Finances in Medicine - Big Life Expenses

As I move from student life to resident life, non-career life goals start to loom a little bit larger. At my age, many of my friends and colleagues are looking towards a few big expenses - getting a car, getting married, having kids, buying a house. None of these come cheap.

Car
This one's simple - most residencies require access to a vehicle, and in most cases, it's going to have to be your own vehicle. Buy something that fits your needs through residency that's reasonably low-maintenance (there's no time to be babying a fixer-upper). It shouldn't be a luxury vehicle. It'll likely be paid for through debt entirely and that's alright. It's a necessary business expense.

House
Ahh, the eternal debate - buy a house in residency or rent a place. In all honesty, there's no simple answer here, it'll depend on numerous factors. To the extent that there is any general advice, it's that the standard for Family Medicine residents is to rent, while the standard for those in 5-year specialties is to buy, but there are many exceptions to those guidelines.

The main reason to buy a house is to build equity with the money you're putting towards your living costs, thereby recouping some of that money rather than losing it as an expense outright. Buying a house becomes a forced investment - and a fairly good one at that - as the money paid towards a mortgage partially goes towards the house that you own, a house which is worth a lot of money and which will generally increase in price over time.

The main reason to rent is to avoid the costs and risks of homeownership. Spending money on rent is money that you'll never get back, but buying a house comes with its own expenses that will not be recouped. Maintenance, repairs, property taxes, interest (on the mortgage and, for residents, often on the down payment as well), closing costs, condo fees (if applicable) - all this adds up and is something renters don't need to deal with. Time is also a factor, as renting means that any housing issues that come up are the landlord's responsibility to deal with. Renting is also less risky, as houses can decline in value (but usually don't), and is more flexible if a move becomes necessary, as it often is for graduating residents.

All things considered, buying a house is usually a better financial decision in the long run. However, in the short-to-medium term, it comes with some distinct disadvantages. For those who have a little bit more medium term stability and a tolerance for some financial risk, it can be worthwhile. For those who face a bit more volatility in their upcoming housing needs or who are risk-averse, renting might be the better option and likely a bit cheaper in the short term. Regardless of the path chosen, all physicians will be able to afford a very nice property, likely a "forever home", only a few years after finishing residency - if not sooner.

Wedding
While everyone in residency needs transportation and housing, not everyone needs or wants to get married. Many do though, and the end of medical school is a prime time for it to happen. A good portion of my classmates just got married or have their wedding planned in the near future. Weddings, however, are expensive. Really expensive. Anything with a reception is likely to run at least $15k. More typical weddings are more in the $20-30k range. It's not hard to go above that upper end figure either. Oftentimes, these costs get offset by gifts from guests, either directly through money or through other gifts. Depending on the culture and attitudes of the guests, the entire cost of the wedding might be covered, but it's not something to count on either. For those uninterested in the traditional reception, a ceremony-only event is an option - whether it's the basic City Hall ceremony or a ceremony with more bells and whistles. The main cost of a wedding is the reception, and a very elegant ceremony can be funded for a fraction of the price of that reception.

Weddings are often financed by a combination of gifts, parental support, and debt. Fortunately, as a one-off event, most graduating medical students can afford that bit of extra debt without much difficulty. Still, when budgeting for the future, the expense of getting married should be in those calculations, because it is not a small one.

Children

As with weddings, many people are opting not to have children, so this may be a non-issue for a growing number of physicians. For those that want kids, children require some serious financial planning. The cost of raising a child to adulthood averages over $250k in Canada, with expenses being higher in the early years. For physicians with generally high standards of living and above-average expectations for their children's care, that figure is likely an underestimate. That's a significant and continuous cost to bear.

Perhaps most challenging for those in medicine, children can't always be put off until later, while houses and weddings can be delayed indefinitely. The biological clock is an unavoidable fact of life for a career path that requires training into many physicians' early 30's or beyond. Women in medicine unquestionably bear the brunt of this reality more so than men, though men are not exempt from timelines either when it comes to having children. Timing therefore becomes a rather important decision. The longer physicians wait to have children, the more financially secure they'll be, but the older they'll be before trying to conceive or adopt.

A small number choose to have children in medical school. Time-wise, this can be a good option. Outside of clerkship, schedules are much lighter and more flexible than they are in residency. Medical schools often do allow time off for children, though this typical means being kept back a year and may mean an extra year of tuition payments. Medical students are, naturally, quite young as well. Money is an issue though, as medical students are piling on debt, not bringing in an income. Within reason, debt-financing child expenses can be done. However, other expenses will have to be kept under tight control unless a high-earning partner is in the picture, and careful financial management is a must.

Waiting until becoming an attending physician is a more common time frame to start having children. By this point demands on physician time have (usually) settled down and are much more flexible. There should be plenty of financial resources available by this point as well. The downsides are age and the hassle of practice management. Age is fairly self-explanatory when it comes to waiting until after residency, but practice management is an often-neglected factor. Unlike in medical school and residency, attending physicians are now fully responsible for their own careers. Taking time off to have a child means, in many cases, having to find someone to cover your practice. This can be particularly worrisome immediately post-residency, when a physician is still working to establish themselves and may not be able to easily take time off just yet. These immediate post-residency career demands can push the timeline to have children back even further than intended. Still, for those who are on the younger side, in shorter residency programs, or happy with being on the older side to start trying, waiting until after residency can be a rather sensible choice.

At the end of the day, residency remains a very popular time to start having children. Time is in exceedingly short supply, but taking maternity or paternity leave is relatively straight-forward. Residents aren't exactly overflowing with money, but they've got enough coming in to support a household. They're older than medical students, but younger than attendings, most being in their late-20's or early-30's, which is a fairly favourable time to start having kids. Residency remains the standard "recommended" time to have children for these reasons.

Nevertheless, circumstances will be different for every individual physician, and there are certainly merits to starting to have children either before or after residency. The timing of having children is a balancing act of competing priorities, and any decision will involve some trade-offs. Proper financial planning and lifestyle management remain the greatest assets when considering children.

Finances in Medicine - Insurance

Having money, or the potential to make money, comes with the unfortunate flip-side of having the potential to lose money. A lot of money. That's where insurance comes in. There are a plethora of insurance types and options within those types, which become tricky to sort out. They can also be very expensive. In the last couple months, this is where I've been spending a lot of mental energy, trying to sort out the optimal insurance balance.

Disability Insurance
Disability insurance is required for 99% of people. The only people who shouldn't buy disability insurance are those who could afford to retire right this second and be completely financially secure. At this stage, this pretty much just means people who are independently wealthy. For those near the end of their careers, who are continuing to work out of interest more than financial need, and have their retirement amply well-financed, disability insurance might also be worthwhile to stop purchasing, since those individuals can simply retire in the event of a disability.

Physicians have high current or future incomes, but those incomes require us to be able to work. If we can't work, we lose that income and, in many cases, are stuck with a lot of debt or an unaffordable lifestyle. Disability insurance means that if you can't work, you can still live comfortably while you recover or transition out of the workforce entirely. You should have as much of it as possible, as soon as possible, so that your income stays as close to your working income if you become disabled. Insurers are smart though, and realize that if workers can get paid as much or more than they currently do if they become disabled, it provides a strong incentive to become disabled, so no insurer will give you disability insurance that covers your full income. The immediate thought then is to get multiple lines of disability insurance, but insurers are one step ahead there too - they'll only pay out a maximum amount collectively, meaning that if you have $X amount of coverage with one insurer and $Y amount of coverage with another insurer, you won't get $X+Y in payouts, you'll get whichever of $X or $Y is higher. That usually means it makes sense to have only a single disability insurance provider.

The first disability insurance most of us will be offered is through our provincial medical associations. In Ontario, the OMA offers rather cheap disability insurance to medical students without a medical, which is worthwhile to take. There are some private options, but they're unlikely to be advantageous in terms of cost, so sticking with the association insurance through medical school is fine for most people. Once in residency, the landscape changes slightly. Association insurance continues to be quite cheap and is generally worth maintaining through residency. However, in most provinces, residency comes with an automatic, employer-provided disability insurance that lasts through residency. It's not terribly great insurance, relatively speaking, and it goes away as soon as residency is done, but it's mandatory. One big advantage with these mandatory, employer-provided disability insurance plans is that in Ontario at least, their benefits are not mutually exclusive with the association coverage. Residency basically breaks the rule that says disability should not be profitable above current salary, though the benefits are still far less than what a fully-qualified physician should make.

Once residency finishes, association plans become expensive, opening up the door for privately provided disability insurance. These private plans aren't cheaper per se, but they come with one major advantage - guarantees. Association plans are owned by the association. Their fees could change, their benefits could change, and you as a client cannot stop it individually. Associations do work on behalf of their members and therefore do not have much cause to agree to a worse deal. If anything, provincial medical associations tend to improve the terms of their deals over time, so this problem is more theoretical than real.  Yet, private plans are owned by you, individually, and cannot change for any reason whatsoever. Fees won't change, benefits won't change, nothing can change. The downside of private plans is that they typically require a medical, which could result in higher rates, and will require a year or two of payments before any pre-existing conditions are covered. This simply means that a period of crossover with the association plans is necessary to ensure continuous disability coverage. At this point association vs private insurance is a matter of preference and comfort, mostly between the guaranteed association coverage that does not necessarily require a medical, or private insurance that does not require faith in the provincial medical association to behave appropriately.

Life Insurance
At some point, you will die. That'll suck. If you die before you retire, you may leave behind some people who were relying on you to earn money. This can be a spouse, stuck with your student debt or a mortgage, children who were counting on you to provide for their future, or other dependents like elderly parents who need some financial help in their day-to-day lives. If you have any of these people in your life, you need life insurance. If you don't, you probably don't need life insurance.

Once again, in Ontario, the OMA provides life insurance for students, this time for free, and it's perfectly adequate for medical school for pretty much anyone who does not have children or other dependents. Life insurance is otherwise pretty independent of stage of training. You need some, it doesn't particularly matter who provides it, as long as it covers whatever costs you'd need to cover in the event of your death. It should be term life insurance, which is generally cheap and expires after a set period of time, at which point you can buy insurance for another term (if you need it). It'll generally be more expensive when you renew because you're older and more likely to die at that point, but that's pretty much unavoidable.

There are other forms of life insurance which can technically last forever, meaning they'll pay out eventually, but they're expensive and generally not worthwhile. They cost you more when you're alive than they'll pay to your estate when you die - you might as well just save that money and invest it. Insurance is meant to lose you money, on average, to guard against an unlikely-but-disastrous outcome. Dying young, which is unlikely, is exactly what insurance is meant for. Dying ever, which is 100% going to happen, is not what insurance is meant for.

Home and Auto Insurance
Do you have a home? A car? Buy insurance for them. They're expensive and you need them.

Other Insurance
There's insurance for just about anything. It comes in all shapes, sizes, costs, and terms. You don't need most of it. You might need some of it, depending on circumstances. In general, you should have insurance for anything expensive you own that you couldn't afford to replace if it got destroyed. That includes yourself. Disability and life insurance cover the "you" part pretty well, but supplementary health insurance might be worthwhile too. Home and auto insurance cover your major personal assets, but you may have other personal property to protect, as well as professional assets such as office space. These individual needs should be discussed with a professional and considered with the following question in mind - can I easily afford to lose the thing I am insuring? If you can, insurance probably isn't necessary. If you can't, it probably is.

One important "other" insurance to mention is insurance on debt. This can be insurance on a line of credit, on a credit card, or on a mortgage. Avoid this insurance like the plague. This type of insurance protects the bank in the event you default on your loan. It's for the bank's benefit, not your's. The guard for yourself against defaulting on these loans is the disability and life insurance you should already have. That's there for you, it goes to you, and it should cover your debts.

Yikes this post got long. Insurance is important, but my apologies for rambling! I will follow-up with some hopefully-shorter thoughts on planning major life expenses to wrap up this impromptu series on finances.

Finances in Medicine

Reaching the end of my final year of medical school, suddenly money has become very important. My student debt levels are reaching their maximum, but I'm about to start earning a real salary for the first time since I left my previous career to start medical school four years ago. With that comes a chance to move on to the next stages in life, as well as an obligation to start contributing financially to society at large, after having largely been a sponge for my life up until now.

Education on medical trainee finances, despite being rather unique and complex, is still largely lacking, and mostly coming from people who have a financial stake it your decisions. Most advisers are reasonably honest and up-front about the rationale behind their recommendations - true shysters get driven out of the industry fairly quickly - but sorting out what's best for you isn't always easy. Here's what I've found out so far.

Debt Management

Naturally, this starts in or even before the first year of medical school, when debt starts to build. Just a quick reminder of the basics, the ideal approach is to maximize scholarships/bursaries/grants first (free money!), then maximize government loans (usually come with no interest while studying, many have grants attached), then rely on private loans in the form of a line of credit (LOC) specific to medical students. Once residency comes and government loans start generating interest, usually at a higher rate than LOCs, it's best to roll the entire sum of the government loans into the LOC, unless you qualify for certain governmental debt-relief programs that require you to leave a balance in those government loans to take advantage of them. There are some individuals who, through bursaries or other outside funding, can get through medical school with just government loans.

Some money can be earned by working in medical school by working. Since government loans and grants get reduced by personal income, however, there are significant diminishing returns on getting a job. Some jobs - such as research positions - can be worthwhile even if they were paid nothing, and so earning money from them is just a small extra benefit. Jobs that are taken just for the money may not be worthwhile, however, as it's not hard to be in a position where a student is working for far less than minimum wage once lost governmental grants are taken into account.

Once in residency and earning a real salary, debt can start to be paid down, though it does not have to be. Depending on personal circumstances, some people will build on their debt, some will keep it stable by paying off any generated interest, others will reduce their debt significantly. For the most part, however, now is when debt-paying habits can start in earnest, even if it is just covering the interest. Automatic transfers are ideal, since it's very easy to upgrade lifestyle to match income if that money is perceived to be available. Developing these habits now is mostly important to carry on into post-residency life, as debt-repayment strategies are pretty much identical to the basic savings strategies which define whether a physician is financially secure or has constant money troubles.

Throughout medical school and into residency, the best thing a trainee can do for their debt is to keep it low by controlling spending. Living a modest lifestyle, even when you can technically afford more, makes future financial decisions significantly easier. Living in a smaller place, eating out less, forgoing nice but unnecessary luxuries, and ultimately, budgeting to keep costs low is how to succeed financially. As with debt repayment, forming the habit that spending is to be deliberate and well below one's means is the most critical aspect. Many physicians have financial troubles and for 99% of them, it's a problem of uncontrolled spending. Learning how to avoid those problems early on, in medical school and residency when it still has a large impact on overall debt load, is an important skill.

There's a lot more financial stuff on my mind these days, but this post started getting a little out of hand, so I'll split it into parts. Best advice I can give to those looking to revamp their finances is to get informed and tailor their approach to their own situation. There's some good advice there, but rarely a one-size-fits-all approach. Money management is not something that can be outsourced, medical students, residents, and physicians need to take an active and informed role in their own finances.

CaRMS & Match Strategies

My class got a quick and by no means thorough breakdown of our overall match results, where the most notable highlight was a complimentary breakfast ten times better than anything I'd been served throughout the prior 4 years. The other notable point concerned how our class did in the match. I'll pump up my cohorts here a bit - we had a lot of people match to some rather competitive specialties, especially surgical specialties. Otherwise our results were fairly typical for our school in terms of the overall unmatched. There's some very good soon-to-be physicians in that cohort of unmatched people at my school, so I'm really hoping they land somewhere acceptable in the second round, or match to their intended residency next year if nothing suitable is left available this year.

Getting a chance to be a bit more up-close-and-personal to the match process has reinforced a few things I had been told, as well as a few I hadn't thought of, when it comes to match strategy.

First and foremost, a good match strategy - applying broadly, backing up where it makes sense to - is still absolutely the way to go. Beggars can't be choosers and when it comes to CaRMS, we're all beggars.

Second, and a perhaps slight caveat to the first, elective choices matter. Splitting electives between competitive specialties is a great way to get neither. The odd person may be able to pull it off, but it's a gamble, even for well-qualified individuals. Backing up should be done when possible, but if a candidate can't give themselves a desirable, viable back-up option without significantly hurting their chances with their first-choice specialty, then maybe a back-up no longer makes sense. Programs shouldn't care about a candidate's exclusive interest in their specialty - the CaRMS algorithm is meant precisely to avoid that kind of thinking - but they do and it shows. Even for less competitive specialties, not showing a reasonable commitment can be a detriment to matching. Any elective set-up should be purposefully created, with a logic to it that fits with a reasonable set of match goals, taking into consideration the timing of CaRMS, the specialty or specialties being applied to, and any geographical restrictions.

Third, networking and playing the social game absolutely have an impact, particularly in smaller fields. Moreover, that factor may be justified. While we often want people to get ahead based on ability than who likes them, few jobs are performed in isolation and medicine is definitely a social job. An ability to get along with others amicably makes a difference in terms of the functioning of the whole group. Networking and playing the social game are the ways to prove that you're easy enough to get along with. Building off the prior point, electives are the ultimate networking opportunity, which is part of the reason they're so important.

Lastly, chance is still a huge factor. In any CaRMS cycle, there seems to be a set of individuals who are phenomenal, clearly desired by programs, and are near-locks to match. That they land their first-choice programs is no surprise. On the opposite end, there are a very small number of individuals who are unsurprisingly left unmatched, or who in some cases never make it through medical school to the match. Yet, most of us fall into the vast middle ground, where we're good, competent candidates without standing head-and-shoulders above the rest. There are differences between candidates in this substantial middle-of-the-pack group, certainly, but the differences end up being more like a difference in flavour than in quality. As a result, when someone ends up on the outside looking in after the first iteration, luck plays a significant role. With the match overall being more competitive than it has been in the past, someone has to go unmatched and it very often is someone who really didn't do anything wrong. Unfortunately people who go unmatched in the first round, or their first year, face a stigma of inferiority, one which is not deserved in many cases. I think this is the part of the CaRMS match that really hit home this year - while the way we approach our residency match does involve some merit-based stratification, outside the extremes it's far less about merit than we like to believe.

Overall, my feelings on a good approach to a match haven't changed much, but the overall importance of certain aspects has. I'm lucky to have had the outcome I did. If I had any new advice to give prospective residents, it'd be merely to emphasize the importance of being proactive with their electives and with developing contacts. Otherwise, stick to the tried-and-true strategies, they're standards for a reason.