The journey to becoming a staff physician is an arduous one, complete with long hours of residency, high stakes exams, and often huge student loan burdens. During our time in school, we became accustomed to the concept of ‘delayed gratification’, where we suffer in the short term in exchange for the promise of rewards (professional and financial) when we finish training. While it is tempting to go crazy with luxuries as a newly minted staff physician, it’s crucial for new grads to manage their finances wisely. Living like a resident, even after the jump in income, can be a savvy financial strategy that allows you to pay down debt, start investing, and secure a more stable financial future. In this post, we’ll explore the concept of living like a resident and how it can benefit you.
What Does ‘Living Like a Resident’ Mean?
This is a financial strategy that involves maintaining a frugal lifestyle, like the one you used during residency and fellowship, even after completing training and having an increased income as a practicing MD. It’s easy to lose sight of what a “good” income is; by the time a Canadian resident is a PGY-5, their gross income will be $81-91K (the outlier is Quebec, at $70K).
To put that in perspective, according to the Stats Can Canadian Income Survey 2021, the median after tax income for Canadian families is $68,400. So, relatively speaking, ‘living like a resident’ is completely reasonable by national standards.
The Benefits of Living Like a Resident:
Rapid debt repayment: The high earning potential of new grads offers a unique opportunity, often at a time of life without major requirements to financially support family (children, aging parents). By continuing to live modestly, you can funnel the majority of your income toward paying off student loans, lines of credit, and high interest credit cards.
Reduced financial stress: In this era of recognizing the need for wellness, it is important to recognize that one of the leading causes of stress among physicians is financial pressure. By living like a resident, doctors can reduce this stress and focus on their well-being leading to better mental and emotional health.
Emergency fund: For peace of mind, it is vital to quickly establish a robust fund that can cover unexpected expenses in case of emergencies involving you or your family; the amount is often described as enough to cover 3-6 months of living expenses.
Savings and investment opportunities: As we have covered in other blog posts, investing as early as possible allows the power of compound interest more time to work. This bolus of money can be used to secure the future, whether it’s for retirement, home purchase, or other long-term goals.
Practical Steps to Live Like a Resident:
Budget: Most people don’t want to micromanage every penny, but consider creating a budget that accounts for all income and expenses. Be honest with yourself, and categorize expenses into ‘needs’ versus ‘wants’.
Minimize housing and transportation costs: The desire to ‘keep up with Joneses’ with a big house and a shiny new car is real. Consider living in a more modest home than your income might otherwise afford. If you don’t have to move after completing residency and your vehicle is running well, you might not need any new big-ticket items.
Limit discretionary spending: Be mindful of non-essential spending from the ‘wants’ category such as dining out, luxury items, and extravagant vacations. Think about what ‘unwinding from work’ means to you, which may not involve fancy trinkets or experiences that others indulge in.
Automate savings and debt payments: Set up automatic transfers to separate savings and debt repayment accounts. For many of us, ‘out of sight is out of mind’; not having easy access to money earmarked for savings is enough not to spend it frivolously.
Seek professional financial advice: Consider consulting a fee-only financial advisor early on who helps you create a personalized financial plan and investment strategy that aligns with your long-term goals and risk tolerance.
Staying the Course
Living like a resident can be challenging, especially when others you have graduated with who seem to be living the high life. It may require discipline and a mindset shift, but the enduring benefits are undeniable. To maintain your commitment, consider the following tips:
Stay accountable: Share your financial goals and plans with your spouse or partner to ensure you’re on the same page. An accountability partner can help you resist the urge to overspend.
Track your progress and celebrate milestones: Recognize and celebrate your financial achievements along the way. Acknowledging your progress can keep you motivated and inspired to continue your frugal lifestyle.
Regularly re-evaluate: As your financial situation evolves (e.g. marriage, kids, parental illness), adjust your budget and plans accordingly. How long should you live like a resident? The answer depends on how comfortable you are at that level. For those without champagne tastes, living frugally for years will bring them financial freedom early. For others, it may be only a few months until all student debts are paid off.
Financial Freedom Ahead
Living like a resident can be a powerful way for new staff physicians to tackle debt, build savings and invest in their future. The choice to live frugally a little while longer is not about deprivation, but rather a strategic approach to securing financial peace of mind and well-being.
Author: Dr. Krishna Sharma, Chief Medical Officer, Specialty Medical Partners
Comments