Becoming a doctor after medical school is the culmination of years of hard work and can be considered the ultimate reward. However, graduation from medical school is not the end of the financial pressures of becoming a doctor. In fact, the years immediately following medical school can be some of the most financially trying for new physicians.
The modest income of a resident physician, combined with long working hours, must be stretched to cover the expenses of living in a new location, studying for and paying for licensing and certification exams, and making payments on outstanding student loans. Although the income of a practicing physician will eventually increase, the financial pressures of residency cannot be avoided. It is therefore useful to know about the expenses that a new physician must cover after the completion of medical school.
- Moving for Residency
Expenses related to moving to a new location for residency are typical for many graduates right after medical school. Depending on where you were matched, you may have to relocate across the country. The costs to move may include rental of a truck, hiring of a moving company, travel expenses to your new destination, first month’s rent, security deposit, and costs to set up utilities in your new home.
A typical new graduate’s first check comes a few weeks after the start of their residency contract. This may leave a few months of living expenses to be covered by other means until the first paycheck arrives. These can include savings, credit, and even the support of family members. It is, therefore, wise to plan ahead and save for such expenses before Match Day. Some even start a relocation fund even before finding out where they will be sent for their residency.
In terms of cost of housing, it’s very important to take into account the commute to and from the hospital for long shifts. While a cheap house may save money in terms of rent, it can create a huge negative for fatigue and stress during the hardest part of your career. So while it’s great to look for deals, it’s even more important to look for places that are close to work so you can get plenty of rest before your long shifts.
- Student Loan Payments During Residency
For many new doctors, student loans are the biggest financial concern after they have graduated. They can have huge amounts of debt, and it is common for residents to be paying back while they are earning less than what attending physicians earn. Because of this, it is very important for residents to carefully choose a repayment plan.
Other considerations when choosing a repayment plan is to consider whether you are planning on a certain career path and if that career path would be eligible for forgiveness programs offered by the federal government or other repayment assistance programs. When it comes to managing your federal loans during residency, you should explore your options for income-driven repayment. Income-driven repayment can help make your monthly payment more manageable during your low-paying residency years.
There are several different repayment plans to consider, and depending on your individual situation, you may also be able to consider options such as deferment, forbearance, a residency loan, or refinancing your loans. Many people have considered refinancing their federal student loans with private refinancing resources. Although refinancing your federal loans with a private lender can be helpful in some instances, it is very important to be aware of the long-term trade-offs, including the loss of protection of federal loans, loss of access to income-driven repayment, and loss of Public Service Loan Forgiveness (PSLF) eligibility. For this reason, it is generally not a good idea to refinance your federal loans unless you are certain that it would be in your best interest in the long run.
However, be cautious of refinancing federal student loans with a private lender as you will give up federal protections, access to income-driven repayment plans, and Public Service Loan Forgiveness (PSLF) eligibility. While refinancing with a private lender may be beneficial for some borrowers, it is not beneficial for everyone. Make sure you understand the long-term trade-offs before making a decision.
- Licensing, Exams, and Professional Costs
Remember also that you will still be paying for the cost of medical school after you graduate. This can include costs for state medical licenses, background checks, fingerprinting, board exams, study materials for these exams, review courses for these exams, and specialty-specific certifications. Some of these costs will be paid by your program, but you will have to pay them up front and wait for reimbursement.
Also, there are various professional items that new doctors may need to purchase. These can include scrubs, white coats, shoes, stethoscopes, medical apps for their smartphones, books on topics of interest, and specialty-specific tools and equipment. A resident would be wise to ask what various items are needed for their particular situation from their senior colleagues in their program.
- Everyday Living Costs on a Resident Salary
Shifts are long and sometimes even overnight. The last thing one wants to do after a long shift is cook dinner. Many residents end up purchasing meals from local eateries to go, grabbing takeout, purchasing from the hospital cafeteria, or buying frozen meals at a local market. In addition, residents may utilize public transportation, spend money on parking, or grab occasional convenience items (e.g. coffee, gum). These seemingly small expenditures can quickly add up over the course of time.
First, create a budget that includes the cost of your residency, such as the monthly payment on your loans, your housing expenses, your car payment and insurance, your health insurance, as well as your savings goals. While your life as a resident will be consumed by work, trying to eat well on a small budget can make a big difference. By planning your meals in advance, buying in bulk, using public transportation when possible, sharing an apartment with other residents, and even freezing some meals in advance for later in the week, you can save money and avoid feeling like you are starving while you are working to become a great doctor.
Insurance is another thing to consider. Many different types of insurance are relevant for doctors, including health, car, renters, disability, and life. Although the program may provide disability insurance, residents should find out what type of coverage is provided and see if they need to purchase any additional insurance.
- Emergency Savings and Future Planning
However, having a small amount of money saved during residency can prevent a lot of stress if unexpected events occur, such as car repairs, medical bills that your insurance didn’t pay, delayed payments from your employer or program, or other family emergencies that may require your attention and money.
Even with just $500 to begin with to set aside in case of an unexpected event, these “rainy day” funds can really make a big difference and ease much stress and worry. Transfer that amount automatically into a separate account as soon as you receive your stipend check, and then continue to add more money over time as your stipend check amount increases. And as you progress in your financial life, instead of letting your newfound income turn into more spending money, that extra money can help continue to grow into more wealth instead!
Final Thoughts
Yes, moving, student loans, licensing, insurance, housing, food, transportation, etc. can and will impact your financial life as a resident doctor.
Being aware of these often “unseen” costs of medical training can help new physicians make wise financial decisions during their residency. Even though the long hours of grueling work of a resident are only temporary, the financial habits that one acquires during this time can have long-lasting effects on a physician’s finances.
