The Resident Starter Pack: 3 Critical Pieces of Financial Planning for Resident Physicians

Schooling to become a physician is COSTLY. Many physicians have thousands of dollars in student loans as they start their residency training and plan to get their first "real" paycheck. Many resident physicians are behind their peers in terms of saving money and investing in their future. Today's post is from Bonnie Mangold, JD, a financial advisor who is sharing 3 CRITICAL pieces of financial planning for residents, fellows and new attendings.




There are 3 critical pieces of financial planning that I frequently recommend to residents, fellows and new attendings in my financial planning practice:

(1) build an emergency fund

(2) have disability planning in place and

(3) open a Roth IRA.


Emergency Fund:


An emergency fund is a critical component of being and feeling financially secure. No matter how carefully you plan your finances, there will always be unexpected expenses. And yet research show that 39% of Americans couldn’t cover an unexpected $400 expense without using a credit card or borrowing the money – which can cost even more money in interest. TIP: Aim to hold three to six months of living expenses in an account you can access easily, like a high-yield savings account.


Disability Planning:


As physicians, your most important asset is your ability to earn an income. It’s what you live on today, and what you’re relying on to reach your goals for the future ... it deserves to be protected. If you were to get sick or hurt and miss work, even for a little while, that could have a catastrophic effect on your net worth long-term. It could also even jeopardize your ability to pay back your student loans. TIP: Have disability planning in place as soon as possible.


Roth IRA:


A Roth IRA is a retirement investment account where you pay taxes on money going into your account, and then all future withdrawals after age 59 ½ (provided they have remained in the account for at least 5 years) are tax-free. By paying taxes now when you are presumably making the lowest income (read: lowest marginal tax bracket) of your career, you get to take advantage of the comparative tax savings. TIP: The sooner you start investing for your future, the better. That’s because it allows you to take full advantage of compounding, which is earning interest on interest over time – and it can make a big difference. Let’s say you turn 45 years old and decide to start investing $100 a month. For simplicity, we’ll say you get a 6 percent annual return, including compound interest. With that return, you can double your money by the time you turn 65. But, if you started saving 10 years earlier, at age 35, you could triple your money – because you’ll be earning interest on your interest for longer. And if you started at age 25, you could quadruple your money by age 65.


Contact Bonnie directly at Bonnie.Mangold@nm.com to set up a complimentary 1:1 consultation and free custom financial plan!


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