My Financial Awakening
By #LifeofaMedStudent
I trust people. I trust my colleagues. When a cardiologist says this patient is going to the cath lab, I don’t second-guess their expertise. When the surgeon says this patient must go to the OR, I make sure the patient is ready. When a financial “advisor” said I needed to roll-over the cash value of a whole life policy from birth into a variable universal life insurance policy, I asked where I needed to sign. When he asked if I had any thoughts on the investments in the package, I said: “Just do what you think is best.” Oh, how naive I was.
The awakening started when I came across a very popular site for medical professional finances called The White Coat Investor. In a matter of days, I realized how costly my trust was going to be (Probably in the neighborhood of $100k difference at years). Is there a time and a place for a whole life policy? Maybe, but nowhere near what was my current financial situation. I doubt this advisor felt he was doing me wrong and is by all measures a very nice guy. But the fact is, an unbiased look would have led toward a cheap term policy and encouragement to invest the $12,000 cash value of my whole life policy from birth.
Reading more, I realized how uneducated I was. Students loans? Yeah, I have a couple hundred thousand I think. Roth IRA? Never heard of her. BUT I have about $30,000 sitting in a taxable account handed down to me though!! What do I pay for that to be managed? Uh doesn’t seem like much I never get a bill. What’s my budget like? Um, I spend less than I earn. Most months. Retirement plan? But I’m not even done with residency.
I consider myself a pretty intelligent person, maybe not THE top end smarts but I can pick things up quickly (humble too!). And here a major aspect of life, and I realized I couldn’t even define the language of finances, let alone sort it out. So I started reading, A LOT. I read probably every post on White Coat Investor and another blog called Physician on FIRE. I readThe White Coat Investor: A Doctor’s Guide To Personal Finance And Investing
I now have at least a basic understanding and plans to cover every aspect of my financial life:
Disability insurance – I know what riders are needed for an adequate policy and have the max allowable coverage for a resident.
Life insurance – realistically I’m stuck with my universal life policy but will be adding term insurance to cover the fact it’s not even enough considering my future income. Go term and invest the difference.
Investments – simple, low-cost, index investing. Accept market returns. When an attending: max 401k, max backdoor Roth IRAs, HSA “stealth” IRA, and a very significant chunk to a taxable account. Don’t give 1+% away to a financial advisor.
Budget – now detailed for every dollar I spend each month. A savings rate of 15% net the rest of residency and pledge to live on half as an attending next year. With the other half going to debt repayment or retirement savings!
Student loans – Currently considering refinancing as a resident. Both LinkCapital, Splash, and Laural Road will refinance and give you a break on payments until an attending, while you enjoy the lower interest rate. Because anesthesia is a high paying specialty and most commonly a private for-profit practice, I would have been smart to have done this several years ago.
LIVE LIKE A RESIDENT UNTIL THE STUDENT LOANS ARE GONE!
I have control of my finances. I know my net worth (-150k) and I know roughly when it will be back to zero. Assuming reasonable returns, I know roughly when I’ll be a millionaire and eventually financially independent. Retire at 50? It’s certainly possible with a reasonable lifestyle.
If you don’t know the basics of the above, it’s time for your own awakening. It will literally save you hundreds of thousands of dollars. Please check out whitecoatinvestor.com and PhysicianonFire.com – these two are infinitely ahead of me in the financial game, and I am in debt to their knowledge. Without sites like theirs, I probably would never become financially independent or even realized my own ignorance of money.
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I’m glad you found my site! We all have an awakening at some point. Mine was much more gradual, and years after I finished residency. I knew enough to stay away from cash value life, but not enough to avoid buying too much house. Live and learn.
When I was in residency, there were no physician personal finance blogs. WCI was still a new intern when I started anesthesia as a PGY-2. Today’s residents and young attendings have more resources and fewer excuses, but without the interest, few of them will find sites like ours. There are more and more of us, though. Perhaps we can start to have a bigger impact.
Best,
-PoF
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