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Financial Planning for Medical Residents: Strategies to Increase Income During Residency

Medical students – congratulations on Match Day!

Back when I graduated, it was a very different time. We were caught smack dab in the middle of the great financial crisis; residents made $40,000 starting out, and there was generally less information on managing debt.


A lot has changed since then. The cost of housing, inflation, money inflammation, and debt are all much higher than before. Even though medical residents earn a higher salary than a decade ago, when accounting for inflation, their expenses are inconsistent with those in many large cities.


It’s easy to read advice like ‘live like a resident,’ but that’s not so easy when you have to graduate, move, and pay for things like fancy scrubs, a loupe, or a stethoscope so you can actually hear a ($300)  murmur –  USMLE Step 3 I’m looking at you – and, in some cases, not get your first paycheck till mid-July or August!



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If reading that dampened your mood, this guide is for you.

As you embark on this transition, assessing your current financial position and prioritizing responsible money management is important.

With an average first-year resident’s salary of around $60,000 in the United States, you must understand that your net monthly income will be less than this gross amount due to taxes and other deductions.


Effective budgeting is the foundation for successful financial planning during residency.

Crafting a practical budget can help manage your essential expenses, set aside savings, and pave the way for financial growth.


Now, despite your limited time, there are more ways to supplement your income with a side gig. Programs have become more flexible and empathetic towards the difficulties residents experience with salaries and income, which is something you can bank on.


Key Takeaways



Understanding Your Financial Position


As you embark on your medical residency, getting a clear picture of your financial situation is essential.

By assessing your income and expenses, managing your debts, and prioritizing savings, you establish a secure foundation for financial planning as a resident physician.


Assessing Income and Expenses

Begin by determining your monthly income after taxes, which may be roughly 70% of your gross pay. For a resident earning $60,000, that is just over $800/week. Your situation might be very different if you are married and have a dual income.

Next, itemize your monthly expenses to outline where your money goes. A budget can be split into categories:

  • Fixed Expenses: Rent, loan payments, insurance premiums.
  • Variable Expenses: Groceries, transportation, golden-weekend entertainment.

By comparing income and expenses, you gain insight into potential areas for cost-saving, which may prevent you from living off instant noodles each month. All that sodium will only increase the palpitations you already feel looking at student loans. Speaking of which…


Debt Analysis and Management

Your debt load, often comprised of student loans, requires a strategy.

Consider the debt snowball or debt avalanche methods:

  • Debt Snowball: Pay off smaller debts first for psychological wins.
  • Debt Avalanche: Tackle debts with the highest interest rates to save money over time.

Review options like federal repayment programs that may offer loan forgiveness after a period of service.


Emergency Funds and Savings

It’s crucial to have an emergency fund set up, which should typically start at $1,000 and grow to cover 3-6 months of expenses.

Simultaneously, try and contribute to savings goals such as retirement. Even if your hospital employer offers no match, setting aside some of your income early leverages compound interest.

While this is good advice, to be honest, it may be too hard in the first year while you’re making a move and getting a new place, first and last month’s rent, and furniture – it’s a lot.

So don’t let this overwhelm you, as it’s easier to start investing now than it ever has. To be candid, planning for a potential move for a fellowship or a job is also tricky.


Effective Budgeting Strategies


As a resident or fellow, mastering financial planning is critical to managing your income while balancing expenses. I know when I moved from Miami to San Francisco, I barely had any extra savings, even after planning it carefully for the better part of 6 months.

It gets better.

So, if you’re stressed, just try to think of the best way to direct your limited time and try not to ignore how important budgeting is.

I can’t tell you the number of friends I had who had to get an extra $10,000 loan on top of credit card debt. I know many first or second-year attendings with five figure credit-card debt, too.

This section will equip you with effective strategies to maximize your financial health.


Creating a Realistic Budget

Assess Your Income and Expenses: carefully tally up all your income sources, which, for a resident, primarily revolves around your salary.

Remember, your gross income is not what you take home due to taxes and deductions.

Once you have a clear picture of your income, list your essential expenses, such as housing, utilities, food, and transportation.

Set Budgeting Goals: allocate your remaining funds to savings, emergency funds, debt repayment, and discretionary spending.

Be realistic about what you can afford to save and spend each month.


Tools and Resources

It’s a bit ironic to pay for a budgeting app, but I think of these as diagnostic tools.


The goal is to use these as your telemetry into your life so that you’re never surprised because you forgot to ‘round on your bank account.’ Once I had so little, I asked my urology friend to cover a Taco Bell receipt.

I feel like she owed me anyway since they always mistook urology for neurology – wrong side of the border, amigo!


Figure 1: Receipt from Taco Bell That Predated Mobile Payments.


Budgeting Apps: Leverage technology to keep track of your finances.

Apps like ProjectionLab or YNAB can help you monitor your spending, set budgets, and get reports on your financial status.

Spreadsheets: If you prefer a hands-on approach, create a custom budget spreadsheet. Contrary to popular belief, Excel is not your enemy.

You can also find templates that cater specifically to financial planning for resident physicians to tailor to your needs.


Cutting Unnecessary Spending

Identify and Eliminate Non-essentials: review your monthly expenses and highlight areas where you can cut back.

These can include dining out, subscriptions you don’t use frequently, or high-cost leisure activities.

Seek Alternatives: find more cost-effective options for necessary expenses.

This could mean opting for shared housing to reduce rent costs or meal prepping to save on food bills. Bonus points if you get a roommate with culinary skills who can save your groceries from decomposing in the neglected depths of your fridge.

Being a resident doesn’t have to mean surviving on a shoestring budget if you’re savvy about cutting costs where it counts.


Investing in Your Future


As a medical resident, your hectic schedule can make it easy to overlook financial planning.

Starting early with a strategy that builds a solid foundation for your future wealth is critical. For me, having roommates and being careful with cash allowed me to travel on a budget and enjoy life more, the closer I got to being an attending.

By investing and finding some of the right side gigs, I was able to start saving early, which paid off materially when I needed to make some bigger purchases and have an emergency fund.

Here’s what you need to focus on.


Retirement Planning

Retirement funds and assets require meticulous planning from the get-go, at least if they’re going to be worth your while.

Consider the power of compound interest; even modest contributions to a retirement account can grow substantially over time.



Employer-sponsored plans like a 401(k) or 403(b) are convenient ways to save for retirement directly from your paycheck.

If your employer offers a match, try to contribute at least enough to get the full benefit—it’s essentially free money. All you have to do is sign up and they’ll deduct it from your paycheck. Use those tax breaks to your advantage whenever possible.


Roth IRA

A Roth IRA offers tax-free growth and tax-free withdrawals in retirement.

This can be advantageous for resident physicians as your income may be lower now than it will be in the future, making you eligible for contributions and favorable tax rates.


Managing Investments

Effective investment management is not about timing the market, but time in the market.

Diversify your portfolio by investing in a broad mix of assets, and consider working with a financial advisor or using investing guides specifically tailored for medical professionals.


Supplementing Income


Exploring side hustles and passive income opportunities can be valuable for residents looking to supplement their earnings.


Side Hustles and Passive Income as a Doctor

While residency demands significant time, channeling your medical expertise into side hustles can be both rewarding and financially beneficial.

Consider opportunities like medical writing, telemedicine consultations, or even medico-legal work.

These options leverage your medical knowledge without heavily compromising your limited time.

For passive income, investing in real estate or the stock market can yield returns over time, though it requires upfront financial literacy and, potentially, initial capital.


Time Management for Extra Work

Balancing residency duties with additional work requires effective time management.

Prioritize your responsibilities carefully, ensuring that your main commitment to residency isn’t affected.

Utilizing tools like digital calendars or apps to schedule and plan your side projects can help make the most of your available time, giving structure to both your essential duties and extra income activities.

Remember, rest and self-care are also critical to maintaining efficiency in all your endeavors.


Professional Development and Advancements


Professional growth is pivotal during your residency, as it can significantly impact your financial trajectory.

A strategic approach to your professional development ensures progress in your career and advancements in your earning potential.


Networking and Mentorship

Don’t be too shy about making the right friends and acquaintances. Networking and mentorship are indispensable tools for your professional journey.

Engage with colleagues, attend medical conferences, and join professional societies to widen your network.

A trusted mentor can guide you through the complex landscape of medicine, offering advice on career choices that align with your financial planning for resident physicians.

They can also highlight opportunities for additional income or positions with growth potential.


Continuing Education and Training

Commitment to continuing education ensures you remain at the forefront of medical advancements. Stagnating in your career can be a deadly blow to your professional growth, and difficult to get over. What was that about tricks and dogs?

By attending workshops and seeking additional certifications, you enhance your skillset, making you a more valuable asset to your employer.

This dedication can also lead to a stronger negotiating position when discussing salaries and benefits, bolstering your financial plan.


Negotiating Salaries and Benefits

Your skill in negotiating salaries and benefits can significantly influence your financial well-being.

Arm yourself with data on average salaries in your specialty and region.

When it’s time to negotiate, emphasize your unique skills and education.

Don’t forget to consider benefits like health insurance, retirement contributions, and loan repayment assistance, which are integral components of financial planning for resident physicians.


Frequently Asked Questions


In this section, we address crucial concerns you may have about managing your finances during your medical residency.

These FAQs are tailored to help you make informed decisions on budgeting, debt management, investments, insurance, taxes, and retirement planning.


What are the key steps in creating a comprehensive budget for a medical resident?

To create a comprehensive budget, first calculate your net income.

Then, routinely track your expenses and categorize them.

It’s essential to differentiate between your needs and wants, and to create an emergency fund.

For more detailed guidance, consider resources such as financial planning for residency.


How should a medical resident approach paying off student loan debt?

You should prioritize high-interest loan repayments and explore loan forgiveness programs if applicable. Seek advice from professionals who understand the complexities of student loans for medical professionals, as found in the Student Loan Planner.


What investment strategies are most effective for medical residents to secure their financial future?

Start with low-cost, diversified index funds and consider tax-advantaged accounts like Roth IRAs. Make investments consistently and align them with your risk tolerance and time horizon. l.


Which insurance policies are essential for medical residents to consider?

Disability and life insurance are crucial for medical residents to secure their future earnings and provide for dependents.

It’s also advisable to review your employer’s coverage and consider supplemental policies if necessary. This topic is elaborated in resources including AMA’s financial steps for residents.


How can medical residents optimize their tax situation?

Utilize tax deductions available for education expenses and student loan interest. Contribute to retirement accounts that offer tax benefits. For in-depth strategies, you can rely on detailed guides such as this: Guide: Financial Planning For Medical Residents.


What retirement planning fundamentals should medical residents be aware of?

Begin by contributing to your employer’s 401(k) or a Roth IRA to take advantage of compound interest.

Make sure to understand the matching contributions if offered by your employer. Try to contribute at least up to the matching limit.



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