How are you going to pay for medical school? How are you going to pay off your med school debt after you start practicing? How will you be able to afford a home and some of the comforts you’ve worked so hard for? Those are the questions we’re going to discuss today with an expert in financial planning who focuses strictly on residents and physicians.
Financial Planning for Doctors [Show Notes]
Ryan Inman is the President and Financial Planner at Physician Wealth Services, which he runs from Las Vegas, NV. He is also the host of the Financial Residency Podcast. Both are aimed at medical students, residents, and physicians in their first 10 years of practice. In addition to a Bachelors in Accounting, Ryan has an MBA and a Masters in Accounting and Financial Management, Personal Finance, all from the University of San Diego.
Ryan, can you tell us a little about your background and how you began your career in financial planning and advising? [2:00]
I got my first glimpse at investment advising from my neighbor. I was the nerdy kid who saved all his money and asked his mom to open up a TD Ameritrade account so I could trade stocks. My neighbor was a certified financial planner, working with high net worth individuals of $1M+, and “working” with him I knew what I wanted to do. When I got out of college in 2008 the entire financial industry was decimated so I ended up starting with KPMG in public accounting. Ultimately I went to work with my neighbor doing financial planning.
I started dating my wife as a freshman in college. We got married 10 years later, and we’ve been married for five, which is how I got into advising physicians, as she is one. I saw all the stuff my wife and her colleagues were pitched – terrible investment products, using fear and scare tactics to sell them – so I helped them out. As my wife and I started talking about our future – whether we wanted kids, our career paths – I realized I really wanted to work with physicians. All of our friends are doctors or financial planners and it’s what I really love doing so I’m very happy to be talking on the show to premeds to arm them with knowledge before they get to med school to avoid mistakes on the back end.
Why have you focused on guiding medical students and doctors early in their careers? Why do they need different advice than a young lawyer or young engineer, for example? [5:21]
One is I’ve been there. I have intimate knowledge of the pain, struggles, and yes, of course joys of a career in medicine. I know what it’s like to be buried in student debt, with your spouse making next to nothing, sleeping every fourth night in the hospital. This is a main driver of why I only work with physicians.
In terms of how they are different, a few things stand out. One, they have delayed gratification. They put so much aside to become a doctor – not just financially, but free time, social time – and are earning pennies per hour in their residency, essentially. They take their work home and chart and that time is not reimbursed, for example. I have clients who have put off starting a family due to student debt. My average client has $283K of debt, and there is a reason why they are overwhelmed with what to do. They are never trained in finance but are then expected to run their own practices. The biggest thing after all of this delayed gratification is they experience this insane lifestyle inflation. An attending salary may be $340K after making about $55K as a resident. That is an insane amount of money coming at them. They had put off buying a car, buying a house, saving in a 529 if they have kids, and suddenly the lifestyle creep goes through the roof. Then they find themselves stuck after 2-3 years – “I overcommitted, my debts are crazy, student loan repayments are starting to come due.” All this newly found money is a giant carrot and it’s understandable you want to spend all of it because you sacrificed so much.
What is your top advice for premeds? [10:13]
I don’t have all the answers but can look at it with a financial lens. Take the cheapest school you can actually get into. Some of my clients go to these elite schools in high cost of living areas and come out with a massive amount of debt. It is hard for me to believe that a school that is 2-3x more expensive has that much difference with career prospects. My wife got in-state tuition, and lived at home for the most part. She could have gone to Stanford but making these choices allowed her to not take so many loans and not pay a crazy amount of tuition. That one decision is going to determine the next 20 years of financial success, because you will pay student debt for a long time.
The number two thing would be to begin your financial education today because you will not get it in med school, residency, or your fellowship. The people you will reach out to are your peers who also don’t know what’s going on. You are never given the opportunity to study personal finance during your training. There are tons of great books, blogs, podcasts, etc., and do that early before you start getting into six figure debt.
My last thing is for med students. Pick a residency in a low cost of living area. We did so in Orange County, CA which made it significantly harder to not get into financial trouble. We did ok, primarily because I was working, so be careful about that and/or make sure a spouse works. If my wife was on her own it would have been really hard for her to make rent and pay for much without going into credit card debt.
Using me as an example, the cost of rent in San Diego for a 3BR house, which is 12-1300 sq ft in a decent part of town (a place my wife could jog without me worrying) – that rent is $2500. My family is from Las Vegas. I can rent a place there in a gated community that is 500-600 sq ft bigger and pay just $900-$1000 in rent.
Linda: My friend’s daughter and husband live in West LA in a 2-bedroom condo, and are moving to Cincinnati and buying a 6,000 sq ft house on an acre of land for slightly less than they anticipate getting for their condo, so the difference in cost of living between Los Angeles and Cincinnati is enormous.
Hypothetical, and probably not so hypothetical question: An applicant is accepted at School A, but really wants to attend School B. B is closer to family, but it’s in a much higher cost of living state. Tuition is about the same at both programs. Should the applicant decline the offer of admission from School A, go get a Masters to improve her qualifications and hopefully get accepted to School B? Or should she grab the acceptance, deal with the distance, and get started on med school? [17:36]
That’s an interesting question. A couple things play out in my head. A masters is going to cost money so you’re taking on more debt in order for your CV to look better to get into another school to take on more debt. You have deferred earnings, and every year you wait might be several hundred thousand dollars. I would assume if you got into med school and declined it, it would actually have a negative effect the next time you apply, so not sure how that looks. The last piece is if school A is in a lower cost of living area, use the savings to travel home, and speaking from experience, my wife studied all the time. We dated long distance, and I was the one coming to visit her not the other way around, and it was nice of her to make time but she was really busy. You’re not going to have a ton of free time anyway.
What do you think of some of the public service programs or the U.S. Military options for financing one’s medical education. I interviewed Captain Jennifer Cox for our July 4 program about the military options (listen to that episode here). [19:43]
Some are state specific, but from a general standpoint if you are going to come out in a residency and set up a 501c3, you will keep track of qualified payments up to 120. First year you have zero dollar payments that count toward the 120. Could you in theory make a similar salary? Take into account the size of your balance, your specialty, how much you will make there, where you want to work, if you want to be an academic (that is easy — then you shouldn’t look at PSLF). In general, if you can get through with a three-year residency and a three-year fellowship in a job in the public sector, you are already 60% of the way through.
Servicers really don’t know what they are doing. I see errors in my client loans in descriptions, qualified payments, and more – one client went to residency for three years, did a three-year fellowship, and they said the work history is 56 payments in residence, two in fellowship, but since you have a 501c3 and payments going through there, it’s not aligning with the right time period. In terms of timing they were double counting what will happen when he reaches 120. There is no forgiveness on loans, and lenders are going to try and find everything wrong in the paperwork. They are not trying to give you a favor, so be careful what info you trust and follow. Supply all the paperwork every year for certification. Make sure you have the correct dates for correct institutions and correct number of payments.
What should med students comparing student loan options be looking closely at? [24:23]
The best loan you can have is the one you don’t take out. If there is a way to not take out as much in loans to live off of, if you can figure out how to budget and understand how much it is for housing and to eat and not go overboard, not take luxury vacations and blow finances up, that is best. Med school and residency is about financial survival and not getting into significant credit card debt and loans since you are paying back with interest. Interest is not cheap and it compounds, so that loan you don’t have to take out is the best thing you can do for yourself. No one will care as much about your money as you, so understand how to budget and not take out too many loans and get into crazy credit card debt.
How do you advise residents or young doctors, usually in their early 30s, to pay off their student loans and at the same time start saving some money, either for a house or for retirement? [27:32]
It sounds fundamental, but the more I dive into physicians and their finances I hear, “It was free money so I took it,” and it’s not, and it is going to come due with interest. If you address it in the very beginning your problems will be much smaller. Debt vs savings is the number one question I get asked. It is different for everyone. I am not going to say it depends. If you have high interest debt it needs to be extinguished. If you are a resident and new attending and the company gives a match, and the first 2% of saving is a dollar for dollar match, invest to get a match and pay down any high interest debt incurred, 7% or above. I would then try to max out tax-advantaged accounts like 401Ks or 403bs, and if you’re a resident contribute to a Roth directly or do a backdoor Roth. Student debt will come due so think about that. How debt averse are you? Will you pay it back when you can, or does it keep you up at night and you need to eliminate it ASAP? For anything above 5% interest allocate as much money as possible to eliminate it as quickly as you can. Many people do a combination of debt and investing. When you pay down debt you are “earning” that money back. If there is a remainder then it comes down to what are the other competing goals – house, saving for kids, college, etc. For me, I had to make sure our retirements were taken care of before their school. I can put debt on their education but not on my retirement. I need to make sure retirement is taken care of before doing other things.
What financial advice do you have for students once they’re in med school? [33:37]
I have a client who is a Lyft driver, and he uses earnings from that for his “fun” money, so think about something like that if the lifestyle allows.
Any specific advice for significant others of med students, physicians, residents, and fellows? [35:53]
You have to be understanding. That immediately comes to mind. The career is tough, there are long hours, and you are splitting time with your spouse and their career. From a spouse perspective you have to understand it is important to them. They are doing whatever they can to save lives/do good and help people, and the time commitments are such that you need to understand. The career takes priority over a lot of things. I had to move around a lot in my own career so she could go through and do her training. In grad school I traveled every weekend to visit her in Kansas to make sure we kept the relationship alive. She didn’t have time to take to come see me. In residency if I wasn’t already living there, I would have had to move most likely. I had to put my career in limbo for a little bit. There is a lot of sacrifice that goes in that you don’t really think about maybe, as well as possibly taking on a heavy debt load.
How do you help physicians, physicians-in-training, and their families? [38:45]
Think of me as your PCP for your finances. What I do is help physicians take control over their money, to understand how they spend money, and where they would like to spend money. What does your ideal life look like? How will you use the money vs how much do you have or how much money do you make? I don’t care how much money a client has, I want to know what drives them, to figure out how can we align the money around their life.
Any last pearls of financial wisdom for aspiring doctors? [40:11]
The biggest mistake I see physicians make is when you finish training don’t let the lifestyle inflation go crazy. Give yourself a “raise,” but don’t spend everything you have in your new position, be responsible for your finances.
Related Links:
• Financial Residency, podcast and free resources for physicians and physicians in training
• Physician Wealth Services
• Navigate the Med School Maze, a free guide to medical school admissions
• Accepted’s Medical School Admissions Consulting Services
Related Shows:
• Get into University of Washington Medical School
• Why Should Medical School Take Four Years?
• The Military: One Way to Get an MD Debt-Free
• The Importance of Teaching Management in Medical School
• Promoting Financial Health for Doctors
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