As a young doctor getting ready to take on the world of medicine, you’re going to face some unique challenges along the way, namely how to maintain your financial security after completing your residency. With the average resident salary ranging from $52,000 to $65,000, this only covers a fraction of the debt you’ll need to repay from student loans. While 25% of residents have no debt, 36% owe over $200,000 in student loans, according to a 2014 Medscape report. And we understand that you’ll want to pay back these loans as soon as possible.

The good news is your potential earning power will increase significantly as soon as you land your first job out of residency. The average salary for a family physician is $195,000, which is a hefty paycheck for a new doctor. Now is a crucial time in your career to make smart financial decisions so you can have a comfortable living down the road. Use these four tips to get you started.

Managing your debt

You shouldn’t wait until finishing your residency to start paying off your student loans. You should start paying them back after graduating from medical school, as deferred payments and interest rates will extend the life of your loans.

While you may not be earning much as a resident, it’s wise to set aside as much money as you can to tame your loans. You don’t have to pay them off all at once, but you can pay them down quicker by paying more than the minimum balance.

You should also look into one of the education provisions in the Affordable Care Act (ACA) which helps reduce the repayment formula of the income-based repayment (IBR) program from 15% of your adjusted gross income to 10%. This provision also reduces the maximum loan repayment duration from 25 years to 20 years before forgiveness. Keep in mind that this program only applies to government issued loans.

Cutting unnecessary expenses

As you transition out of residency, you’ll be eager to exercise your recent increase in income. While you may have a little extra money to throw around now, don’t get carried away especially if you still have mounds of looming debt. By focusing on material comforts such as a new car, expensive dinners, luxury goods and subscription services, you risk neglecting the “savings” portion of money management. Just because you can afford these extra amenities doesn’t mean you have to shell out the cash for them.

Simply put, cut any unnecessary expenses and live within your means. You don’t want to open the door to brand new debt such as car payments or a mortgage. This is important particularly if you have a poor credit score which could hurt your chances for taking out additional loans or buying a house. Focus your energy on taking care of the essentials:

  • Rent
  • Transportation (gas, public transit, etc.)
  • Groceries
  • Utilities
  • Credit card debt
  • Student loans
  • Savings

Consider looking for a roommate to lessen the burden of rent and other bills. If you’ve budgeted your money correctly and have funds left over at the end of the month, go ahead and treat yourself! You deserve it.

Building a financial security blanket

Maintaining your financial security requires more than squirreling away a few hundred bucks a month into a savings account. While that’s a good start, it may not be enough to sustain your lifestyle if you were to suddenly become unemployed.

Calculate at least three to six month’s salary and start saving for a rainy day. Consider opening a money market account or a certificate of deposit – both of which will yield returns on any money that is deposited into those accounts. You may find better rates through credits unions than national banks, so look around for the best deals.

In addition to setting up a savings account, start thinking about what retirement will look like for you. Yes, retirement may seem like a long way from now, but it’s something you should heavily consider – sooner rather than later. Saving 10-15% of your income in your 20s or 30s will allow more time for your money to grow. If your employer matches retirement contributions, even better.

If you want to set up your own retirement plan outside of your employer, there are a few options available such as 401(k)s, 403(b)s, IRAs, pension plans and more. Do your research and consider speaking to a financial advisor to see which plan best fits your needs.

Protecting your income

You’re young, you’re healthy and you have a six-figure income. But what if you were unable to work for a long period of time due to an injury or illness? How would you maintain your style of living? You may not realize this but your greatest asset is your ability to earn an income, and if your health becomes compromised, you may find yourself in financial straits.

To protect your hard-earned income, think about disability income insurance offered by the AAFP Insurance Program. This is perhaps one of the most overlooked insurances by young family physicians, next to life insurance. A quarter of young adults in their 20s become disabled before they retire. Losing the ability to work can put a toll on your finances. You will still need to pay your regular expenses on top of your loans and medical bills. The best way to protect your financial future is to purchase a disability insurance policy early in your career.

You have a bright future ahead of you. It can be even brighter if you follow these financial tips. Remember, money management is all about balancing your saving and spending habits. It’s also about understanding the financial choices we make and dealing with those consequences. By repaying your student debt, managing your expenses and considering additional financial protection, your money will remain in good health for years to come.


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