Andrew Winegarner, MD
Clinical Anesthesia Year 2
Rhode Island Hospital/Brown University
Andrew Winegarner is finishing up his CA-2 year in the next couple of days at Rhode Island Hospital. He is planning on continuing his career at Rhode Island Hospital after graduating residency as a General Anesthesiologist. Outside of medicine, Andrew has many interests - one of which is finances . The tricky part of finances as a doctor is there aren’t any finance classes in medical school. You have to learn this stuff on your own and seek out information. In this post, Andrew speaks from his own experience about 5 Tips for a Graduating Medical Student. It’s never too early (or too late) to start thinking about your future goals, particularly when it comes to wealth. You work too hard to not reap the seeds you sow.
Why do finances matter? You didn’t become a doctor to get rich right?
Finances matter because becoming financially independent means power and autonomy over your own life. If you are able to generate and create wealth, it gives you the power to only work the jobs that bring you satisfaction, in places you want, and for the hours you want. When finances are not a concern, it frees you to spend time with your family, travel, take less lucrative but more fulfilling jobs, walk away from a job you no longer like, and so on. The idea is to create enough wealth that self-sustains through portfolio growth, cash flow and interest that can be enough by itself to sustain you, whereafter you are financially independent aka you no longer need your day job (being a doctor) to pay the bills. There are many paths but here are some basic common tenets true for anyone getting started as they finish medical school:
1. Do rePaye for loan repayment (filing taxes during MS4 will help this)
2. Open a Roth IRA account
3. Rent somewhere cheap, drive something cheap, cook at home
4. Get life insurance and specialty specific disability insurance once starting residency
5. Take into account finances when ranking residency programs
1) Finishing medical school means you will soon be paying back all those student loans, and there are a litany of ways to do this. For the overwhelming majority of people, your best repayment plan will be the rePaye option. This option makes your payments 10% of your discretionary income (eg. low payments on a resident salary, and very low payments for beginning of intern year if you filed taxes during MS4 when you had an income of $0). Additionally, this option means half of the interest accruing on your loans during this time is actually subsidized (ie. government pays it off for you). This is huge in terms of saving on the overall amount of money you will be paying. Lastly, payments made with rePaye will count towards the total payments you need to qualify for PSLF (Public Service Loan Forgiveness).
2) Even though you will not be making much as a resident, you need to start building your networth now. Open a Roth IRA - you will qualify for this as a resident but not as an attending, as your income will be too high at that point to contribute to a normal Roth IRA. Essentially, this is a way to put money away for retirement, and let it grow tax free. There is zero tax when you pull it out since you paid the taxes on that money up front. This is ideal since your tax bracket will be the lowest during residency compared to any point for the rest of your career. Cashing it out at the end of your career saves you massively on taxes. Use a compound interest calculator and try putting an annual return of 5-6%, which is fairly conservative historically, to get an idea for how much money you will have tucked away from $6k contributions throughout residency by the time you retire. Buy index funds for the passive approach or try your hand at individual stock picking if you want to play a more active role and scratch that itch (statistically your portfolio will perform better if you buy index funds, but a Roth IRA is a good way to practice trading stocks more actively while still be tax free avoiding all capital gains tax).
3) You finally have an income, but that doesn’t mean budgeting should go away. Try to keep rent under ⅓ of your take home pay. If that’s not feasible, consider ranking other programs where it is feasible. Likewise, continue to drive an old car, eat at home, and other common sense fiscally responsible habits. These save you money now, which compounds over the year in terms of dollar amount and also in habits. It is one of the main factors that separates people whom are able to retire literal decades before their partners.
4) Tomorrow is promised to no one. If you have a spouse or significant other, get life insurance, term life insurance specifically. It is incredibly cheap and only needs to be for 20 years or so. Obviously pay more for a bigger payout if you have children. Likewise, get specialty specific disability insurance once in residency or near the end of residency. If you are a surgical resident and lose your hand in a freak accident, but do not have specialty specific disability insurance, insurance companies may try to insist you are still able to work as a doctor and thus refuse payment. Specialty specific insurance narrows it down to if you are able to perform the duties of a physician for the specialty in which you trained. This is much more expensive but also an insurance to protect the already massive time and financial investment you have put into your life to get this far.
5) People do not like to hear that one should be mindful of finances when ranking residency programs, but it can and does have a much larger trajectory on finances than most realize. Rent can be astronomical in major hubs like NYC, Boston, SF, etc. If you are not going into a relatively high paying residency program or have some sort of affordable housing contract lined up, it can be another obstacle to building your wealth, especially if you have a family with kids or do not have a partner who is also earning income. Priorities matter, but blindly ranking a program in an expensive area higher may not always be fiscally sound. You should not be surprised to be paying several thousand dollars more per month than other residents on basic things like rent.
