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We're thrilled to welcome you to the Physician Cents Podcast! It's our very first episode, and we're excited to embark on this journey with you. this podcast is tailored specifically for physicians to provide financial education that will help you navigate your career. This is an especially exciting time of the year as we just passed Match Week. Congratulations to all the physicians who have received their match results! For those who didn't get good news, remember, we're here for you. The journey continues, and we're committed to supporting you every step of the way.
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In this episode, we're diving into three critical aspects of financial management that are particularly relevant to physicians who are just starting their professional journey:
The concept of budgeting—or what we like to call cash flow management—is essential at every stage of life. Many of you who are just finishing medical school may be living off of loan disbursements. As you prepare to transition into working this summer, there are numerous expenses to consider, such as moving costs, deposits for your new apartment, and licensing fees—all without any immediate paycheck.
Successfully managing your finances during this critical transition period involves these key steps:
Itemize Fixed and Variable Expenses
First, it's crucial to differentiate between fixed and variable expenses. Fixed expenses include car payments, insurance premiums, and subscriptions, while variable expenses encompass costs like food and gas. Don't forget about one-time expenses such as moving trucks and apartment deposits.
Calculate Total Cost for the Transition Period
Once you have itemized your expenses, calculate the total cost you'll need to cover from now until your first paycheck as a resident. This calculation will give you a clear picture of your financial obligations.
Explore Options
If you find that your expenses exceed your available funds, you might need to consider taking out additional loans. While this isn’t ideal, it's preferable to being caught off guard by unexpected financial obligations.
Transitioning to a resident's salary comes with its own set of financial challenges. On average, resident physicians earn between $3,500 and $4,000 a month. While this may seem like a substantial amount, the reality is that your hours and responsibilities make this seem less adequate.
Reasonable Expectations with Resident Salary
Living on a resident's salary requires careful planning. Keep in mind that many residents may still have credit card debt from the transition period between medical school and residency.
Building Budgeting Habits
Developing strong budgeting habits now will pay off immensely in the future. Whether you choose to manage your finances weekly, monthly, or semi-annually, the key is consistency.
Here are some effective budgeting tips to help you manage your finances as a resident physician:
Write It Down vs. Technology
Everyone has different preferences. Some find it more helpful to write things down, while others may prefer using budgeting apps like You Need a Budget (YNAB), Tiller, or Monarch. The key is to find what works best for you.
Account for Outstanding Balances
If you used a credit card to cover some of your initial costs, make sure to incorporate these payments into your budget.
Involve Your Spouse/Partner
If you're married or have a significant other, involve them in the budgeting process. It’s important to ensure you're both on the same page financially.
Find a Sustainable Routine
Determine a routine that’s manageable for you, whether it’s a weekly, monthly, or periodic review of your finances. The goal is to find a balance that’s sustainable and not overwhelming.
Make It Exciting
Lastly, try to make budgeting fun and engaging. Celebrate small wins and milestones to keep yourself motivated.
Federal student loans are a significant part of the financial landscape for most physicians. Understanding how to manage these loans effectively can save you a substantial amount of money in the long run.
One of the most crucial steps you should take immediately after graduating is to apply for federal student loan consolidation. By bypassing the six-month grace period, you can start making qualifying payments for Public Service Loan Forgiveness (PSLF) as early as August instead of waiting until December.
How to Apply
To apply for consolidation, visit studentaid.gov. Make sure your school has updated your status with the National Registry to show that you've graduated.
Requirements
File your tax return electronically, even if you didn’t make any income last year. When you complete the loan consolidation application, it will ask you to link your IRS tax return. Filing a return ensures that your application process goes smoothly.
Selecting the right income-driven repayment plan is another critical decision. The introduction of the SAVE plan has been a game-changer, particularly for physicians in training.
Overview of Plans
Repayment plans like PAYE, SAVE, IBR, and ICR each have their own pros and cons. For many, the SAVE plan is the most beneficial, especially if you're planning to work at a nonprofit during your residency.
Factors to Consider
Keep in mind factors such as your marital status and your spouse’s income. We recommend discussing these details with a financial planner to ensure you choose the best plan for your situation.
It’s essential to document your qualifying payments for Public Service Loan Forgiveness (PSLF) by filling out the PSLF employer certification form annually. This ensures that all your payments are tracked and verified correctly. Moreover, now that the form can be filled out electronically, it's much easier to stay on top of this important task.
Private student loans come with their own set of challenges. While they don’t offer the same benefits as federal loans, it's crucial to manage them wisely.
Private loans typically come with higher interest rates ranging from 9% to 15%. During your residency, it’s crucial to find a payment plan that’s manageable.
Periods and Deferment Options
Some private loans may offer deferment options, but interest will continue to accrue. Review your loan terms carefully to understand your options.
Treading Water vs. Aggressive Repayment
The main goal during your residency should be to tread water financially. Focus on making manageable payments rather than trying to pay off the entire loan aggressively.
Refinancing Considerations
Refinancing can help you secure a lower interest rate or a more manageable payment plan. Programs like Earnest (On our "Best of the Best" list, and contact us for a special rate discount🤫) offer beneficial resident loan refinancing options.
🚨 Do NOT refinance any loans that you want to use a government loan forgiveness program (Ex. PSLF).
Balancing Interest Rates and Comfortable Payments
While a lower interest rate is ideal, the priority should be on finding a payment that fits within your budget.
Monitoring Rates for Potential Refinancing
Set reminders to periodically check interest rates and see if refinancing at a later date could offer better terms.
In this first episode, we’ve covered the fundamentals of budgeting, managing federal and private student loans, and setting yourself up for financial success as a new physician.
Thank you for joining us on this journey. Stay tuned for more insights and tips on mastering your finances as a physician.
The best of the best list is a paid sponsorship, but these are professionals/companies that Tyler and Chad collaborate with within their own practices or have been vetted to earn a spot this list. By supporting our sponsors, it allows Chad & Tyler to dedicate more time to you and the Physician Cents community. If you ever have a question (or not a great experience, which we don’t expect!) about a sponsor, please let us know. We call it the “best of the best” for a reason, and we will maintain that standard for our listeners & viewers.
This information is for general purposes only. This information is not intended to be a substitute for specific professional financial, tax, or legal advice, as individual circumstances vary. Please see a financial professional, CPA, and/or an attorney in regards to your own individual situation.
Wealthkeel’s Advisory Services and Financial Planning offered through Vicus Capital, Inc., a Federally Registered Investment Advisor. WealthKeel LLC, 615 Channelside Drive, Suite 207, Tampa, FL 33602 -- 267.590.9533.
Olson Consulting LLC, Offering Advisory Services and Financial Planning, is a State-Registered Investment Advisor.
A podcast designed specifically for physicians, offering a breakdown of complex financial topics to help you develop your financial IQ, further your financial journey, and improve your well-being. Whether you're a medical student, resident, fellow, or attending physician, you're sure to learn something new that will benefit your journey.
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Conversations helping graduating medical students to attending physicians build a strong financial foundation
