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Top Two Ways to Live Within Your Means: For Medical Residents

March 7, 2017

Medical students, residents, physicians, and anyone looking to save money as they move up or along their prospective career ladder — it is time to heed these four words of advice: “Live like a resident.”

If you are familiar with The White Coat Investor, you’ve probably heard this sound advice repeatedly, but what does it mean? While primarily targeted at medical residents who are about to graduate from residency (and likewise move up substantially in pay scale), it is actually great advice for anyone who wishes to learn how to make a budget and live within it. If you are likely to receive a significant boost in income — whether now or in the near future — you should try to maintain a budget that falls in line with your previous — or lower — income. By learning to live modestly and well below your current earnings on a routine basis, you are more likely to have more money to spend in other ways, such as paying down student loans, paying off other debts, going on vacation, pursuing a hobby, retiring early, investing, and simply doing something just for the fun of it.

Creating a budget and reserving a portion of your earnings for future goals can help individuals, particularly medical residents, make the leap from low to high earnings in a manner that allows them to enjoy some of their hard-earned success both now and in the future.

#1 Live Modestly From the Start

Whether you are in residency or working in a short-term, lower-salary job, living modestly and within your means is an important habit to acquire. For medical residents, this means that you should not live like an attending physician when you are a resident. Do not be tempted to buy things you cannot currently afford  by spending as if you are already earning the wages associated with your future job title. Even though you know that you will likely be earning more in the near future, this style of spending is an easy way to accumulate debt, additional loans (car, home, personal), and possibly lower credit scores. Following this advice early, however, can help you set up great financial planning habits, such as paying off debts, saving for a retirement plan or investments, being able to go on vacation, and any other long-term financial goals that you may desire.

 

#2 Live a Modest Lifestyle After Climbing Your Career Ladder

Once you begin earning higher wage, whether you are now an attending physician or working in some other higher-earning profession, consider maintaining a modest lifestyle. Opting for a smaller house or a less expensive car, or simply continuing to maintain the budget that you followed in residency previous position, can help you achieve this goal. Why you should do this, however, is the best part. With a climbing income and fairly stable expenses, you will have more money coming in that going out, and therefore, more money to pay down student loans, to add to your blossoming retirement account, to invest, or to enjoy with your family. If you want to maintain your modest budget while experiencing more of what you are passionate about, consider setting aside more of your budget for this category. For example, if you want to travel the world, keep everything except travel expenses at your residency-level budget. If you have a growing family and need a bigger house in a nicer neighborhood, consider relocating to an area that is less expensive, or cut back on expenses in other categories so that your mortgage does not consume too much of your extra capital. Regardless of your situation, there is a plan that can work for you.

While you are paying down your student loans in this phase, consider this potentially money-saving strategy — refinancing for a lower rate! Refinancing student loans (and consolidating multiple loans) into one loan, ideally with a lower rate, could help you save countless, hard-earned dollars. If you want to see how much you could save, check out our loan calculator or talk to a representative at Education Loan Finance.

Live for Today. Plan for Tomorrow

Physicians are often already accustomed to experiencing delayed gratification, having trained for years longer than most to ultimately obtain a higher income. Without their early working years to obtain and save wages, physicians who are in residency or just out of residency should take precautions to save and budget their income wisely. The bottom line is, “five times the pay doesn’t equal five times the lifestyle,” and while physicians eventually do typically make more money than many other professions, they also have more professional expenses (CMEs, professional licensing, and more), often higher overhead expenses, and higher student loans. Financially planning for these factors and formulating a well-informed way to maintain a modest budget, at least for the first few years after residency, can go a long way in securing a peaceful financial future.

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Medical resident taking a break in local park and reviewing messages on cellphone.
2019-03-11
Medical Match Day Finance Tips

Congratulations you’ve worked hard been through multiple interviews and finally, your hard work has paid off! You’ve been matched and you’re getting ready for residency. It’s so exciting to jump into residency and see what having this career will really be like. You’ll have the ability to learn from experienced professionals in your field of interest. Getting yourself prepared for your residency can feel stressful, but it doesn’t need to be. Here are some financial tips to help you get settled and make good choices for your future.  

Set Up Loan Payments

Once you are done with school, you should start paying on student loans. Residency can take several years to complete. It’s likely that your residency isn’t paying you what a full-time position in your career will so all the medical school debt that’s accumulated, can be difficult to sort through. If you find yourself with a large amount of federal
student loan debt, look into income-based repayment plans. We would recommend this as a temporary solution until you’ve completed your residency program.  This will assure that you’re making student loan payments towards your medical school debt, but that those payments are not impossible to complete. You may eventually qualify for public loan forgiveness on your federal student loans. If you qualify to get on an IBR plan in residency after completing the program you may only have a few years remaining.     If you also have private student loans there is no need to worry. Most private student loan lenders will work with you to offer some type of payment plan. You may want to consider refinancing your medical student loan debt. In order to qualify for student loan refinancing, you may need to add a cosigner due to income you’ll be making in your residency. Regardless of which route you chose, in the first few months after graduation, you’ll want to have your payment plan set up. Don’t let this task fall off your radar—in-school deferment ends shortly after graduation for most kinds of medical school debt.  

How to Reduce Medical School Debt

   

Make a Budget

The average income for first-year medical residents is about $55,000, according to a recent report. That money may not go very far with your loan payments and other living expenses. It’s crucial to set your budget and stick to it. Many medical professionals suggest living with roommates, carpooling, using public transit, and setting a budget to keep other spending at a minimum.    

Look Into Your Benefits

If you’re starting off pretty frugal until you get accustomed to your new budget, that doesn’t mean you shouldn’t think about saving for the future. When it comes to saving for retirement, the sooner the better. Employer matches and retirement programs should be on your list of things to do early in your residency. Take advantage of match money for retirement if your employer offers it. Match money from your employer is free money! Don’t miss out on that opportunity, and check out the rest of your benefits while you’re at it. There are usually several perks and programs you can look into that might help make your transition to residency more comfortable.  

Set Up Housing

Speaking of housing arrangements, there is conflicting advice on whether or not it makes sense to buy a home vs. renting while in residency. Since most residents spend long hours working and don’t have time for household maintenance or upkeep, buying a home can be a difficult choice. Plus knowing that you might not choose to live in the same place long term cause many experts to advise renting. Look at your unique situation and make sure you’re weighing all of these factors when you decide what to do for housing.   As far as finding somewhere to live, location will probably be top of your list. After working long hours and several days in a row, having a long commute is the last thing you want. If the area near your work is not cost-effective, look for ways to get connected with a good roommate or two. Research the area before you relocate and stick to your budget for housing costs so that you don’t end up being rent-poor or house-poor.  

Practice Self-Care and Routine

Residency can be engrossing. You’re so involved in your work role and in living the life of a busy resident, that it’s not uncommon to let self-care fall by the wayside. Remember, you can’t care for others if you haven’t cared for yourself. Make sure you’re doing what you can to stick to healthy habits, even if there are days you’re low on sleep or not making the best food choices. Getting rest on your time off, enjoying your hobbies even in small doses, and exercising or meal planning can help make sure you’re cared for even with a busy schedule.   Enjoy your new life adventure!  

Ways to Save on Student Loan Debt During Residency

  NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.  
Friends enjoying themselves and talking about predatory lending in student loan refinancing.
2019-03-08
Student Loan Refinancing: How To Avoid Predatory Lending

No one wants to get scammed, but it can be hard to feel confident about whether you’re working with a reputable source or not. In an era when we have access to so many different options and there are countless financial entities available at our fingertips, there are definitely some things to keep in mind so that you don’t end up getting a raw deal.  It’s not uncommon if you’re interested in student loan refinancing, or have been approached by a company to want to see if they’re legit before you move forward. Here are some tips on how to avoid being a victim of predatory lending.  

Check your sources.

It’s not uncommon to find random financing offers around the internet. Maybe you read about it on Reddit, saw a social media post, or even direct mail. Companies regularly send postcards and mailers to try to get your attention. The marketing material can look pretty convincing, too! Don’t let a slick landing page or a nice mailer fool you. You generally want to find suggestions from sources you trust, like a financial expert, or trusted online sources. A good resource would be the Better Business Bureau. You can see online complaints, information about the company, and all provided by an unbiased source. A second site that provides unbiased online reviews is Trustpilot. Websites with unbiased reviews and legitimate accreditation or backing can be an ideal source to verify credibility.  

Never trust dishonest marketing.

It may sound extreme, but we’ve heard of examples where someone was approached by an entity that attempted to look like the government. These scare tactics are used frequently enough by scammy companies for one reason - they work. These companies use this scare tactic because when you think the government is trying to get in touch and you’re in trouble, you answer! These options work similarly to the IRS scams that are always happening with the IRS calling your phone, but in reality, the IRS doesn’t actually call anyone. If the company tried to look like a government program and later you find out they’re not, drop them. A legitimate company won’t send fake notices or use a misleading URL in order to get your business.  

Listen to the old adage.

If it’s too good to be true, it probably is. There’s a reason that this simple advice is so often passed down. Really amazing offers are rare. If something sounds like there’s no way they could offer you such incredible terms or that great of a deal, there is likely fine print that’s missing. Fact check the offer and look for comparable data. Your alarm bells should go off if you’re looking at a company whose reputation is dubious. This especially proves true if they’re claiming to get you unheard of service or savings.  

Requirements to Refinance Student Loans

 

What do I owe you?

There are lots of scams across all kinds of industries. One of the most common is when a person tries to get you to pay something up front with the promise of services to come. Lending is no different. If you have to pay a fee or anything before you can see the offer, chances are that this is a scam. Companies often will offer to facilitate student loan discharge for someone with a permanent disability. The process of applying for student loan discharge if you have a qualifying disability is free. Any company offering to do it for a hefty up-front fee is scamming you!  

Avoid anyone who is too aggressive.

Sometimes a company will aggressively pursue potential borrowers and push them to select a consolidation option that’s not in the borrower’s best financial interest. They might be a legitimate company but will leave out crucial details in order to sign you up. A good general rule of thumb is to be aware of the interest rate and terms. Understand how a lower payment can extend the life of your loans, thus increasing the overall amount due. Always get all the details, so you know the financial implications of your decision.  

Give it a gut check.

Sometimes your intuition is your best tool. If something doesn’t feel right, don’t be afraid to hit pause until you can find more information. Be wary of any company that’s asking for too much personal information before you are sure that they’re legit. Keep an eye out for things that just don’t seem right, like misspellings or a digital presence that seems fishy. You should never be faulted or made to feel bad for giving yourself time to look into the details and read everything over. If you feel like you’re being hurried through or your questions aren’t being answered stop and take a breather to do a gut check. All of your concerns should be addressed with ample information so that you feel confident about the process and decision. If that’s not what you’re experiencing, you should back away.  

Use your village.

There are lots of reputable companies out there, and it’s pretty easy to find them by reading unbiased reviews. Do your research and continue learning more about how their process will help you. Use resources available to you to vet companies before you reach out. If you utilize the resources available to you, you’ll be less likely to encounter an unreputable company on the prowl.

You should never be badgered or threatened.

No reputable company is going to make threats against you or repeatedly harass you to sign up. As a consumer, you have certain protections and any company that violates these should be investigated. If you’re facing this treatment from any lender, would like to see more information on various types of financial products and your rights, visit the FDIC website.    

Check Out Our Guide to Student Loan Refinancing

  NOTICE: Third Party Web Sites Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – The bank is not responsible for the content. Please contact us with any concerns or comments.
2018-07-27
Student Loan Debt & Medical Residency

Repaying student loan debt can be tough for those who close up their books and don a lab coat for a grueling 3+ year residency or fellowship program. The average non-specialized medical school graduate comes out with nearly $200K in student loan debt. That graduate is immediately required to begin making payments, opt for deferment, or extend their repayment term through an income-driven repayment plan. Making payments in full is hardly an option considering residents make about $9.50 - $12/hour when you break their $50K salaries into 80-hour work weeks. Deferment is great for not having monthly payments, but not so great for accruing interest while you put off the inevitable. Extending the repayment term 20-25 years isn’t the worst thing, but you’re going to end up paying significantly more than your original loan balance, often up to $20K/year.

Public Service Loan Forgiveness

There is, of course, the Public Service Loan Forgiveness (PSLF) program, but it’s crucial that you understand the requirements and stay on top of things. Staying on top of anything during an 80-hour work week is easier said than done, but that’s for you to decide. If you are pursuing public service loan forgiveness, educate yourself on these common (and costly) mistakes doctors make during residency. Be aware that hundreds of thousands come to the end of their 120 payments on an IBR plan with heightened blood pressure and a horrifying question - “What do you mean I’m not qualified?” Let’s be honest, what could be worse than trudging through making 120 payments on an IBR plan to find out you still have to repay your student loan debt in full? If PSLF is your end-game, check… Then re-check every few months.

Learn More About Loan Forgiveness

The truth is – you didn’t sign up to become a doctor because you thought it’d be easy. Residency is the most financially trying time of your career. You’ll have no problem making payments at the conclusion of your program, but it can be incredibly frustrating putting in those 80 hours a week for just above minimum wage, while your student loans are compounding every year.

Ways you can save money during your residency:

  • Get a roommate. Save on housing cost by sharing a place with a friend. This will help to keep costs low while you’re within your residency.
  • Get a side gig. With the birth of Instagram and blogging, there is no excuse why you can’t get a side gig. If you get enough followers companies will pay you to share information about their product.
  • If your hospital provides you with a meal card, use it! If you don’t get a meal card be sure to pack your own food for additional savings that are better served towards your student loan debt.
  • Live close to transit or where you’ll be working. This will cut out the cost of owning a car.
  • Cut the cord! Since your busy working and side hustling, there is no need to pay for cable. Try a subscription to Netflix or Hulu. With a subscription-based service it’s guaranteed you can watch it on your cell phone from anywhere at any time you want.
  • Buy secondhand clothes or furniture if you can. If you live in an area with consignment stores or garage sales be sure to check them out for additional savings.
  • Make plans with friends that are free or low cost. Look at the surrounding areas and see if there are local concerts or activities.
  • Use your local library. If you want to watch a movie or play a video game to get your mind off work, your library has them for free. Some libraries even offer streaming services, where you don’t even have to leave your couch!
In addition to the daily activities that can save you money, consider refinancing – which consolidates your multiple loans into a single, easy-to-remember monthly payment. If your credit is good, you’ll have access to low-interest rates, and the flexibility to choose your terms to find a repayment method that fits your current budget. If your credit is not good, a cosigner may help you to access the same low rates.

Manage Student Loan Debt

Reputable lenders like Education Loan Finance even consider your future salary potential when determining your interest rates. This allows you to start making affordable payments now and manage your student debt without compounding interest running circles through your already tired brain. ELFI borrowers on average have reported saving $309/month*, which goes a long way on a medical resident’s salary. That’s money you could be stashing away into an investment fund or high-interest savings account. Look at that, by refinancing your student loans, interest is now working for you instead of against you. When your residency ends, you’ll already be way ahead of your colleagues and you can use that hefty first paycheck to start aggressively attacking your student loan debt. Just don’t forget to take some time (and money) to celebrate. You earned it.

See What You Could Be Saving

*Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.