Financial Advice for New Residents

Financial Advice for New Residents

Early July is an exciting time in teaching hospitals across the country.  A new batch of medical students suddenly makes the transition from debt accumulators to debt repayors.  According to some statistics, the average medical student now has over $180,000 of debt when they graduate from medical school, and they are woefully unprepared to manage it.  Debt management is not covered in medical school, and sound financial advice for new residents is rarely found on the agenda of new resident orientations.  Even if it was on the agenda,  most new residents I work with are not worried about their debt; they are concerned about being on call for the first time!.

I get a chance to speak to our group of new interns every year on orientation day, not about finances but central line infections.  This year I am branching out a bit and including a few pearls on managing their finances.

If I Could Give Financial Advice to All New Residents

This is what I would tell them: For most of you, welcome to your first real job. You have been anxiously awaiting this day since high school almost a decade ago.  After 8+ years of expensive schooling, the next four years will be less expensive but more intense than the last four years.

Sleep deprivation, personal conflicts, and life & death situations will all be featured heavily in your education.

Through all this, a critical part of your lifelong education will never be addressed by your programs. Your financial education.

One Financial Goal

If I could give you one financial goal for the remainder of your training it would be this:

 Learn how to live within your means.

If you can live within your means as a resident for the next four years, you will have what it takes to be financially successful in life.

It will not be easy. Most of you will have to learn the finer points of budgeting and loan repayment on your own.  If you want to start with the basics,  I put together a free guide on how to budget as a high-income professional for attendings, but it works for residents just the same.

Here is What Living Like a Resident Looks Like

#1 You Are Here To Become a Physician

It’s never too late to learn new things but right now is a special time in your career to transition the general book knowledge of medical school into the useful and actionable knowledge of your specialty.

Build a quality foundation on which you can build a successful career. Even average physicians will do well financially, but rock stars in medicine are rewarded better just like rock stars in other fields.

If there is an extra bit of work for you to do, do it.  This is the time to learn.  The days are long but the weeks will fly by.  Don’t let a day go by without learning something new.

#2 Put Your Finances On Autopilot:

You will have enough to occupy your attention at the hospital.  Simplify your financial life by putting as many of your bills on auto pay as possible.   Rent, water, electric, cell phone, music you name the service,  set it up for automatic payments.

Automatic payments will prevent the unwanted experience of coming back from the hospital to discover that your electricity has been shut off while you were on call in the ICU the last two months and forgot to pay your bills.

Eliminate the extra stuff starting out.  All the extras from medical school are not needed now. , No cable, no home phone, no Netflix or Birchbox or Dollar Shave Club.

Once you get settled a few months in, you can always reevaluate but start with a clean slate.

#3 Get Organized:

If you haven’t figured it out yet, everything in life counts.  Sure some things count more than others, but unrelated areas of your life will affect each other more than you realize.

This is the concept of The Compound Effect.  Setting good habits in one part of your life will affect your habits in other areas.

Get your finances and home life organized, and it will help you stay organized at work. When you have an ICU full of patients, being organized is critical to getting the necessary work done on time.

The easiest way to keep your finances organized is to use an account aggregator like Personal Capital or Mint.

#4 Rent, Don’t Buy Your Housing

Better yet, find a roommate or two or three. When you are spending 80 hrs a week at the hospital and another 50 hrs a week sleeping, there is no need to come home to a palace. All you need is a corner to throw your mattress.

The next four years are not for kicking back and relaxing at your pad.  The next four years are for becoming a damn fine physician.

If you have a young family and need your own home, renting a home is far less expensive over short periods of time.

Unless you are training in the same town that you grew up in, will never leave this town and will take any job available in town when you finish residency:  don’t even think about buying a home. The costs are just too great in the short term.

#5 Live Close To Work.

You are called a resident or house staff for a reason. The term house staff refers to the fact that you used to physically live in the hospital and unfortunately, times haven’t changed that much at some programs across the country.

The last thing you want to do is waste precious sleeping time commuting in a car. Driving tired is just as dangerous as driving drunk. If you live close enough to work, you can consider ditching the car.

Walking, biking and Uber are all viable options today and could save you thousands of dollars compared to car ownership.

Walking or biking to work adds the benefit of an easy way to stay active without having to spend an hour at the gym.   Self-care and fitness is critical for your well-being as a resident. Fit individuals need less sleep which is always in short supply.  Exercise also releases endorphins that help fight depression and make that long day feel better.  It’s a win-win.

Besides, how can you ask your patients to exercise and keep a healthy weight if you can’t commit to doing it yourself.

#6 Decision Fatigue Is Real.

Try not to make any important decisions after a long day in the hospital. You spend your entire day making hundreds of decisions,  challenging your mental reserve when you get home

When looking for jobs, or making any major decisions, try to make them on a day off with a clear head.

At the bare minimum,  do the most important, have-to-get-done items on your to-do list first.

My personal preference has been waking up at 0400 to get a couple of hours of work in before the day starts.  Doing your most important tasks first allows the evenings to be devoted to rest and recharge.

# 7 Get A Handle On Your Loans:

Getting a handle on your loans goes along with getting organized. Order a $10 binder, some page protectors and a journal from Amazon and create an organization system for your finances.   Write down and keep copies of all your, loan statements, insurance contracts, employment contracts, medical licenses, etc..

An ideal situation for anyone with over $100,000 of educational debt is to have some of that debt forgiven if possible. Although it is on shaky legs, the Public Service Loan Forgiveness(PSLF) is the only show in town. The key number with PSLF is the 120 required payments needed on your consolidated federal loans to have them forgiven. By starting right out of medical school, you can be almost half of the way through your required payments by the time you finish residency.

Because you have relatively little income, income-based payments on your loans are nice. Once your salary increases as an attending, your student loan payments will increase as well.

One more benefit is that your resident and fellow years will be some of the last years that you will be able to deduct student loan interest on your taxes.

#8 Forget The Emergency Fund And Just Open A Roth IRA.

At first glance, this may not seem to make much sense.  You can tap the contributions of your Roth IRA if needed for an actual emergency and the hurdled of having this money being in a slightly less accessible account, makes it less likely that you will use it for non-emergencies.

If you don’t need it you will have accumulated some of the most valuable retirement savings there are, ready to compound for the next 30 years.

#9 Embrace Being Middle Class

The average salary for an intern today is around $50,000 which puts you in firmly in the middle-class tax bracket. Embrace how far that $50,000 goes. Pay attention to the sacrifices and decisions you have to make.

Finding an extra $450 each month to put into your Roth IRA, is hard. This his how most of America lives. Heck, for some of your friends who went to law school, this is how they live.

Embracing being middle class is an important process because if you have $500,000 of student loans at 8%, this is going to be how you will have to live until they are paid off.

If you embrace being middle-class, it will go further than you think. Find some healthy cheap meals so that you do not need to eat out all the time.  Renting with roommates, ditching the subscriptions, eliminating your car note.  These are all things you will have to consider to stay on budget.

Save if you can, but above all, don’t accumulate any more debt in residency.  It would be nice to save for retirement, but if you can get out of residency with no additional debt, you will be doing just fine.

#10 Moonlighting Can Be Bad For You

In general, I love the idea of moonlighting. It gets you more hands on experience at a time when you need the experience.  Used wisely it can improve your education and support your budget.

My recommendation is to use moonlighting to pay for special events like a wedding or vacation you have planned.    Moonlighting to pay the bills, leaves little time for your family or friends and precious little time to get away and decompress when needed.

What moonlighting doesn’t do is to fix overspending. If you are moonlighting just to cover your routine expenses, you are setting yourself up for burnout.

#11 Continue Your Non-medical Education.

There were a solid five years where I did not read anything of substance outside of my medical training. Today in the era of audiobooks and podcasts there is no shortage ways to continue your non-medical education.

I listen to my books while I am commuting by bicycle or foot, exercising my brain and my body.

If you sign up now, you can get 2 free audiobooks to start your library.

We are at the beginning of an audio revolution.  With podcasts, audiobooks and now Amazon Alexa and Google Home, audio is saving us time – which is your most valuable resource.

An added benefit is when it comes time to move,  you don’t have to pack up your books and drag them across the country.  My Audible library is now almost as large as my hardcover library and a whole lot easier to move.


I look back on my training years with fond memories now that the fog of sleep deprivation has faded.  It was a very much work hard, play hard period of life and I miss the simplicity of it at times.

Here are the 11 key points summarized:

  1. Build your skills; You will never regret becoming a rockstar at your day job.
  2. Put your basic finances on autopilot:.   This is a double edged sword as I mentioned in the High Cost of Being Busy.  However, set it and forget it is not a bad idea for four years of residency.
  3. Get Organized:  The applies to everything.  When you only work 6hrs a day, who cares if you spend 2 hours with Netflix.   When you work 16 hrs a day,  every minute counts.  Keep your financial documents organized.
  4. Rent, don’t own your housing: Debatable depending on your location but applies for most residents.
  5. Live close to work:  Hard to do as some teaching hospitals are in terrible parts of town but super awesome if you can pull it off.
  6. Decision Fatigue:  A lifelong problem, learn how to manage it now.
  7. Get a Handle on Your Loans:  After staying on budget, the most important thing you can do for your finances in residency.
  8. Forget the Emergency Fund and Open a Roth IRA: A great way to kill two birds with one stone.
  9. Embrace being Middle Class:  Keeps you humble and helps you appreciate where the rest of the hospital lives once you are an attending.
  10. Moonlighting can be bad for you: Like most things,  good in moderation
  11. Continue your non-medical education:  Important for personal growth outside of medicine.

What advice do you have for interns today?

One More Thing

Don’t be poisoned by the negativity surrounding healthcare right now. Most of Healthcare anchors itself in the past, in times that are never coming back.

You are the future, and this will be the only healthcare system you know.

Yes, electronic records have problems, but they are going to get better.
Yes, patients are sicker today, but we know how to manage their diseases better.
Yes, you will be at the hospital 80 hrs this week, but it is fewer with work hours rules.
Yes, patients will suffer from hospital-acquired infections, but less in high-quality institutions.
Yes, the information load is overwhelming, but access to on-demand information is better.

You will be the first generation of physicians to have your reputation closely graded.  With the influx of EMRs,  quality measures and big data,  you will know just how well you manage patients.  Unfortunately,  how well you do on some of these measures may be all that others think of you.

Unfortunately,  how well you manage these diseases will depend on how well you help patients manage their behaviors.

When you are tired, it’s easy to focus on the negatives, I remember to this day, how hard it is to be pleasant to a nurse or colleague when you have been up and hustling in the ICU for 36+ hrs straight.

Be kind, Get your sleep. All the other stuff can wait.

Resources Mentioned In This Post That you Might Enjoy

Some of the links in this article are affiliate links; some are not.  Affiliate links are links that,  at no cost to you,  I may receive a small compensation for sharing these resources with you.   The linking company uses affiliates to grow an audience for their products.  Affiliate linking is present throughout the web and is a matter of trust.   If you trust me not to ruin my brand and destroy your trust recommending junk, then do not be concerned.

I only recommend books, tools, podcasts, etc.. that I use and benefit from using.  It’s as simple as that.  I will not recommend anything I don’t personally use.  IF you trust what I am recommending and think it may be useful to you, then consider the items that are linked throughout this site.

Audible – My go-to source for audiobooks.  I don’t have time to read text outside of medicine, so this is how I have been able to “read” 2-3 books per month for the past year.

The Freedom Journal:  My Goal Journal that keeps me on task, accomplishing my personal goals.  Not for everyone but if you are a goal-oriented person, it might be worth checking out.

The Compound Effect by Darren Hardy:  Great book about the powers of small changes adding up to huge rewards.  I have seen big changes in my life with this approach over the past year.

Personal Capital:  Widely recommended account aggregator around the web. It is my personal preference over Mint due to its ability to handle investments more accurately.

Amazon Echo:   This is a new addition to our household, and the jury is still out.  Right now it’s basically a voice activated music player, timer, and alarm in our house but the potential is exciting.
This post was proofread by Grammarly

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2 thoughts on “Financial Advice for New Residents

    1. Dr in Debt Post author

      Starting smart is a big head start. I managed to get most of them right. I will have to say that using a Roth IRA as an emergency fund was nowhere on my radar. Thanks for stopping by.


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