• 7 Steps to Worry-Free Finances

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    You just graduated residency. Nice one!

    In the process, you completed hundreds of cataract surgeries, navigated the rigors of emergency call and built strong relationships with your co-residents and attendings. Now on to your next career milestone. 

    Whether continuing training with a fellowship or starting as an attending physician at a university or in a private practice, now is the time to address areas you may have neglected: for many of us, a financial checklist tops that list. 

    A simple reason many of us avoid this subject during residency is that we are overwhelmed with clinical education and our income and debts often seem like an afterthought. You may be asking yourself, “Where do I begin?” Taking the time to get your financial house in order can help avoid stress and burnout later in your career. 

    Step 1: Dare to dream.

    The first step in your checklist should be to set a clear goal for the future. Is your goal to own a home? Are you planning to start a family? Do you want to pay off all your debts? A map to nowhere is not a map at all. Write down your financial goals and it will be much easier to plan the steps needed to achieve them.

    Step 2: Make a budget.

    Without keeping a budget, it is hard to know where you are financially. A budget does not have to be an arduous process. Record all your income and expenses and sort them by category. Many free apps can automatically import and organize your income and expenses directly from your bank accounts and credit cards. Some popular app options include Mint, Personal Capital, Clarity or Honeydue (for couples). Once you have monthly data, you can make changes to better suit your personal goals. 

    Step 3: Insurance is protection for the unexpected.

    Stress is usually a reaction to feelings of uncertainty. Having adequate disability and life insurance can give you and your loved one’s peace of mind for an uncertain future. Group disability and term life policies are available for minimal cost through most university hospitals and large employers.Strongly consider obtaining an individual disability policy which specifically insures the technical and surgical aspects of your job. If you are considering malpractice insurance, consider the Ophthalmic Mutual Insurance Co.

    If you join a smaller private practice, make sure to ask about coverage options. Choose term life policies, which are less expensive and cover you for a fixed period, over whole life policies, which are more costly. If your spouse has an existing policy, see if you can join to save on the expense of separate policies. 

    Step 4: Refinance or pay off student debt.

    During residency, government loans are usually locked in a forbearance status or require interest-only payments, but unless you are continuing onto fellowship, payments are required after a six-month grace period. 

    Pay off your debts entirely or apply for a student loan refinance. Even with less than stellar credit, most banks see physicians as a solid credit risk. With interest rates at all-time lows you may save a considerable sum by refinancing now. Public service loan forgiveness options are also an alternative if you work for a qualifying employer, but strict rules apply, and most physicians will have difficulty qualifying.

    Step 5: Save for a rainy day.

    Be sure to keep at least three to six months of monthly expenses in a savings account for unexpected events. Do this before you decide to purchase any big-ticket items, such as a new car or home. You may not ever need it, but if you do you will be happy it is there. 

    Step 6: Avoid buying big-ticket, expensive items too soon.

    Your income will rise dramatically after residency, but avoid making the mistake of increasing your debt or buying large items immediately after graduation. Force yourself to wait six months to determine your new budget, then decide on any large purchases. Even if your income increases from a $50,000 resident salary to a $300,000 attending salary, these gains can quickly evaporate with a single large purchase. 

    Step 7: Maximize tax-deferred accounts.

    Do not leave any money on the table. In addition to negotiating your base salary and bonus structure, inquire about matching retirement plan contributions, disability and life insurance coverage, and health insurance for you and your family. 

    You can obtain additional tax benefits from contributions to a health savings account through a high deductible health plan, opening a 529 college savings plan for you or your children (available even if you don’t have children) and a traditional individual retirement account (IRA) which can be rolled into a Roth IRA (called a backdoor rollover), which achieves added tax savings. All these options can be completed online and monthly or annual contributions set automatically for additional convenience. 

    Conclusion

    With residency in the rear-view mirror, it is time to move on to the next steps in your life journey. Financial independence is achievable for everyone and should be a source of confidence rather than stress. Medicine is the most noble of professions and we are fortunate to be well compensated for our efforts. Good luck on your journey!

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    Andrew W. Francis, MDAbout the author: Andrew Francis, MD, completed his residency at the University of Illinois at Chicago in 2016 followed by a vitreoretinal surgical fellowship at the University of California San Francisco and is now in private practice in Chicago, IL.