Monday, October 03, 2022

by Andy Harms

If your wallet needs live-saving measures, now is a great time to avert a crisis.

The grind. Residents know about it. Long days requiring intense mental focus. Physically demanding. Exhilarating and enjoyable, yet exhausting and overwhelming at times. Loving what we do—but not loving what it does to us on some of those days.

We’re a diverse set of people yet bound together by purpose. We can thrive in ever-changing, always-evolving patient care environments and on-call opportunities. Just as well, many of us excel best with a more structured day, one with meticulous order and greater command over outcomes. Our personal identities and varied interests were a large part of how we chose our specialty.

Regardless, as residents we’ve all been trained to think on our feet, orient and analyze quickly, decide with assurance, and act toward a favorable outcome.

In speaking with residents over the years about personal financial situations, I see an incredible ability for young physicians to manage—if not juggle! —their money matters despite weighty, disorderly, and persistent challenges.

Wouldn’t it be nice if there was an easier way to prepare and plan financially, to bring order from chaos? The good news: there IS a better way. The bad news is you likely were NOT trained in finances the same way you trained for medical practice.

The Journal of the American College of Surgeons published a study in 2018 titled “Clinically Competent and Fiscally at Risk: Impact of Debt and Financial Parameters on the Surgical Resident.”^[1] One hundred five resident trainees were surveyed on topics of personal finance, and the majority (79%) of respondents felt strongly that inclusion of additional financial training in residency education is a critical need. The authors conclude: In a climate of increasingly delayed financial gratification, surgical trainees are on critically unstable financial footing. There is a major gap in current surgical education that requires reassessment for the long-term financial health of residents.

In digging deeper for perspective on resident finances, I spoke with the researcher and author of this study with the longest tenure in medicine, Dr. Bruce Harms, MD, MBA, FACS. “My generation of doctors, I believe, assumed that we could out-grow, with time, any financial mistakes and miscalculations we made in residency and early on in our careers. I think that is an incorrect assumption nowadays. For younger docs, in this era, the mistakes made from a financial standpoint may be extremely costly in the long run.” When asked to point out the biggest differences from then (Dr. Harms began residency in 1978) to now, he pointed out “certainly educational debt is the biggest difference I see, but also the cost of living. Housing, transportation, health care and childcare command a significantly greater part of a budget as compared to when I received my start in medicine.”

If you’re in a residency program that addresses your financial literacy and financial preparation needs well, count your blessings. That’s certainly not common throughout organized medicine in the United States. Similarly, if you’re employed in a residency program that offers a retirement plan with matching employer contributions, count yourself fortunate.

So where can we turn for assistance to avoid making costly financial mistakes and confidently face the challenges of personal finance during residency, given it may be unlikely to come through our employers or GME programs?

One of my favorite recommendations for residents hoping for better command over their personal finances is to pick up, digest, and implement suggestions from a book titled MD in the Black: A Personal Finance Primer for Medical Residents.^[2] (Please note: I have no ties to the authors or sponsors of this book) It’s informative, practical, and concise. For all those in the TL;DR camp, it's only a hundred pages. I recognize your time is limited—among the barriers to better financial literacy—but reading this book is certainly worth making a priority. Editor-in-Chief Eric Shappell, MD, MHPE, and physician educators from around the United States created a great resource, specifically designed for residents.

The book focuses on five topics: 1) Educational debt, 2) Long-term disability insurance, 3) Life insurance, 4) Investing, and 5) Financial advisors

Likely you have questions in all these areas. The authors point out “they are each related to a significant financial decision that the majority of residents will encounter during training.”

We won’t breakdown each major category here, of course, but I would like to highlight two takeaways that every reader of this article at the residency level should consider:

First, on the topic of educational debt: Have you asked yourself “What is Public Service Loan Forgiveness?” and “Should I Pursue PSLF?” This is the first decision you should make, and various sources can help you better understand how to approach this process of determination. Once a determination is made regarding PSLF, a debt repayment strategy can be mapped out further.

As important as long-term disability insurance, life insurance, and investing are to the needs of a resident, a personal and in-depth commentary on each is beyond the scope and space of this article. However, they are a good lead-in to the second point we’d like to highlight here from Dr. Shappell’s book, considering the question “Should I Hire a Financial Advisor in Residency?”

Most residents should be able to get along just fine with only a few hours dedicated to researching the basic financial decisions of residency (1) choosing a loan repayment plan, (2) choosing which insurance products to purchase and when, and (3) what to do with any extra income (typically a decision of whether to make extra payments on loans vs. invest). If you don’t feel comfortable making these decisions on your own and aren’t interested in learning more about them yourself, choosing to hire a financial advisor may be the way to go. This also may be a good idea if you have unusually complex financial circumstances. (Shappell 84)

Whether during residency or as an attending, the likely outcome in any event is a search for an experienced and trusted financial advisor. What credentials do you seek, what questions do you ask? MD in the Black notes residents looking to start at the ground-level in forming a financial plan will do well to consider an advisor with a Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC) or Certified Public Accountant/Personal Financial Specialist (CPA/PFS) designation. Additionally, I suggest aiming to find a Fee-Only advising arrangement, particularly for planning services. This model minimizes conflicts and ensures that your financial planner acts as a fiduciary. Fee-Only planners are compensated directly by their clients for advice, plan implementation and for the ongoing management of assets.^[3] Fee-only financial advisors may be paid hourly, as a retainer, as a percentage of assets under management, or as a flat fee, depending upon the planner you choose.

As residents, we understand the importance of preventative health care and the consequences of delayed treatment. This understanding, applied to our personal finances, will not only stave off a trip to the financial ED (i.e., more borrowing, lower net worth, less financial freedom), but enable us to enjoy the peace of mind and sense of confidence that comes with financial health. Our goal should be to confine the chaotic moments and stressors related to medicine to the hospital and away from our pocketbooks.

We invite you to check out the resources mentioned above and reach out for help at any time to gain better financial understanding, set financial goals, and establish a path to financial wellness. Residency may be the best time to reach out, while the time is still on your side.

Andy Harms is co-founder of ScrubMoney, a free app now available for download, providing financial literacy and relevant personal financial content. ScrubMoney aims to empower early-career physicians to achieve financial wellness and enable stakeholders in healthcare to better develop financially confident doctors within their organizations.

^[1] Clinically Competent and Fiscally at Risk: Impact of Debt an... : Journal of the American College of Surgeons (lww.com)

^[2] MD in the Black: Personal Finance for Residents and Medical Students

^[3] What is Fee-Only Financial Advising | NAPFA