Managing Debt After Residency

Managing Debt After Residency

Quick Tips for New Physicians

debt after residency

According to the American Medical Student Association, approximately 86 percent of medical school graduates are burdened with a large amount of debt. The average amount these graduates incur is approximately $189,000.

Juggling the start of full-time practice, long hours and a new practice environment, in addition to figuring out how to pay back six-figures of debt is a lot to manage for most people. Sometimes because of these new stressors, some things get pushed to the side and priority is focused elsewhere. The thought of “oh, I will get to it when I can” is common versus proactively managing student debt. Unfortunately, after residency, your debt still lingers. With a little help and good financial practices, physicians can quickly take control of managing and paying off debt.

We went to our ApolloMD physicians, those who have seen and lived similar experiences, to ask for the financial advice they would give young physicians just finishing residency. Remember these tips as you assess your financial situation:

Track spending and cash flow closely

The best way to track your spending is by putting yourself on a budget. One of our physicians mentioned to set your budget quarterly and truly put the effort into following the budget. At the end of each quarter, review your spending and see how closely you stuck to the budget. Adjustments can be made for the next quarter based on your previous quarter spending. There may be small changes each quarter, but overall you should have a good idea of where the majority of your money goes. Other tools to help track cash flow include various smartphone apps and programs. One ApolloMD physician suggests using Mint. It’s user-friendly and available right at your fingertips. If you know where your money is going, you can make adjustments to spending and find additional sources to pay down debt.

Establish an Emergency Fund

Catastrophes happen all the time and most people chose to stick those costs on a high-interest credit card. Instead of racking up more debt, set up a money market or savings account and put a minimum of $1000 in it for emergencies. When it comes time to take care of that plumbing leak or new car part, you can pay cash rather than increase your credit card balance.

Keep living like a resident

This means to keep living modestly for at least two to five years post-residency. If you continue to spend like you are still an attending, the additional income can be used for paying off debt and making extra payments toward your loans each month.

Just like you did in residency, watch unnecessary debt and spending. Often times, people entering in high-paying professions for the first time are not used to larger paychecks and find it easy to get carried away with spending. Some of the quickest ways to create a deeper financial burden are with unnecessary spending. For example, our physicians put together a list of the top things you shouldn’t do when you’re trying to repay student loans:

  • Don’t buy a brand new car/luxury vehicle right out of residency. We get it. Your new income now allows for you to buy the luxury sports car you’ve always wanted, but can you really afford to do it and how necessary is it? Buying a luxury vehicle isn’t just paying the sticker price. There are other factors to consider which will cost even more money later. For example, routine maintenance, new tires, oil changes, etc. These things are all far more expensive on a luxury vehicle because of the higher quality of product needed. If you are going to buy a luxury vehicle or any new car, consider other options rather than going to the dealership to purchase a brand new car off the lot. For example, you can buy a certified pre-owned vehicle and still get the new car feel and warranty with half of the expense. You will have to do your research, but in the end, you will be saving a good bit of money and be satisfied with your new car.
  • Don’t lend money with the expectation of being paid back. If you have the extra dime to lend to a family member or close friend in need, there is nothing wrong with helping someone out. But, lending an amount you cannot live without is never advised.
  • Don’t rack up credit card debt. While there are benefits to some credit cards, unpaid balances at the end of each month only cause more stress and increased debt. If you are going to use a credit card, be sure to pay it off as soon as the balance is posted. At the end of each month, double check the account to be sure there isn’t an outstanding balance. Research credit cards before signing up to choose the right one for your lifestyle and use it wisely.
  • Don’t buy a house so expensive you can’t pay it off in 15 In some cities, it may not be affordable to buy a home on a 15-year mortgage. However, in most cases, there is no reason to buy something you can’t pay off in a reasonable time frame. Your mortgage should be a small portion of your income. If something happened to prevent you from making a mortgage payment on a 15-year plan, it’s likely it still wouldn’t be paid on a 30-year plan. Do not double the years if you don’t have to or out of fear of a catastrophic event occurring. Choosing the 15-year mortgage will get you out of debt faster, as well as a lower interest rate.

Educate yourself and become an expert in your finances or hire an expert to help

Our physicians highly suggest reading “The White Coat Investor”, a book focused on finances which was written by an emergency room physician for healthcare professionals. After you finish the book, remember to continue to invest in your financial knowledge, keep going with blogs, books and podcasts. Get as smart about money as you can. We also suggest educating yourself a good bit before seeking a financial advisor. This will help you chose the right person for you and provide a better understanding in the process. Additional online resources recommended by ApolloMD physicians include: www.mdintheblack.com and www.whitecoatinvestor.com.

If you chose to hire an expert, do this as early as possible. A great financial advisor can help with long- and short-term goals and develop plans to best fit the physician’s current lifestyle and future plans.

Start paying your debts early

Tackle the smallest amount first, then move on-ward by amount owed, paying off the smaller ones before the larger. When assessing the amounts, pay close attention to interest rates, you want to get high-interest rates paid as soon as possible. If this plan doesn’t work for you, work with an expert to figure out which repayment plan best fits your situation and the amount owed.

Refinance or consolidate your loans

Depending on your debt to income ratio, it may be reasonable to consolidate your loans. Another option is to look into refinancing. Both options have pro’s and con’s. Consult with an expert to decide what is best for your financial situation.

Pay your future self

Make retirement savings a priority. You have a shorter savings window in medicine than most professions. If you wait to save for retirement for when you’ve paid off your loans, then you have already missed out on significant time to have your savings compound.


Described in this article are some examples of general guidelines commonly followed by physicians. The scenarios provided in this article regarding tax saving and retirement planning strategies are neither recommendations nor suggestions, but are merely examples. We recommend that before employing any of the tax savings and/or retirement planning strategies discussed that each provider obtains the guidance and advice of an experienced financial planner and a knowledgeable accountant to make sure that each specific strategy most effectively meets each physician’s individual needs.

Share this post. Email this to someoneShare on LinkedInShare on FacebookTweet about this on Twitter