Residency is without a doubt a busy time. From clinical responsibilities to research to sleep to maintaining sanity, things are not always easy. That being said, a little time spent here and there on financial education can vastly improve your chances of achieving financial independence as early as possible.
Refinance your student loans
With the current interest rates set at 5.31% for Direct Unsubsidized and 6.31% for Grad Plus, capitalized interest can really increase your already sky-high loans. As long as you read the details of the income-driven repayment plans such as IBR, PAYE, and REPAYE, refinancing your loans at a lower rate could save you a reasonable amount in the long-term. Yes, there are some things to be aware of such as no longer qualifying for the federal income-driven repayment plans should you choose to refinance, but definitely look into your options and decide what your game plan is for repayment.
Disability insurance
A resident’s most valuable financial asset is their future earnings ability, which — especially given their current negative net worth during residency — could be at risk of loss due to disability. Often times, you can get disability insurance cheaper as a resident than as a specialist. Plus, during residency you’ll be younger and (hopefully) healthier than you’ll ever be in the future, so why not do the medical underwriting now? In addition, policies you purchase now are most likely non-cancelable in that your low premiums now will remain level throughout your career. Although you won’t be able to afford as much disability as you will need as resident, it’s possible to find decent policies with future purchase options that will benefit you greatly in the future when you have a much higher income.
Roth IRA
Hands down, the Roth IRA is a great retirement tool that you should start taking advantage of ASAP. If offers key tax advantages, financial flexibility, and also gets you in the good habit of saving. By contributing to a Roth IRA as a resident, you’ll be putting away after-tax money while in a relatively low tax bracket (perhaps the 15% income tax bracket after deductions and exemptions) that you’ll probably never find yourself in again.
Live like a resident
Yes, residency can be a grueling few years. But be prepared to work hard and start saving for retirement. If you’re a dental resident, you’ll be lucky to be making a salary roughly equivalent to the average American household income. In fact, these few short years in residency will give you perspective on how your patients live that will stick with you for the rest of your career. Seeing as how most dental residencies charge tuition, however, it’s crucial that you think and plan accordingly to take out the smallest amount of loans possible. Now is not the time to pay exorbitant rent on a super nice apartment, or to take out a car loan on a fancy car. If you’re in a paid residency, there is no excuse to take out as many loans as a resident as you did in dental school.
Financial Literacy
Finally, residency provides an ideal time for you to improve your financial literacy. I get it, you barely have time to sleep! But try to make time not only to read some financial books and blogs, but also discuss finances with other residents in similar positions and with attendings. Your future self will be forever grateful.
What are your thoughts? What else should residents focus on besides their speciality? Comment below!
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