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Transition to Practice: A Guide to Personal Finance for Graduating Residents, Fellows, and Early Career Attending Physicians

So you’ve finally made it to the end of training! Congratulations. Whether you’re a graduating resident or fellow or a relatively newly minted attending physician, this is a unique time in regards to physician finance. It reflects an inflection point in the physician financial journey. You can finally see where you’re not living paycheck to paycheck, but you’re also not yet living the financially independent physician life. This is also around the time period that there are many changes in an early career physician’s personal life, and if applicable, family life. Juggling all of those things to put together a financial plan that allows you to start building wealth while also starting to stop living like a resident and start enjoying the fruits of your labor is a tough balancing act. In this article, we give graduating residents and fellows the basic principles for personal finance, and hopefully help you to build a financial plan for your early attending years. Don’t worry - personal finance at this stage is not complicated. It just requires being disciplined about setting goals, protecting yourself from financial catastrophe, and starting to build a solid financial foundation that will allow your money to start working for you in the background.


Note: This article is part of our resources for graduating residents and fellows and transition to practice series. We’ve compiled a list of other relevant resources below. If you are not a part of our transition to practice series and would like to sign up, you can find the sign-up link at the top of our transition to practice guide.


Disclaimers/Disclosures: This page contains information about our sponsors, as well as affiliate links, which support the group at no cost to you. These should be viewed as introductions rather than formal recommendations. We do not provide individualized advice and are not formal financial, legal, or otherwise licensed professionals. You should consult these parties as appropriate and do your own due diligence before making decisions based on this page.


Personal finance principles for graduating residents transitioning into practice




General Personal Finance Principles for Graduating Residents and Fellows to Keep in Mind as You Navigate the Transition to Early Career Attending Physician


There is a lot happening during this time. As you begin, keep it simple and set reasonable, achievable goals. Here are some principles we like for doctors to keep in mind when creating their first budget as an attending physician.


  • You have a tried and true pathway to wealth and financial independence. Your job is not to mess it up.

  • Resist the urge to inflate your spending too quickly. Lifestyle creep is real and can get you in trouble, as well as keep you from hitting financial goals when you want them too. Understand all the taxes and deductions that come out of the first paycheck as an attending physician before deciding whether or not you can afford something.

  • That said, do not deprive yourself to the point where you aren’t enjoying the fruits of your efforts and success. Physician burnout is real and delaying gratification forever is a surefire way to add to it. Splurge on the things that mean the most to you, but keep everything in moderation.

  • Pay yourself first. Take 20% of your salary and set it aside for your retirement accounts and other savings and investments. Then you can do what you want with the rest.

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  • Learn about basic personal finance. Even if you choose to use a financial advisor or other professionals to help you manage your money, know enough to understand what they’re saying and so that you can recognize good advice from bad advice, because there’s a lot of predatory financial advice geared towards physicians out there. It’s also in your best interest to understand taxes and tax strategy as soon as possible, so you can make savvy decisions that can have huge implications for how fast you grow your wealth.

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  • Protect yourself and loved ones from financial catastrophe. Doctors need a lot of insurance to protect what they’ve worked so hard to build. Make sure you have adequate life, disability, malpractice, health, umbrella, home, and auto insurance.

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  • Make sure you have a plan to address any high interest debt, and/or student loans or personal loans or credit card debt from training. It is very hard to get past paying the interest portion and actually tackling the principle otherwise.

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  • Avoid making too many large financial commitments early, like buying a house before you’re sure you like a job or investing in your first investment property. This is a time of your life where lots is changing - allow yourself to settle in before committing to things where the potential for loss could be a huge setback to your financial trajectory early on. Remember that time in the market beats timing the market and money saved now will grow exponentially before you hit retirement age.

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  • You can increase your savings and wealth by making more money and saving more money. Make sure you also don’t become complacent about your income - negotiate good contracts, know your worth and stand up for it in requests to take on more work, and explore options for alternative income streams. Having all of your eggs in one basket can be a big threat to your ability to have leverage at the negotiating table.

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General Personal Finance Steps for Graduating Residents and Fellows as You Navigate the Transition to Early Career Attending Physician


These are all the important things that you need to do first, before getting into the more sophisticated aspects of personal finance. This really should be most of what you need to know for the first year unless you happen to be in the fortunate position of having more money than you know what to do with right out of training (or independently wealthy or with a high earning partner), and what most financial accountants will tell you to do. 


  1. Protect against financial catastrophe (insurance, basic asset protection, and basic estate planning)

  2. Establish an emergency fund

  3. Plan to max out your tax advantaged accounts if possible (retirement accounts, HSA, Roth, Backdoor Roth, 529s if applicable)

  4. Make a plan for paying back student loans if applicable.

  5. Pay off high interest debt.

  6. Start a taxable account for excess savings.


The order in which you do this will vary, but most would agree that you should secure your life and disability insurance, establish your emergency fund, and max out any retirement accounts where you get a match (that’s free money you’d be leaving on the table otherwise). After that, we generally recommend paying back high interest debt, funding the rest of your tax advantaged accounts, and then starting to invest in a taxable account.  We go into each of these steps in more detail below.


Basic personal finance steps for graduating residents transitioning into practice


Protect against financial catastrophe


As we said, don’t mess up a tried and true pathway to wealth. You’ve worked hard to get here and you and your loved ones deserve financial security for life. You should ask yourself two questions:

  • What’s my plan to support myself [and/or loved ones] if I can’t earn money as a physician due to disability?

  • What’s my plan to support loved ones if I were to pass away earlier than expected?


If you haven’t already, this is a good time to buy your life and disability insurance. If you already have these insurance policies, think about whether you need to increase your benefit amount. 


As you and your family get used to not living like a resident, your needs will change. If you bought a future benefit increase option rider on your disability policy during training and have just the baseline level of coverage, this is the right time to exercise the ability to increase it to reflect your new earnings.



Life and disability insurance for residents and fellows

Also make sure that you have adequate insurance coverage for your home and auto policies, as well as umbrella insurance. This is your cheapest option for asset protection as a physician, and we generally recommend getting as much as you qualify for that will cover your net worth. Note that umbrella insurance does not cover you from malpractice lawsuits, so you’ll also want to make sure that you have adequate malpractice insurance. Same goes for health insurance. If you’re having a hard time figuring out what kind of health insurance to pick, this article has an explanation of the major different types of health insurance plans.


You’ll also want to make sure that your wills and trusts are updated to reflect any changes. 


Learn more about the basics of estate planning as a physician.


Our insurance agents for physicians and attorney database for physicians can help you with many of these things.


Action item: Buy disability and life insurance using one of our recommended insurance agents for physicians if you haven’t already.


Action item: Ensure you have a plan for health insurance between jobs.


Types of insurance all doctors should consider carrying


Establish an emergency fund


Now that you can build up some savings, it’s time to set aside 3-6 months worth of your family’s expenses. Use the budget that you created (and if you don’t know how, this article goes over budgeting as a physician) to determine what this amount is. This emergency fund will be your financial safety net in case you have unexpected expenses (like replacing a car that breaks down, a major home repair, or if you lose your job and have a period of unemployment). With inflation being as high as it is, we recommend that you don’t just leave this money in a normal checking or savings account. While we don’t think high yield savings accounts or similar are a good long term investment strategy, they are very good for money that you need to keep liquid in case of an emergency. Consider this or other short term investment options for doctors to keep their emergency funds such as money market funds. These are a good way to keep your money safe, while still working for you in the background to generate some returns.



Action item: Create a budget so you can figure out how big of an emergency fund you need.



Emergency fund guidance for graduating residents starting their personal finance journey


Plan to max out your tax advantaged accounts (retirement accounts, HSA, Roth, Backdoor Roth, 529s if applicable)


If you’re an employed physician, you’ll likely have access to retirement accounts through your employer. With any luck, they will match a certain percentage or amount that you put in. You should definitely plan on at least contributing that amount. Otherwise, that’s free money that you’re letting go. Once you’ve contributed to the max you need to match, if you happen to qualify for an HSA because you have a high deductible health plan, we recommend you look at filling up the maximum contribution there next. That’s because this is a triple tax free account (not taxed on the money that goes in, not taxed on the growth, and not taxed when you take it out). We literally refer to it as a stealth IRA and love this option as a savvy tax strategy for physicians. Learn more about why we love the Health Savings Account (HSA) for doctors. It can be confusing when you first start out to know which retirement accounts to choose if you have access to a few. Generally the 401k or equivalent makes sense to contribute to first. If you also have access to a 457b, be careful that you understand the advantages and disadvantages of contributing to a 457b as a physician, particularly if you are in a non-governmental organization, as there are several risks and limitations associated with these.


This guide to retirement accounts for doctors will walk you through the options most often offered to physicians through their employment (and if you’re self-employed, it goes through your options for contributing to retirement there as well). Read this if you’re wondering about whether you should contribute to the Roth 401k or the traditional 401k. If you’re self-employed (or you are a physician with a side gig!), you can start with a solo401k before moving onto fancier options for self employed physicians if your income allows it. If your income level for the calendar year where you finished residency is below the income threshold where you can contribute to a Roth, we recommend that you do that. Otherwise, think about doing a backdoor Roth. Many physicians use this as another way to get more money into an account that will grow tax free over decades, so it’s a good tax strategy option that should be utilized before contributing to a taxable account. Other tax advantaged accounts to consider are a 529 plan if you have children.


Tax advantaged retirement accounts graduating residents should consider investing in

If you’re wondering - once I start these accounts, where do I actually invest them? We recommend starting with the basics. A three fund portfolio is a great option - it’s easy, low maintenance, and historically proven. Other low effort investment methods that are solid options are outlined in this article on lazy investment options for physicians, along with the pros and cons of each. 


This really isn’t hard - in most cases you’ll set it and forget it for most of the year. If you’re really not comfortable with it after looking into it, you can always use a financial planner, but read our guide to financial advisors for physicians beforehand to know what to watch out for in terms of fees and fiduciary responsibilities.


That covers what you likely need to know about retirement accounts for now.  Once you’ve done these steps, if you still have money left over, you’ll want to start thinking about creating a taxable investment account.


Action item: Learn about retirement accounts for physicians.



Action item: Learn about how to invest as a physician.



Make a plan for paying back student loans if applicable


Many of us have debt coming out of training. The most obvious of those that the majority of physicians have is student loans. Given that the average student loan amounts for physicians are six figure amounts, this will likely significantly affect your financial picture in the near term.


If you have private student loans, you always want to be on the lookout for lower rates through private student loan refinancing. It doesn’t cost you anything to refinance your student loans, so if you get a lower interest rate, it’s generally a good idea. If you have federal loans, this situation has gotten a lot more complicated over the last few years. The good news is that there are several options. If you are going for PSLF, your plan is relatively straightforward.


What graduating residents need to know about income driven repayment (IDR) plans for student loans

If you are doing an income driven repayment plan, SAVE is the new plan that could make sense for a lot of borrowers assuming that you aren’t so high income that the lack of a payment cap will hurt you. If you have a small amount of student loan debt, that may also not be the best plan for you. It’s well worth the time to look at all of the options and calculate your numbers under each situation. In some cases, especially if you make a very high income where income driven repayment programs will actually mean you pay more, or if you want to pay off the student loans quickly so you don’t have them hanging over you for a decade or more, you may be better off refinancing your loans to private loans.  Note that once you go to the private system, you can’t go back to the federal loans or any associated forgiveness programs




Make a plan for paying back high interest debt


Depending on your situation, you may also have car loans, mortgages, credit card debt, and personal loans.


That’s okay, and honestly expected, especially if you’re coming out of training in a high cost of living area or have a family that you’ve been supporting and who’s been supporting you as you finish training. 


The big problem is high interest debt, because those loans are extremely difficult, if not impossible, to pay off if all you’re doing is making the minimum payments. This is because the majority of your payment may just be going towards interest, and not even cutting down on the principal. If you have high interest debt (in today’s interest rate environment in 2024, let’s call that 7% or above), you should be thinking about how to pay that off. After you’ve contributed the amount you have to in order to get your retirement account contribution matching, you should tackle this money. 


What to consider as high interest debt for graduating residents

If you have credit card debt, a lot of which is very high interest (some >20%), it could make sense to pay those off with a personal loan, which is still a higher interest rate loan, but not usually quite as high as credit card debt, and then tackle the personal loan immediately after. 


If you need a resource for personal loans, we have two:


  • Doc2Doc Lending: provides physicians with fast access to personal loans. Use our affiliate link at www.doc2doclending.com/psg for a $100 cash rebate with any newly funded loan, a 0.25% discount if you use auto payment, and your first payment due date held for 30-45 days.

  • Credible: offers options for personal loans.  Explore options through our affiliate link www.credible.com/physiciansidegigs.    



Lastly, you’ll learn that debt isn’t always a bad thing - as you move further down your investing journey you may even find that leveraging (low interest) debt can be one of the best tools to get a sizeable return on investment as long as you can protect against the downsides of having debt. Many people do this to buy real estate as physicians, where they put down a 25% down payment on an investment property such as a long term rental, but create monthly cashflow. Later on, you’ll come to questions like whether you should pay off debt or invest, but for now, focus on getting rid of the high interest debt.



Start a taxable account for excess savings


If you are in the fortunate position of having more money left over after all the things above, it’s time to consider opening a brokerage account. We recommend keeping it very simple at the beginning. As above, a three fund portfolio is a great option for a tried and true pathway to wealth with low expenses that you really can manage yourself. 


Why we love the three-fund portfolio for graduating residents and fellows

This is also the point where we highly recommend doing a deeper dive into learning about personal finance. 


Start here for a more in depth guide to personal finance for physicians.


Once you’ve got your feet firmly settled in attending territory, you can start thinking about things like investing in real estate or other individual investments if they make sense for you. 



If you find yourself needing a financial advisor, read our guide to financial advisors for physicians beforehand to understand what to watch out for in terms of fees and fiduciary responsibilities.



Conclusion


This should really get you started with the foundation that you need to start your career as an attending physician. Once you have done these things, you can explore the section of our webpage dedicated to resources for learning about personal finance for physicians for more detailed articles and guides.



Additional Resources for Residents and Fellows


If you’re a resident or fellow, make sure you watch the recordings of the transition to practice series events on our communities, which answer a lot of other FAQs we see during this time period, as well as other events tailored towards residents and fellows


Checklist of things to do as a Graduating Resident or Fellow


Securing your life and disability insurance


Contract negotiations and Job Search


Personal Finance


Student Loan Refinancing


Side Gigs for Residents and Fellows


Figuring out what to do with retirement accounts


Housing for physicians

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