The COVID-19 pandemic has disrupted health care systems and economies around the world. With so much global turmoil, what safe and reliable financial advice should a resident follow?
Step 1: Residency Is an Investment
“Nothing of great value in this life comes easily.” — Norman Vincent Peale
Physicians in the United States are among the highest-paid professionals in the world; however, residency requires long working hours with low pay, and student loan and credit card debt may cause financial insecurity. But stay positive. Lifetime earnings as a physician number in the millions and make every second of residency worth the effort.
Step 2: Make a Budget and Review It
“Beware of small expenses; a small leak will sink a great ship.” — Benjamin Franklin
How much you save comes down to a simple equation: Revenue – Expenses = Income. So, each month, record all of your expenses and subtract this number from your income. Be sure to categorize expenses into fixed costs (e.g., rent, car payments) and variable costs (e.g., groceries, gas), review your budget periodically and reduce costs to increase your disposable income.
Step 3: Avoid Credit Card Debt
“Never spend your money before you have it.” — Thomas Jefferson
Credit cards can earn points, miles or cash back, but they lose their value when balances are not paid in full each month. If you must keep a balance, consider a balance transfer. Many companies offer 0% interest deals that result in huge savings. Inquire if transaction fees can be waived.
Better still, refinance your debt. Banks see young physicians as worth the loan risk, even those with less than stellar credit histories. To apply for a mortgage or business loan in the future, always remember to build your credit history by making payments on time, every time.
Step 4: Contribute to Retirement Accounts
“It’s not how much money you make, but how much money you keep, how hard it works for you and how many generations you keep it for.” — Robert Kiyosaki
Retirement accounts come in two basic categories: 403(b)/457(b) and individual retirement accounts (IRA):
- 403(b)/457(b) accounts are offered through hospital employers. A percentage of each paycheck is invested, which grows tax free over time. The money is invested “pretax” (i.e., taxes due near retirement) or “after tax” (i.e., taxes are paid upfront). Conversions are possible. Some employers also offer a “match” of deposited funds. This is basically free money.
- IRAs offer similar pretax and after-tax options. They are available to all individuals and are not linked to your employer. Contributions cannot be withdrawn easily. Penalties are costly for early withdrawals.
Step 5: Buy Life Insurance When You’re Young and Healthy
“The only certainties in life are death and taxes.” — Mark Twain
Residency is the best time to buy life insurance coverage since it’s likely the healthiest period of your life. There are three types of life insurance you should consider:
- Term life insurance pays in the event of death.
- Disability insurance pays if serious illness or injury occurs.
- Accident insurance offsets the costs of serious accident or injury.
Coverage is available through hospital group plans. For residents with children, life insurance is essential. Some companies offer residents locks on lifetime interest rates.
Keep in mind though that life insurance companies are not the same as health insurance companies: they can deny individuals based on preexisting medical conditions. So, again, in order to obtain the best coverage, there’s no time like today when you’re young and healthy!
In the end, be sure to maintain a budget, keep debts low, invest and purchase life insurance. Most importantly, stay positive! Residency is about learning how to become a physician. This experience includes more than just the procurement of raw clinical acumen.
“Experience is simply the name we give our mistakes.” — Oscar Wilde
The Academy Is Here to Help
Members-in-training and ophthalmologists in their first year of practice receive a complimentary membership in the American Academy of Ophthalmic Executives® (AAOE®). This is ophthalmology’s most engaged practice management community, so be sure to use this resource to master the business side of your profession. Benefits include:
- Practice Management Resource Library: Check out this digital library of free coding and practice management tools, videos, webinars, coding courses and more.
- Listservs: Connect with supportive members to have questions answered, share opinions and network with your peers.
- Practice Forms Library: Browse this comprehensive collection for ophthalmic medical practice forms that are supplied and shared by your colleagues.
- AcadeMetrics™ Benchmarking Tool: Access these salary tools to measure your practice’s financial performance and practice efficiency.
- Practice Management Express: Read this popular weekly email newsletter for the latest tips and most current updates to ophthalmic coding.
- Consultant Directory Listing: Find the support you need with our curated directory of practice management professionals.
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Andrew W. Francis, MD,
is a retina specialist in Chicago, Ill., and joined the YO Info
editorial board in 2020.