A regular reader of the blog reached out to me in his final year of residency, offering to anonymously but publicly share his numbers, victories, and failures in his attempts to grow his net worth as a resident.
As most medical school grads do, he started out with a net worth in the negative six-figures. As he approaches the finish line that is residency graduation, he’ll likely still have a negative net worth, but it will be in the low five figures or less. Within weeks or months thereafter, I have no doubt it will be positive.
Will everyone be able to follow in his footsteps? Not exactly. You might have kids, have matched to a program in a high cost of living area, or have double or triple the debt he started with.
Nevertheless, I think it’s valuable to see the choices he has made and how fiscal responsibility has played a role in them. He also notes that he’s been far from perfect — we all make mistakes, myself included.
Frankly, today’s guest author fared much better financially than I did in residency. I have a feeling he’ll be challenging Ether to FI in making rapid progress once he’s a full-fledged attending physician. Let’s see how he managed to grow his net worth as a resident.
A Resident Physician on FIRE: How One Doctor Grows His Net Worth in Residency
My FIRE Journey Through Residency
During the waning days of medical school, an assessment of my financial situation revealed six figures of high-interest government debt and a modest salary for the next three years.
As an early adopter of the FIRE movement, I understood principles of personal finance but had little confidence I could make headway during training. My goal was to hold on for dear life, maybe keep my debt close to where it was and at best start a meager retirement savings.
However, due to a combination of good planning and good luck, I have made substantial progress in my FIRE goal. Approaching the end of my three-year internal medicine residency, I have made gains on my net worth. I would like to share my journey through residency with all of you and show that saving during residency is doable.
My Medical School Financial Experience
I did not pay much mind to finances during medical school. I spent countless nights out with my friends spending our “fake money” not grasping that this “fake money” was high-interest debt. I was not an egregious spender, but could have been more parsimonious with my budget.
During my fourth year of medical school, I started to read this blog and other personal finance sources. I made the following moves during this year:
- Found a job: I worked for a tutoring company that payed $80 per hour.
- Built an emergency fund: Using my above job I was able to save about $10,000 in liquid funds.
- Started a Roth IRA: While I was not able to max out my contribution, I was able to contribute $4,000. At the very least this got me in the habit of saving for retirement.
- Purchased disability insurance: Not enough can be said about protecting your financial future. I was able to set up a high-quality disability insurance with a future increase option and true own occupation.
- Matched at a financially optimal program: Part of my ranking decision was based on finances. I chose a program that allowed me to stay in my low-rent apartment (more on this below) and allowed me to moonlight.
With all of that above my balance sheet at the end of medical school looked like this:
Assets:
Roth IRA: $4,000
Checking/Savings: $10,000
Rent paid/security deposit: $1,500
______________________________
Total: $15,500
Liabilities:
Federal loans: $77,500
Low-interest school loans: $35,400
Low-interest state loans: $10,000
____________________________
Total: $122,900
Net Worth:
$15,500-$122,900 = $-107,400
Transition to Residency
An honest look in the mirror reveals that I am poor. Yes, I have an education that will enable future earnings, but at this moment, I am very poor.
Rather than bask in my misery, I decided to turn my finances around. Even with a modest salary, if I kept my expenses low I knew I could make progress on my net worth. Over these two and a half years, I have largely stuck to my plan and done a great job of saving. Below I describe what I did well financially during residency and what I could have done better.
What I did Well in Residency:
Cheap Housing: This is number one, two, and three. After medical school I resisted the temptation to upgrade my living situation and stayed in my sweetheart deal house. Being in Boston, the average monthly rent for a 1-bedroom is about $2,500 and for a 2-bedroom $3,400. I have been paying $750 per month.
Being conservative, that is a savings of $15,000 per year or $45,000 over three years. Even more, this is all post-tax savings. The lesson here is that even in high cost of living cities there are deals to be had if you look hard enough. It is also ok to keep living with roommates especially if they are your friends.
Paid Myself First: Set it and forget it. My hospital offers both traditional and Roth 403(b) plans. I automatically set a contribution of about $1,000 per month to my Roth 403(b). This is money I never see and never even knew I had.
When someone asks my monthly salary I think of it in terms of this money not being there. In addition, the first 6 months of the year I contribute $1,000 per month to my Roth IRA until it is maxed out for the year. The lesson here is always pay yourself first.
Moonlighting: I am fortunate that my program offers moonlighting opportunities in our PGY-2 and PGY-3 years. I have tried to strike a balance between working extra shifts and preserving my precious time off. Some of these shifts are quite lucrative and pay up to $2,000 for a 12-hour shift. I
view moonlighting as a way to partially correct how underpaid we are as residents. By the time I graduate I am projected to have made an extra $45,000 in gross income from moonlighting.
More importantly, while colleagues have viewed moonlighting as a way to splurge on lucrative expenses (i.e. trips, watches, clothes) I have viewed it as a way to save more towards retirement.
Traveled: Despite my push to save I have still been able to enjoy travel. During my residency I have taken trips to France, Italy, Morocco, and several domestic trips.
I have been able to keep the cost of these trips down by staying with family or in Airbnbs, traveling slightly off peak season, and using credit card points to book flights.
Things I Could Have Done Better:
Health Insurance: I opted for my employer’s cheapest health insurance package. Having never suffered any major medical problems, I figured that would remain the case for the next three years.
During my intern year I had complicated, acute appendicitis. With the co-insurance on my bargain policy this cost me $3,000 out of pocket. Lesson learned: pay a little more to protect against disasters.
Choice of Investments: This is a small one but a good lesson learned. I invested about 80% of my portfolio in index funds across sectors. These have performed quite well and have been the anchor of my portfolio.
The other 20% I decided to have fun with and invest in individual securities. Predictably, some of these stocks did quite well and others poorly. As a whole, they vastly underperformed my index funds.
Maybe the fun I had was worth the $2,000 in gains I failed to accrue? Regardless, medical residents do not have the time or information to successfully pick stocks, stick to index funds.
Budgeting: I have never made a budget. Sure, I made a Mint account but never went ahead and made a formal plan.
I probably could have been even tighter about my expenses but I figured I would just pay myself first and make do with the rest. As long as my liquid accounts stayed the same I figured I was spending the right amount.
Made a Loan Plan: This is probably the most complicated of all and I am still unsure of my plan. Paying back loans is complicated, and has been discussed in detail on this site. I made the early decision to put my non-federal loans into forbearance.
Early in my residency, I was trying to pay down my federal loans aggressively. I quickly reversed course when I realized I was not making much progress towards reducing the principal and I would rather invest in an increasing retirement account balance.
My new strategy is to make my required monthly payment and then make a small additional payment towards my highest interest loan.
[PoF: This is a good time to remind you to check the latest refinancing rates. If you haven’t refinanced in the last 6 to 12 months, there’s an excellent chance refinancing now will decrease your monthly payment and/or total payback amount. As always, do NOT refinance if pursuing PSLF.]
Student Loan Refinancing Disclosures
Moving Forward
With 6 months remaining in my residency here is my new financial situation:
Assets:
Roth IRA: $28,500
Roth 403b: $28,800
Checking/Savings: $16,000
Rent paid/security deposit: $1,500
______________________________
Total: $74,800
Liabilities:
Federal loans: $69,000
Low-interest school loans: $35,400
Low-interest state loans: $8,500
____________________________
Total: $112,900
Net Worth:
$74,800-$112,900 = $-38,100
While I do not think I will quite reach my goal of achieving an even net worth in the next 6 months, I should come close.
As you all can see, with the right circumstances and plan, making financial progress is possible during medical training. Even better, you do not need to perfect!
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Did you make progress financially as a resident or plunge deeper into debt? What do you wish you knew then that you know now? Residents and students, what steps have you taken to improve your financial picture?
You’re on the right path and your future self will thank you a million times over! You totally got this!
Wow, I think the thing I am most surprised by is residency is only 3 years? It’s a minimum of 7 where I live to become a specialist (if you’re very lucky with posts and pursuing an unpopular speciality) more like 8 or 9 for most folks. That doesn’t include a fellowship.
We generally don’t have the massive cost of student loans though, I managed to get through med school without any although I did work to pay for all my living expenses during that time.
Well done on taking control of your finances from such an early start, I wish I’d been smarter early on. I keep trying to tell my interns but most aren’t ready to hear it.
Where do you live?
In the U.S., it’s generally 4 years of college, 4 years of med school, then 3 to 7 years of residency, depending on specialty. Fellowship of 1 to 3 years after that.
Tough to get out before 29 or 30 without a shortcut of some kind.
Cheers!
-PoF
Interesting, thanks for clarifying.
I live in South Africa. We either go straight into a medical degree from high-school, which is usually 6 years, or do an undergrad degree and then a post grad medical program (3 + 4yrs) depending on the university. After that there’s 2 years of general internship and a year of community service (basically a way to force junior docs to work in unpopular areas) before you get full registration. Then a variable amount of time working as a medical officer in your chosen speciality while waiting for a registrar post. Reg time is 4 – 5 years, and then a fellowship after if you want to (it’s not mandatory, usually 6 months to 1 year).
If you’re lucky and you want to do something unpopular like psych or general medicine (hospitalist), and you get to work in that field for your comm serv year you’ll probably get out before 30. If you want to work in a popular speciality like orthos or anaesthetics then mid 30s is more realistic, because you’ll wait longer for a training post. Guess I wouldn’t be here moaning about this if I’d chosen smarter 🙂
I totally agree about housing. I think this is really easy as long as you are single. I think I paid less than $500/month for most of my residency in a HCOL city living with roommates. Probably much, much harder if one is married, especially if starting a family. I also think that this particular person’s (relatively) low debt load (barely 6 figures rather than the multiples of 6 figures I so often hear about these days) makes a huge difference.
Training in a place with low COL is a good point. If you are good enough to get the choice of medical school and residency this is something that should be considered along side academics.
In my home state of NY the State Med school in Brooklyn cost the same as the state med school in Buffalo. I am sure you can guess which place is cheaper to live.
Very cool and inspiring story.
Getting a job that pays $80/hr as a med student is truly incredible and shows that there are indeed opportunities like that out there.
The fact that you used moonlighting money to improve your net worth rather than by splurge items was also an incredibly wise decision and one that most would not have made (which is why the majority graduate with 6 figure loans still).
You also must have made some wise decisions choosing your med school as even your initial liabilities were not that bad compared to most.
Keep up the good work and when the attending paychecks hit you can dramatically grow your net worth if you keep up the same habits.