The majority of medical students anticipate they will graduate with upwards of $150,000 in student-loan debt, yet just 18 percent of consider themselves very or somewhat knowledgeable about personal financial matters, according to a recent survey.
Allan Phillips, a Certified Financial Planner™ with Taylor Wealth Solutions who has worked extensively with physicians at all levels, believes it is never too early to chart your financial future.
“As a medical student, you layer on your medical knowledge as you progress through school and training,” he said in AMA Insurance’s “2017 Report on U.S. Physicians’ Financial Preparedness.”
“It also makes sense to layer on financial knowledge starting now rather than trying to learn it all at once,” Phillips added. “The decisions you’re making today will have an effect on your life years into the future. And the more you know, the better prepared you are.”
You may not be able to start addressing your debt or save for retirement during your medical school years. But there is an opportunity to get in the mindset and exercise the discipline that will lead to a prosperous financial future. Here are a few tips on how medical students can form healthy financial habits.
Find the right resources
The tools to help you grow your knowledge base and manage your money are numerous. They may be on campus or online. What’s most important is that they speak to your needs.
Diana Chen is a third-year medical student at Michigan State who is pursuing a dual-degree through an MD/MBA program. She was able to grow her financial acumen through her MBA classes as well as an elective class on finance in med school.
“Students can try to pull resources from their community, even if they aren’t adept at the financial lingo, to get this knowledge,” she said. “Just to try to understand basic financial know-how, it doesn’t have to be anything too crazy.”
You can also seek the help of a finance professional.
“Read the materials that you have and become familiar with the topics like types of loan forgiveness, but also you can leverage a professional to help you,” Phillips told AMA Wire®. “Somebody who is going to take that part of their finances seriously and understand the serious ramifications for the rest of your life. Finding an adviser who works in that area and makes it a priority is going to be very important.”
Make a budget
Budgeting isn’t really optional during medical school and your residency—it is imperative. Student loans typically come in an annual chunk that must be spread evenly to make it through the year. A more detailed budgeting plan will offer financial flexibility as you transition from medical school to residency and beyond.
“I wasn’t so great at [budgeting] the first two years of med school, getting into a difficult financial situation this past summer,” Chen said. “Since then, I’ve used a couple tools. I’m actively checking my credit score and managing it. I’m using this app called Clarity that finds everything that you subscribe to and it breaks it down in categories of how you spend your money. I’m kind of looking at that on a daily basis and always checking my account and dividing up a monthly allowance.”
Saving now can pay off later
A savings account is not in the cards for every med student, but if you can cut your expenses and put money away, it will offer significant long-term benefits. Savings can offer a cushion when an emergency happens—ideally you want to have enough saved to cover your expenses for three to six months—and that money could eventually be invested. Think about this: $5,000 invested at a 6 percent rate of return will be worth $16,000 in 20 years and $51,000 in 40 years.
“The things that a younger person does with their long-term wealth—while the amounts may be smaller, the end result of their forward thinking and planning could help them earn a lot more money than if they get started later,” Phillips said.
AMA Insurance does not provide financial planning or investment advisory services. Taylor Wealth Solutions is not affiliated with the AMA. Taylor Wealth Solutions offers insurance products through Taylor Financial Corp. Securities offered through Taylor Securities Inc. (member FINRA/SIPC).
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