Financial Planning for a Medical Resident

today's topic financial planning for a medical resident one of my favorite pieces of the financial planning puzzle you just hit training year out of medical school you'll finally have some money coming in now what do we do from student loans to budgeting to homeownership to insurance to investing we're gonna cover it all that's all coming up next so stay tuned [Music] first topic a big one student loans you were at a very good spot to take advantage of this so depending on where you are in your training so if you're early on we always say the best time to get your student loans organized is that transition from medical school to intern year pgy one because that's where you have the most leverage going forward we're gonna keep things simple here for student loans so first thing is just get your student loans organized know which loans are federal know which loans are private mm when you even dig into your federal loans even more what loans are already direct loans what bones are Perkins Loans what's loans are federal family education loans also known as fell loans knowing those little pieces is very vital and you getting organized going forward with your student loans so first just get organized second piece is how are you going to do this how are we going to tackle this at this phase of your professional career we probably have two routes route one is public service loan forgiveness you're at a teaching hospital you have you know a few years of residency coming up here depending on what your specialty is you probably have a few years of fellowship then you have your attending career the attending career is usually where you might end up leaving a non-profit or you leave academia and you go private practice maybe you know that ahead of time if that's the case we should start preparing for more of an aggressive payoff because public service loan forgiveness may not be in our cards but the main goal here is just to get on a good track going forward if you're going for public service loan forgiveness get on the proper repayment plan add an annual reminder to your calendar to recertify all tall payments don't let them pile up I do this for a living I help a lot of our physicians early on then we get into a good habit but early on you know you're going back to that Hospital you know your residency and then your fellowship and then you have some use your 10 it's not fun going back to HR departments they get those things certified put it in your reminder get them certified every year certify your income every year little bombard you to do that one no matter what but add good reminders the key here for for student loans to routes at least in my professional opinion and building a lot of these plans we're either starting to prepare to get organized for public service loan forgiveness or we're starting to get properly prepared for going through the aggressive payoff from the private side now if you have private loans in there so let's keep federal loans on their own little island and figure out what way we're going to go forward if you already have private loans in there that you're gonna have to start paying back maybe look for a better rate at this point you have some income coming in hopefully I was still a good debt to equity ratio so really main goal is here we're trying to get your student loans organized next up budgeting we know everyone thinks it's like a swearword budgeting is important think of it as money in money out and telling your money where to go maybe that's a better buzzword for you we have another post called simply literally called budging for medical residents we have a template in there read through that post it's also in if you scroll down from the video here in the actual blog post that we're attaching this to scroll down and you're gonna see an actual link that'll take you to that the actual Excel spreadsheet to download on your own but you have to start to build a budget walk through you know hey here's my gross pay all right I got a pay Uncle Sam I have some deductions coming up from the hospital for my health insurance and maybe the 403 B etc okay here's my net pay that actually hits my bank account we got a pay rent we need food we got utilities I'm gonna get some disability going whatever the example would be you have to start budgeting now start building that financial foundation start building those good habits now while you're in training so that by the time you do hit your attending status and you have a multiple increase in your income you already have good habits in place you have a good budget in place yes you're gonna have a little bit of lifestyle creep in there that's natural but we have good strong foundation already getting built and in place next up is your emergency fund whether you call an emergency fund or your rainy day fund we want you to start putting some money towards your emergency fund having some cash on hand and and while I know it almost feels like you're poor when you even though you have probably a salary between sixty to seventy thousand dollars in by all means is not labeled as poor but I know that there's a lot of time and energy going into it I also know that student loans are starting to take up a big piece of it so at the end it doesn't feel like there's much but you should start to put even if it's as small as a hundred or fifty dollars a month start directing some money towards an emergency fund a rainy day fund even starting to save money for maybe a possible home downpayment I know I know you have a physician mortgage in your back pocket but still there's still benefits of trying to get a more conventional mortgage maybe you're just starting to save up some cash because you know that you have to fly all over the country when you start to interview for your attending position those are things that we want you to start putting some money aside for it continue to build those good habits so main goal here is start to build up those cash reserves even it's as small as $50 a month just get in that habit of putting some money aside all right the next topic I'm gonna be honest the the headlines a little bit harsh where it says avoid homeownership at all costs there are certain circumstances and we have many clients that have come to us for one-time plans or even ongoing planning that have owned a home or owned a home while they're in training so there are circumstances where it makes sense we just think if we had to make a more general classification usually usually doesn't make sense to be a homeowner why you're in training because we still have a lot of unknowns so that's why we don't like it can it work it can some other notes to add in here I know that we like the term physician mortgage because he sounds we say it sounds like it was custom built for us but you have to keep an eye out for a physician mortgages we put a whole nother blog post on position mortgages that we could put in there as a reference for you but if you can start to save up and if you can save up enough to get a conventional mortgage that could be an option too yes you're probably gonna have PMI for less than 20% but sometimes what we've seen is physician mortgages have a little bit higher interest rate compared to a conventional mortgage not all the time but sometimes if that's the case you want to start to do the cost comparison maybe a smaller down payment with PMI and the conventional mortgage actually ends up being a better deal in the long term compared to no money down or some very small amount of money down with no PMI but a higher interest rate so just keep an eye on that so while the the actual title a little bit harsh there is some flexibility there but for the most part try to avoid homeownership while you're in your training maybe once you sign that contract if you're fortunate you know to be in the same city maybe there it makes a little bit more sense but early on keep some flexibility next big topic is insurance so for the most part we're looking at four things here the two that we're gonna cover in detail disability insurance term life insurance you should have malpractice insurance you don't need a financial planner to tell you that but you should have good malpractice understand your insurance how it works make sure there's tail coverage probably not as vital if you're just getting into training but even as you transfer hospitals make sure you understand how that works the other policy that we won't dig into too much but we pretty much build into every financial plan is something called an umbrella policy which just adds extra liability for you so keep an eye on those two the main things that we think are important here are for certain disability insurance so the base plan whether you're in residency or fellowship is gonna be a $5,000 per month based plan you're looking at premiums around $150 a month might be a little bit lower if you're male could be a little bit higher if you're female just because of how the claims have been in the past if you're female try to find something called unisex rates unisex rates will help keep your rates lower main things you're looking for again your base benefits gonna be $5,000 that's just how they're all built you're looking for true o NOK with specialty specific language you're going to look for guaranteed insurer ability which just means that when you go from training whether we're talking resident or fellow to your attending role that you already have guaranteed and sure ability built in there so that when you get that new contract you don't have to reprove your health you would just be to increase your policy by showing that higher income so we think disability is a is it in is really insurance that you should have no matter what here it doesn't really matter from a from a family perspective for the most part you should have disability so make sure you're looking for good true Oh NOK disability insurance the one that has some flexibility to it is term life insurance you know if you've seen our videos before if you read our blog posts or fans of term life insurance we don't think you have to over complicate things with permanent life insurance if you're a single individual maybe term life insurance doesn't make sense but maybe if you have a spouse or if you have children or maybe you had someone that co-signed on your student loans you can start to make the argument that term life insurance gets more attractive here so keep an eye on that build around it from for your exact situation there but disability insurance I think should be in your plan no matter what term life insurance depends on a case-by-case basis but the good news is term life insurance is relatively inexpensive especially if you're in good health so crunch some numbers see what you're looking for but that's what we want to talk through from the insurance side of things last but not least investing so at this point again we know there's not a ton of funds that you're hey I'm just gonna max out my four or three B every year we know that we're probably not at that level of flexibility you said maybe we are and if you are great job that's awesome here's how we look at it if they're offering you a match let's just use a four or three because of our example if they're offering you a match on your four or three B D at least try to take advantage of that now a lot of hospitals will not provide matches while you're in residency or fellowship for whatever reason we see that quite a bit some do some don't so at a bare minimum trying to take advantage of that that at least starts the compounding interest clock which in our opinion is the most powerful tool in all finance so that's part one maybe you start to get a Roth IRA started up you probably don't even have to add in the term back to a Roth IRA just yet because your incomes not high enough now depending on your spousal situation keep an eye on that but at least start the investing clock if you were going for public service loan forgiveness or even traditional forgiveness and you're using an income driven repayment plan the more you save to your 403 B 401 K 457 B even your HSA EFSA's the lower you can get your adjusted gross income the lower your payments are so that is one thing to keep in mind there we want you to try to get your adjusted gross income as low as possible to keep those numbers lower from an adjusted gross income perspective but then that's also going to lower your income driven repayment amount so keep that in mind from investing respective and there you have it financial planning for a medical resident we wanted to give you some big important topics for you to keep an eye on things to get organized as you really start to build that financial foundation there's a lot of moving parts in the world of personal finance but you really just have to get a few things organized get a few things on autopilot and you'll continue to build that foundation very strong so we hope you got some good content out of today's video as always if you have questions shoot us a note but thanks for tuning in and we'll catch you on the next video

Channel: WealthKeel LLC

Views: 287

Rating: 5 out of 5

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Id: gMmEqEGl_Ww

Length: 12min 20sec (740 seconds)

Published: Mon Jun 08 2020