- You are busy as a resident or fellow and you need a fast, practical approach to getting your finances under control while still allowing you to enjoy life.
- You should use a budget and a way to track your spending, and it’s important to keep that as simple as possible.
- When done right, consolidation and automation of your finances can relieve some of the stress you’re under as a doctor and set a strong foundation for your financial future.
As a resident or fellow, you are working an incredibly difficult and demanding job. Your free time and financial resources are both under significant pressure. We get it. As doctors, we’ve been where you are — trying to master the impossible balancing act of work, free time, and money.
Between patient care, social obligations, and education, it is easy to let your finances slide. But, as you know, sorting out your finances is vitally important – not only for your peace of mind, but also for your long-term financial well-being.
In fact, cultivating healthy financial habits now can help you prepare for the next few years. It will be here sooner than you think: residency will end, you’ll become an attending, and go into practice. When that happens, you’ll want a solid foundation for buying a house, buying-in to a medical practice, having kids, insulating yourself from financial risk, and enjoying life — and the earlier you start, the better.
#1 Consider Consolidation of Existing Loans
One of your biggest expenses is going to be any debt you have accumulated to get to this point in your medical career. This debt will most likely come in two flavors: high interest credit cards and your student loans.
We get it because we had to do it as well. Those credit cards you took out in medical school were, unfortunately, probably a necessity to get by at the time. But now there is a better solution…
Benefits of Consolidating Credit Card (“Toxic”) Debt
Toxic debt is commonly accumulated as credit card debts. Consolidating this debt under a single loan can have several benefits:
- Simplifies your finances and record-keeping as there is only one payment.
- Can lower your monthly payments by reducing your interest rate.
- Allows you to get a fixed payment, ensuring you know exactly how much interest you must pay back regularly (because it will be the same amount every month).
- Enables you to pay more each month if you have extra income at the end of each month, which can reduce the time you need to repay and help you save more on interest charges.
For more information about consolidating credit card debt under a single loan with lower interest than a credit card without the need for a co-signer, learn more about Panacea’s PRN Personal Loan Program.
Consolidating Your Student Debt Owed Back to Government (Public Lenders)
If you wish to consolidate your student loans while in residency, you may prefer to do so using a single public loan holder. Many residents and fellows will qualify for the Public Service Loan Forgiveness (PSLF) program, so making qualifying payments while in residency or fellowship could shorten your time to forgiveness. Consolidating under a private lender may be the right solution in specific situations as well; however, you lose access to federal forgiveness programs.
Meanwhile, federal student loans provide built-in benefits as well as fixed, low-interest rates. As an example, for the 2019-2020 school year, federal student loan interest rates are currently 5.30% for Graduate PLUS Loans.
For more information, please see the recent article that our Co-Founder, Dr. Jerkins, wrote on a the Impact of a Biden Presidency on Medical School Debt.
#2 Create a “Reverse” Budget Based on Your Actual Spending
Creating a budget based on what you think you’ll spend can be a problem, as many of us don’t estimate our spending correctly. In fact, while around 80 percent of us think budgeting is important, only 40 percent of us actually follow one. As a resident or fellow, you don’t have much time, so it’s often easier to create a reverse budget based on what you actually spend, rather than a hypothetical.
How to Create a Reverse Budget
- Look through your bank, credit card, and other financial statements for the last three to six months.
- You want to get an average amount that you make and spend per month.
- Split out your income (money you receive) from your expenses (money you spend).
- Put each of your expenses into a category such as groceries, utilities, investing, etc.
- Determine how much you’re actually spending in each area.
The easiest way to put together on a budget like this is by using a tool like Mint, You Need a Budget (YNAB), Tiller Money, or Money Patrol. You can connect these to your bank and other financial accounts, and they’ll import all of your transactions so you can understand and assign them.
#3 Track Your Spending and Eliminate Unnecessary Costs
You want the confidence of knowing your spending is under control. Therefore, tracking what you spend needs to be as friction-free as possible.
How to Track Your Spending and Cut Costs
- Sign up for one of the budget tracking apps we mentioned above.
- Sign up for daily balance updates from your bank, credit card, and other accounts.
- Spend 30 minutes to an hour each month going through your spending and cutting out anything that’s not necessary.
Benefits of Tracking and Controlling Spending as a Resident or Fellow
- Get an at-a-glance look at your most important finances.
- Get early notifications of account transactions so you can spot anything unusual.
- Learn where you’re spending unnecessarily and cut it out.
- Avoid any financial surprises.
- Have money available to pay down toxic debt, for surprise expenditures, or to start saving for your future.
#4 Automate Expenses – and Savings
When you’re in the middle of a hospital shift, you don’t want to worry about whether you’ve paid the electricity bill or be distracted by your upcoming car payment. Automating payments in combination with your tracking keeps everything running smoothly.
Automating your savings, even if it is just a small amount, can help keep you on track with your goals. If the money is going straight into your savings account, you’ll be less tempted to spend it on something else.
How to Set Up Automatic Payments and Savings
- Log into your financial accounts and set up automatic payments.
- Go to the provider’s websites for utilities, internet services, etc. and set up automatic payments there as well.
- Pay a little more than you need to on your loans and credit cards, which can help reduce the interest you pay.
- If you can afford to save or invest, put a small amount into an account every month. You probably won’t miss it, and over time, it will make a big difference.
Another benefit of developing healthy money habits is in stress reduction. There is already enough pressure and stress in the practice of medicine – these recommendations can help mitigate any some of the financial stresses that develop.
Furthermore, these practices will help you build a strong financial foundation and healthy money habits for the next stage of your career. Stay tuned for more tips and insights for residents and fellows, from those of us who have been where you are.
Panacea Financial, a division of Primis. Member FDIC.