As of 2014, there were a dozen medical schools with the AVERAGE student loan debt over $200,000.   I work with some residents that finish their training with over $500,000 of student loan debt.  It has been stated many times before, but this is a major problem for our generation of physicians.

The average millennial physician’s starting financial situation is so much worse than previous generations that they should not be buying a home until they are five years out of training and have their student loans under control.

We could be outraged over this unfairness, but that will not change our circumstances.  Instead,  you are going to crush that debt on your way to financial independence.

We have to live life as it is, not as we want it to be.

You Can Still Be Financially Successful

Believe it or not,  despite these economic handicaps, you are still in a position to be the financially successful physician everyone thought you were going to be when you first received your acceptance letter to medical school.

Your biggest enemy on your personal finance journey is yourself. If you can get past a few preconceived notions of how things should be,  you will be much better at accepting things as they are and making the difficult choices you face.

Let’s look at some reasons why I used the bold headline that millennial physicians should be delaying home ownership out of training longer than most people currently do.

Reason #1:  You are Already Worse than Broke

To borrow the phrase from White Coat Investor: if you are like some dual physician couples finishing residency,  you are already worse than broke.  The sad thing is no-one had the guts to tell you. I work with residents every day that have over $500,000 in student loan debt.  Most of them don’t understand the severity of their problem.   The have never sat down and crunched the numbers.

Because most individuals don’t like to talk openly about finances and their life choices,  the conversation that should have taken place when you first received your admission letter to that expensive private medical school never happened.   The conversation about being an additional $200,000 in debt when you finish never occurred.   The conversation instead revolved around you being super awesome for getting into medical school.

If you finish your training with $200,000 of student loan debt at an interest rate of 6% and you want to pay it off within five years,  your monthly payment will be around $3,800-4,000/month.   That loan payment alone is more than you made/make each month as a resident.

This is a Relatively “New” Problem

Part of the reason these conversations never happened is that millennials are the first generation to have to live with this problem of disproportionate education costs.

Even if your parents were physicians,  the cost of their education was reasonable in proportion to their future earnings.

We can’t change the price of school now. We need to live with the world as it is right now, not in the world as we want it to be.  So no,  you cannot afford that home right now until you get back to being just broke.

Reason #2: Your Home Isn’t An Investment

Before all you homeowners pen your rebuttal,  I am not saying owning a home is a bad thing.  I own my home now seven years post residency.   It just isn’t an investment.

Home ownership = forced savings

If you read up on the financial benefits of home ownership, the main argument for ownership boils down to the fact that your home is a forced savings account and a very poor one at that.   The data for this case comes from the statistic that the difference in net worth between homeowners and renters was the equity in their homes.  The problem with this is that this is equity that took years to accumulate.   With a  traditional 30 year mortgage,  in the first ten years, you can pay more in interest than you build in equity.

The Myth of the Starter Home

If you finish residency with a ton of debt, chances are you are being reasonable and are looking for a starter home.  Don’t buy a starter home.   Especially don’t purchase a starter home if you have gobs of other debt around.   The transaction costs and costs of ownership will eat up any price appreciation you may get unless you run into a roaring local real estate market or your spouse is a contractor and can invest the time needed to improve the home.

Homeowners who make money buying a starter home understand that all their gains come from price appreciation and have ways to make that home appreciate in value.

The ongoing costs of home ownership make renting and then investing the difference the smarter choice if price appreciation is low in your area.  This is the vast majority of cities across the US.

Price appreciation is the secret sauce to making money on home ownership, but it is not guaranteed.  In most markets over the long term appreciation barely keeps up with inflation.   However, in some markets, appreciation can be in double digits over a very short period.   It’s these stories and the house flippers on HGTV that give the false impression that any home is an investment.

Buying a Home to Live in Isn’t Investing in Real Estate

Purchasing a home to live in isn’t real estate investing.  They are many different ways to make money in real estate, but they apply to investment properties, not your personal home.

Your home’s primary purpose is a shelter from the elements.  First-time homebuyers often convince themselves that their home is an investment.  Your home can be a hedge against inflation, but I wouldn’t consider it an investment.

We know now that we don’t mix insurance with investing when looking for life insurance.   Don’t don’t mix shelter with investing when looking for a home.

Carrying costs are too high to be an investment.

The main reason I don’t consider a home an investment is that the carrying costs are too high.  The interest expense, insurance, taxes maintenance and opportunity costs of owning a home vs. renting are too great to be considered a good investment when you have other debts around.

Reason #3:  You Only Get One Chance for a Great Start!

You Only Have One Job:

Saving for retirement isn’t rocket science. It also takes most of us about 30 years to get there. You have plenty of time to learn the details of saving and investing.  Better yet, you don’t have much money to lose if you make an early mistake or two as you learn how to save and invest.

To start your retirement savings off right there is only one item of focus.  How much can you save each month?  In your first decade of savings,  the majority of your investment portfolio growth comes from how much you save each month.  Not the return of the market. Not how much time you have spent in the market.

The growth of your retirement savings in your early career is going to depend on one factor:  how much you can save each month.

Start Smart:

If you start smart, you can make up for all the retirement saving you could have done your entire 4-6 years of training.    As a newly minted attending,  you can compensate for the fact that you didn’t save a cent all through residency by maxing out your 401k and doing a backdoor Roth IRA your first year on the job.

You won’t be able to make it up that time if you turn right around and commit 40% of your cash flow to your dream home complete with master suite, pool and chef’s kitchen even before you cash the first paycheck from your first attending job.

Don’t Make Long-Term Commitments Your First Year

As a physician, you are already behind all your engineering friends who began working right out of college at 22 and now have a decade of savings under their belt.  Time is already in short supply when you finish.   If you play your cards right in your first couple years out,  you can make up for the decade of lost savings you had in your 20’s.

Don’t buy that house until you have made saving at least 20% of your new physician income a habit.   Get your retirement savings right now, and you never have to think about it again.  You can retire on time with little worry by taking the small steps from the start.

Let’s say you are a critical care physician making $300,000 per year.   You can save up to $36,000 per year combined in a 401(k),  457(b).  If you add an addition $5000 in an HSA and don’t use it for medical expenses, this adds up to a total of $41,000.  In this situation, your monthly savings are $3500 /month.   That total is almost more than you were earning each month just last year.

If all the numbers are starting to overwhelm you, it might be time for you to start your first budget.  If you haven’t begun to budget before you need to start now.  Even though you may be earning more money than ever before,  the pent up wants and needs for those same dollars are going to be much greater than before.

If you need help budgeting, check out my free download for tips on budgeting as a high income professional.

Reason #4:  Your Emotion’s and Bias Will Get the Best of You

You probably looked at the first three items here and thought, no big deal, I already know all this.  The truth is, you probably already know everything you need to know about losing weight too. The math in both cases is simple.

The execution gets complicated by how you design your life and the choices you are going to make right at the end of your training.  When you leave residency, you have a chance to hit reset on a lot of items.  Use that opportunity to set yourself up for success.

There is going to be a horde of salesman across various industries looking to get a slice of your hard earned income. They do this by tugging on your emotions at a time when you have a lot of choices to make.

There will be strong emotional reasons to immediately buy a house.  Don’t do it.

There will be strong emotional reasons to buy whole live insurance.  Don’t do it.

There will be strong emotional reasons to buy a new car.  Don’t do it.

There will not be an attending or mentor looking over your shoulder at the choices you make.  If you want to take half your income and go to Vegas each month, you can.   If you want to buy season tickets to your favorite sports team or a timeshare in the Caribbean, there is someone who will gladly sell you those items.

Keeping our wants and our needs in check is a challenge.  No-one is saying that you can never go to Vegas or never have season tickets to your favorite sports team.   You just don’t have to do it all at once.

Reason #5:  Your Job is More Fun If You are not Financially Stressed:

When was the last time you had a really awesome day at your job?   As a resident, those days can be few and far between depending on your program.  As an attending, you should be enjoying your work more often than not.  You finally get to do what you spent the majority of your life learning to do.  Sadly this isn’t the case for many of my colleagues.  Many of them are burned out bundles of stress.

Burnout is one of your biggest career risks today:

They don’t tell you in residency,  but burnout is a significant risk for physicians today.  Chances are you know a friend or attending who is hating their job right now.   You probably don’t know exactly why they are disgruntled.  What we do know is:  if you feel “trapped” by your finances,  you are setting yourself up for burnout.

Some of the most disgruntled coworkers I know are also the most financially strapped colleagues I have had.  The less that you feel that you “have” to work to pay the bills,  the less chance you will develop symptoms of burnout.   You just spent years getting your education to start your career.  Don’t sink it from the outset by making it a job that you “have” to do to pay your mortgage.

Overspending Contributes to Burnout:

The last reason I want you to consider delaying your purchase of a home is that your job is more fun when you are not financially stretched.   In the latest Medscape survey on burnout two of the top three factors contributing to burnout were Insufficient Income and too many hours at work.    Those factors are closely related.  If you overspend your income will appear insufficient, and you will have to spend more time at work.

Set the Stage for a Prosperous Career:

There are a ton of great things about being a physician but to enjoy them you need to pave the way properly.  If you have to pick up every extra shift available for the next ten years just to make your mortgage and student loan payments, it’s not safe for you or your patients.


Personal finances are not complicated, but they sure are not easy.   Often making the right financial choice goes against current social expectations and we have to be willing to swim against the current.

I managed to get some of these decisions right and some of them wrong.  I am probably about seven years behind the ideal circumstance, but it is not the end of the world for us.    Sure, I should have started smart years ago but the next best time to start it right now!

If you have made a few mistakes,  it’s ok, shake it off and fix them ASAP.   You still have time to recover despite a few setbacks in your life.

For those of you still in residency or just those of you with your first contract;  set yourself up for success from the very beginning.

Owning a home is like oxygen,   it’s only important to you when you don’t have it.

The principle is simple.  You should not buy a house if you are a millennial physician until you have your loans paid off and the foundation of your savings and retirement squared away.

The priority of your finances your first few years out of training should be:

  1. Elimination of your consumer debt(credit cards)
  2. Eradication of your student debt
  3. Setting your baseline investments for retirement(20% min)
  4. Learn how to budget your newfound cashflow
  5. Saving any additional cash for a down payment on your future home

It looks so simple when you write it down before we make it complicated.  If you haven’t done it yet, take the time to create a budget.  Budgeting for high-income professionals can be different than most.  If you are a physician budgeting right, you don’t have to “budget” each month, but you need to go through the process once to get started on the right track.  Check out my free guide to budgeting for high-income professionals and get your finances started off on the right foot.

Resources for this Post:

Personal Capital:  A great tool to help track and budget your expenses automatically once you have your system in place: Click Here to Join Personal Capital Now!

Budgeting for High-Income Professionals:  My free guide to show you how high-income professionals can create a budget that helps them accomplish all their financial goals.

Thanks for reading.  What do you think?   Would you delay owning a home for ten years if that is how long it took to eliminate your student debt?


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