bringing work home with you, see if you school has other graduate programs. Like med students, students in other grad programs are typically focused, high achieving, and might make an ideal roommate or three.

Ultimately, shacking up with a roommate for a few years while in school isn’t the worst thing you can do. It’s a great way to save on your largest expense outside of med school tuition and can reduce your need for loans.

Budget for Larger Expenses

As you progress through medical school, remember the long game. By the time you become an attending, (if you’re in the US), your superlative education will include:

  • Four years of undergrad
  • Four years of medical school
  • at least 3 years of residency
  • TOTAL: 11 YEARS after high school

If you’re like the Surgeon and planning on a surgery sub-specialty, that’s a seven year residency (including research). Tack on roughly two years of fellowship. Say you’re interested in becoming a Thoracic Surgeon. That’s a 17 YEAR ride after high school – buckle up.

My point with this isn’t to scare you, but to realize that your high income years (at this point) are about a decade away, the decisions you make regarding finances early on can save you much later in the long run. Remember, life is a marathon, not a sprint.

During medical school, larger expenses might include mandatory testing (like STEP exams), vacation (responsibly), transportation (keeping your car alive), and in your fourth year: residency interviews. Loans are certainly one way to manage these expenses. But another, perhaps more prudent option, would be budgeting and planning for these expenses ahead of time.

What Should YOU Do?

In the end, I can’t tell you what to do. I know what worked for The Surgeon and me, and I’ve seen what can work for others. Ultimately, it’s about being responsible with your financial decisions, closely evaluating living arrangements and expenses, and keeping your mind and body healthy for the long run.

It’s also great to instill these habits early, so that once you are making a bit of an income (at least adding to the positive side of the ledger) in residency, you can work on saving. Keeping those habits into your attending years will have you set up to be debt free while maximizing your financial potential for your life time!

What questions about expenses and budgeting do you have while in med school? How to make ramen more tasty? Adding an egg and some leafy greens can really kick up a ramen pack on the cheap.

-SurgeonJourney

Resources for Managing Finances and Life Advice

It’s hard for anyone to get where they are without some help and guidance. With today’s resources available view the world wide interwebs, there’s never a better time to educate yourself about personal finance and student loans. The financial advice you might be seeking also likely ends up going along with some sage life advice – good gems to collect along the way.

I’ve Googled and searched more terms than I can count and stumbled upon these blogs and sites that I’ve found incredibly helpful while navigating med school loans for my spouse and researching different investment portfolios and tax strategies.

Without further ado, here’s the list of blogs I check at least weekly for new content, and have used their posts countless of times for research.

Mr. Money Mustache

One of the first FIRE bloggers I discovered – I started reading and talking about Mr. Money Mustache with colleagues when I worked at a startup a few years ago. MMM started out in software, similar to my own profession, and has now “retired” and pursues his own interests, many of which are quite lucrative.

While MMM’s frugalness takes it to the next level, it’s a great way to think about how your own life decisions affect your ability save and retire. I thought his post about commuting was particularly sobering.

The White Coat Investor

After I had been reading MMM, I started looking for more specific advice for those in the medical field. The White Coat Investor is an excellent resource for investing for more established physicians. Additionally, WCI also some great content regarding student loans and physician mortgages. Check it out!

Physician on FIRE

An anesthesiologist in the midwest, this blog is particularly focused on leveraging a high income profession to FIRE – financial independence and retire early. He has some great posts regarding investment portfolios, traveling, and how to successfully execute the back door ROTH contribution. With new posts all the time, I check out PoF nearly weekly for updates!

I’ll credit the above for helping navigate through decisions for med school loans and how to successfully stay on course for PSLF – Because there isn’t one great resource for medical students and early residents to use for financial decisions and PSLF, check out my guide to loans and PSLF!

There’s so much great content available on the web, leave a comment with your favorite resources and posts!

-SurgeonJourney

Budgeting and Financial Tools for the Win

The ol’ adage of “you can’t improve what you don’t measure” is certainly true in the financial health and literacy department. A big part of setting up a successful financial plan that fits your needs and circumstances starts with understanding where you are today.

This means seeing where money is coming in, where it’s going out, and how much you have as a surplus (or savings) each month. In a single metric to track your financial health, I’d likely point to using Net Worth.

What You Own – What You Owe = Net Worth

Lucky for you, dear reader, there’s never been a better time to create a monthly budget and track your net worth to make sure you can afford those Balenciaga’s (for those hype beasts out there, you know who you are) or a new vehicle or vacation plans.

There are a number of tools out there designed to help you keep track of your finances so you can see where you are today, and set budgets and goals for the future.

Types of Financial and Budgeting Tools

In most cases, the tools that you’ll want to use are web applications that integrate with the various banks, loans, and investing platforms that you have. They aggregate all the information collected from your different accounts and provide you with a holistic financial picture complete with a net worth calculation.

How do they do this? You will need to provide your login credentials to the tool or tools of your choice so that they can pull the appropriate transaction and balance information from each of your accounts.

For example, if you have a checking and savings account with Chase, and you have a ROTH IRA with Fidelity, you’ll provide your username and passwords for Chase and Fidelity to the online financial tool so that it can gather your information from each of these institutions respectively.

Concerns about security and sharing your data? It’s definitely something you should consider when choosing a tool, and also when using the internet in general. I’ve decided that I trust the financial tools that I use and understand the potential implications of sharing my usernames and passwords.

In any case, I’m going to take this moment to get on my soapbox and ask you to please, please, please, use a Password Manager and make sure you have a unique and random password for each and every account that you create. Yes, your dog is the cutest with the easiest name to remember, but that’s also incredibly easy for a nefarious individual to compromise.

Best Tools for Budgeting and Getting your Financial Picture

In order of which tools I prefer, here’s the SurgeonJourney Approved (TM) list of online and offline tools for tracking your finances.

  1. Personal Capital
  2. Mint
  3. A Spreadsheet
  4. YNAB – You Need a Budget

Why this list, you may ask? I’m going to go through each one to explain my pros and cons. While this is the definitive SurgeonJourney list of finance and budget tools, you may have a different tool of choice depending on your needs and priorities, like security, for example.

Personal Capital – The Investors Choice

I’ve been using Personal Capital for the last few years and I can’t say enough good things. It’s focused primarily on tracking investment performance and can also help with portfolio composition analysis. Because the tool is built so that you can get a clear picture of where your investments are and how they are performing, I check multiple times a week to see how my net worth is doing.

I should note that while I look at Personal Capital a few times a week, I don’t make changes to my investment plans based on day to day changes in the market – that is bad (I’ll dig into investing strategies in a future post!).

Pros for Personal Capital

  • Great investment analysis and tracking tools
  • Intuitive UI and functional desktop and mobile applications
  • The financial tools are provided free of charge because they want you to use their Wealth Management services
  • Because Personal Capital is trying to sell you a service by offering their wealth management advising, it’s less likely they’re trying to sell your data to marketing partners

Cons for Personal Capital

  • Budgeting tools and goal creation isn’t as robust as Mint
  • Transaction categories are limited and I’ve found automatic categorization to be less accurate than Mint
  • The financial institutions that are available to connect with are slightly more limited than Mint, though in practice this really isn’t an issue
  • Online tool requires that you share your financial account credentials with Personal Capital

While there are some draw backs, Personal Capital fits most of our needs and we have linked accounts from banking to investing to loans, even our house and cars. It’s a great way to get your complete financial picture in one holistic view.

Try out Personal Capital

Mint – The Budgeting Incumbent and Intuit Behemoth

Before I started using Personal Capital, I was on team Mint for years. It’s one of the original financial aggregation tools to gain broad appeal and does an excellent job with account integration. It’s primarily a budgeting and goal setting tool and it excels at both of those tasks.

It has a friendly interface and solid web and mobile applications, making it easy to track your finances. You can even set alerts for low balances and also it will track when bills are due.

Pros for Mint

  • Excellent budgeting and goals tools, this is what I started with to set up my monthly spending and savings plans
  • Great integrations with a plethora of accounts from banking to wealth management and more
  • Bill tracking and payment through Mint if desired
  • Free credit score provided quarterly

Cons for Mint

  • Investment tracking is a feature, but not as robust as Personal Capital
  • Investment charts still use Flash and won’t display for most users with modern browsers (like Chrome)
  • You are the product, as in your data is most definitely sold and shared with marketing partners of Mint and Intuit
  • Online tool requires that you share your financial account credentials with Mint

Given that I’ve shifted our focus to investing, I would recommend Mint after Personal Capital. If you are just starting out with budgeting and setting goals, give Mint a shot. I will say that be aware that the information you provide to Mint is absolutely shared with partners. While the offers you will receive are tailored to you based on your accounts and spending habits, it’s up to you whether that’s worth it to you.

Try out Mint

A Spreadsheet – The Manual Option

For full control and complete customization, consider using Google Sheets or Microsoft Excel (don’t use Numbers, just don’t) to keep track of your finances. It’s definitely not the easiest and it’s probably the most time consuming, but going through the exercise of crafting a spreadsheet budget will help you become intimately familiar with your finances.

Additionally, building the discipline to enter your transactions and tracking your investments manually will have you more attuned to your spending than most. Do what works for you.

Pros for Spreadsheets

  • Infinite customization, very flexible to fit the format and needs of your financial picture
  • Templates are available online to help you get started
  • You can keep all your account information private, you don’t need to share credentials to gather transactions and balances
  • Most banking and investment accounts offer the option to download transactions to spreadsheet, making it easier to move transactions into your budget and tracking sheet
  • The self satisfaction of creating and maintaining your own spreadsheet shouldn’t be underestimated

Cons for Spreasheets

  • Very manual, you’ll need to have the time and discipline to enter in transactions and investments monthly
  • Charts and graphs will need to be created manually
  • No automated investing and savings recommendations

While there’s a big time investment to making your own financial tracking spreadsheet, you’ll have a deep understanding of your spending and saving habits after you do this for a few months. There are some great resources to create your own if you’re interested! I’ll be posting some resources I like to use in the future.

Try out a Spreadsheet

YNAB – The Alternative, but also Great, Budgeting Tool

I’ll admit, I tried really hard to use You Need a Budget, and I just didn’t get it. It’s probably because I seek immediate gratification (I know, #millennial, sue me) and the logic of YNAB didn’t make sense to me; but I don’t want my experience to stop you. I’ve had friends use YNAB to great success and it can really help with wrangling expenses and debt if that is something your struggling with.

The idea is that you allocate every dollar in each month to a job. Whether it’s for groceries or a car payment or entertainment, every dollar should have a purpose and be put to use. That way, you don’t need to check whether you have enough for X expenditure, because you’ve carefully budgeted all your income and expenses for the month.

Pros for YNAB

  • Amazing budgeting tool, website has helpful tutorials to get started
  • Great for getting out of the paycheck to paycheck cycle, or paying down debt
  • Builds budgeting and spending discipline

Cons for YNAB

  • No investment tracking, for budgeting only
  • Budgeting paradigm might not work for everyone
  • YNAB isn’t free, but this may also help make sure you use the tool

Perhaps I didn’t give YNAB enough of a chance, but again, don’t let me stop you from trying out YNAB. It can really work wonders and I do recommend you giving it a shot to see whether it works for you or not.

Try out YNAB

It’s Not the Tool, It’s How You Use It

In the end, it’s not what you use, it’s how you use it, or whatever that old saying is. Understanding your earning and spending habits is critical to building a healthy financial foundation for your future. This can start while you’re in medical school and building the skills and discipline for budgeting and saving can never start soon enough.

By the time you’re an attending, you might earn a high income, but without the spending and saving habits you develop early – making $300,000 and living paycheck to paycheck isn’t where you want to be. Use investing and budgeting tools to start early and stay ahead of the game.

I’ve suggested a few tools above, let me know in the comments which ones you’ve tried and what works best for you!

-SurgeonJourney

Part 1: Med School Loans and How to Find Them

Accepted to Med School, Now What?

Congratulations! Your hard work through your undergrad years has paid off – that GPA and MCAT score and your summers spent doing research and shadowing have prepared you for the next four years, studying to become a doctor. As the glow fades from your monumental achievement, reality set in as you must figure out how to finance this expedition. (If you found this post by accident and you don’t require loans for medical school, go have a mai-tai and then come back for other info).

Let’s jump into the different ways one can pay for school. You’ll likely have information from the medical school you plan on attending to secure funding to pay for tuition and living expenses. You can skim through this section if you took loans out for undergrad. Keep in mind, the type of loan you accept will alter the different repayment options you can choose down the road. This decision, though seemingly minor, can have a large impact on a doctor’s financial situation for potentially decades.

Once you accept an offer, get your checkbook out – typically there’s a deposit required to hold your spot, and the school will provide resources to you for financial assistance depending on your situation. In my anecdotal experience, it seems that these Financial Aid offices can be anywhere from mildly helpful to possibly committing willful malfeasance. Your mileage may vary. Nevertheless, there are a TON of resources to talk you through the different options.

Since this blog is focused largely on surgeons with a residency of at least five years (my surgeon is in the greater than five year category), plus an additional one or two (or possibly three) year fellowship, I’ll focus on the decisions you need to make that will allow you to qualify for PSLF. I should note, also, that there are some longer residency + fellowship combos with medicine specialties that make this information helpful (cardiology, for one).

What’s PSLF? I’m Glad you Asked!

PSLF is an acronym for Public Service Loan Forgiveness, and the Consumer Financial Protection Bureau has a great summary of the program:

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your federal Direct Loans after you make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying public service employer. 

–consumerfinance.gov

So, what does that mean? Let’s break it down:

  • Federal Direct Loans
    • This means that the US Department of Education (and Betsy DeVos) is your lender. Basically you’re securing your loan directly from the Department of Education.
  • Qualifying Monthly Payments, 120 of them
    • Meeting the required payment each month as specified by your payment plan is all you need to do here. If you are attempting to qualify for PSLF, you should choose FedLoan as your servicer – they’re the only loan servicing operation that will manage PSLF.
  • Qualifying Repayment Plan
    • This is where some real value can come into play with the PSLF program. Federal loans can qualify for a number of different repayment plans, I’ll dig into this with lots more detail in a post dedicated to PSLF, but know for now that it can dramatically decrease your monthly payments to as little as $0.00.
  • Working Full-time
    • At least 40 hours a week. If you’re a general surgery resident, this will be less than half your week (unofficially; of course your week is officially 80 hours).
  • Qualifying Public Service Employer
    • In nearly all cases, as a resident you’ll be employed by a non-profit – 501(c)(3) – organization affiliated with your teaching hospital and have nothing to worry about here. (I’ve heard reports that Kaiser in CA does have their physicians, including residents, employed by a for-profit entity; I’ll do some more research on this).

So there it is! Work ten years for a non-profit while meeting the payment required each month and the remainder of your loan will be forgiven (principal and interest TAX FREE!) by good Ol’ Uncle Sam.

Too much of a good thing?

I have heard that there is brewing interest in Congress to institute caps on forgiveness, but for now there aren’t any. At the time of this post, it’s still safe to go for PSLF as a med student. If there are changes, most speculate that existing borrowers won’t be affected – depends how the US Treasury is looking.

Photo by Ricardo Rocha on Unsplash

Loan Decision Time

I digressed a bit with the PSLF intro, but let’s get back to paying for med school – it’ll all fit together, I promise. Once you get over the sticker shock, put together a rough budget of your expenses you think you’ll have each year, broken down by semester – there are lots of guides online for this, so I’ll just create an example here:

By Semester:Cost:
Tuition$25,000
Miscellaneous and spurious fees$4,000
Living costs: Housing ($1000/month), Food ($400/month)$8,400
Total (per semester):$37,400

Depending how frugal (or not) you are, you’ll be spending at least $70,000 per year between tuition and living expenses.

Getting that Cheddar, Public or Private?

Two main options are private and public loans. In order to qualify for PSLF, you must use a public loan. After submitting a FAFSA form, you’ll likely be approved for two federal loans, Direct Unsubsidized and Direct PLUS. The former are capped at $40,500 per year, though Direct Unsubsidized Loans don’t have any strict requirements, like credit checks, and come with a pretty reasonable fixed interest rate.

You might be wondering what’s the difference between Unsubsidized and Subsidized Loans – I sure did when I first saw it. It has to do with how the interest on your loan is handled. For Subsidized Loans, the kindly U.S. Department of Education will pay the interest accrued while you’re in medical school. They do come with more restrictions than unsubsidized loans and are based on financial need. You’re responsible for the interest accrued on unsubsidized loans while you’re in school – if you choose not to pay interest while you’re in school, it will capitalize (your interest accrued gets added to the principal) on your loan.

If you find yourself needing more than $40,500 per year in loans, and you very well might, Direct PLUS loans are your next stop. These do come with more requirements, like a credit check, and may have more restrictions for borrowers with an adverse credit history.

SurgeonJourney’s Suggestion

From my perspective, I didn’t fully understand how PSLF worked until my spouse’s last year of medical school. By that time, we had maxed out the Direct Unsubsidized option every year and covered the rest of tuition with private loans. Were we to do it again, I would likely try to take out all public loan options for the purpose of PSLF.

We were fortunate that while my spouse was in school, I was working a full time job at a software startup, which certainly eased concerns for living expenses. I know that not everyone will have this situation, so it’s important to know your loan options and also focus on managing your expenses wisely. There are some great budgeting tools out there I’ll cover in later posts.

Let me know your thoughts and questions in the comments!

-SurgeonJourney