Career and Life Planning Guidebook for Medical Residents

R E A D : Live Like a Resident: The most important year in a physician’s financial life is the first year out of training, and the most important advice this chapter can give you is contained in just four words. Live Like A Resident! Did you get that? I cannot emphasize it enough. You’ve just finished living on $40,000–$60,000 per year for three to five years. You know you can do it. The biggest single financial issue that most physicians face in their quest for “the good life” is the sudden tripling or quadrupling of their income upon leaving residency. Too many doctors grow into this income much too quickly, often immediately. Those who aren’t living on less than their income during residency often find they are actually spending more than their new salary within a year or two of residency completion. An even worse predicament happens to those residents who start building the attending physician lifestyle even before they graduate from residency by maxing out credit cards, getting high-end car loans and a large mortgage in anticipation of the larger paycheck. If a new attending physician can manage to live the same lifestyle they have been living on as a resident, the vast majority of that additional income can be put toward increasing his/her wealth by paying for a significant down payment on a home, paying off student loans and other debt, saving for retirement and other long-term goals. In addition, a graduating resident may be used to 80-hour workweeks. If you continue to work that hard in establishing your practice, you’ll not only enjoy an “attending income” but also a very high income for your specialty. This is not a very good long-term solution, as it can often lead to unhappiness and burnout, but doing it for a few years or even just a few months can really get you started off on the right foot in your new career. Of course, this is very hard to do, and few new attendings honestly have the discipline to do it. I certainly didn’t. Upon leaving residency, I entered a period of active duty with the United States Air Force. My salary tripled from about $40,000 to about $120,000 a year. Did we live the same lifestyle we had as a resident? No. We had been renting a 2-room duplex for $800 a month in residency. Nowwe bought a 3-bedroom townhome for $138,000.We had just one cell phone between the two of us, so we bought another. We had been a one-car family, and we decided to get a second one (it literally cost $1,850). Our lifestyle definitely improved and it was wonderful. But it didn’t triple. It probably didn’t even double. Where did all that extra money go? First, it went to pay off a short-term loan my parents gave me to help with our down payment, but within a couple of months, we had a couple of thousand extra dollars every month that we had to decide what to do with. That’s a great feeling. The money went into a 401(k), into Roth IRAs, toward paying down the mortgage, toward saving for the car we really wanted, toward college saving accounts for our children, and toward an emergency fund. But there is a lot of room between living the same lifestyle you had as a resident and the lifestyle attainable by spending every cent of attending income. The slower you improve your lifestyle, the more wealth you will eventually attain. Moderation in all things, of course, but trust me when I say you’ll still feel rich even if you only double your income instead of quadrupling it. Financial Life Planning 351 WWW.PHYSICIANCAREERPLANNING.COM