all right how are you feeling today hi
my name is Jim Dahle I'm a practicing
emergency physician and the founder of
the white coat investor the white coat
investor is the most widely read
physician specific personal finance and
investing website in the world there's a
blog a newsletter a book series of
podcast a forum a Facebook group an
online course and even a live conference
all of it is dedicated to helping those
who wear the white coat get a fair shake
on Wall Street essentially I want
doctors to be financially successful
because I believe that reducing
financial stress reduces burnout divorce
and suicide and even improves patient
care a doctor who doesn't have to worry
about money can concentrate on our
patients her family and her health today
we're going to talk about five things I
wish I had known about paying for
medical school medical school is
expensive 20 years ago when I enrolled
but is dramatically more expensive today
in-state tuition on my school has gone
up four times in those 20 years while
physician incomes have only doubled the
squeeze between those numbers is very
real and particularly felt by young
doctors just becoming a doctor's no
longer enough to guarantee financial
success the first thing I wish I had
known about paying for medical school is
the key to paying off student loans that
key is encompassed in four words live
like a resident that means you need to
do well in medical school and match into
a residency to start with the non match
rate has been climbing and some doctors
end up with an MD hundreds of thousands
in debt and no job that's a serious
financial catastrophe so make sure you
do well in school and match into a
residency it also means that you stop
borrowing money when you graduate from
medical school some doctors just keep
borrowing money during residency so they
can live like attendings that's not
going to work out well you must learn to
live within your means as a resident and
preferably even start saving money on
that salary residents get paid about
$60,000 a year the median u.s. household
income if you can't save on that how do
you expect most Americans to be able to
do so but mostly live like a resident
refers to that most important year in
the financial life of a doctor the year
you leave residency and that year you
are used to living on $60,000 but you
are earning 150 200 300 or more thousand
dollars a year if
you'll simply keep living on 60,000 you
can take the difference between what you
are isn't ten-ton attending and what you
made as a resident and throw it at your
loans even 300,000 in student loans
doesn't last long when you're throwing
$10,000 a month at it this is the key to
paying off student loans and really to
becoming the rich doctor your friends
family and patients already think you
are I'm not saying you have to do it
forever but if you will live like a
resident for two to five years after
residency that will make up for nearly
any other financial mistake you can make
in your life including the ones you have
already made the second thing I wish I
had known is that a certain amount of
medical school debt is no big deal but
that a lot of debt is absolutely
crushing to your soul and your finances
as a medical student it all feels like
monopoly money you probably borrowed
more in your first year than you have
ever made in your entire life you have
no idea what it really takes to earn and
pay back that much in after-tax dollars
in attending physician tax brackets so
I'm going to tell you how much is okay 1
X that's the number if you can finish
residency only less than 1 X or 1 x your
gross salary that's okay you can knock
that out very quickly if you throw one
third of your newfound attending income
at that debt for 3 years you will pay
for school in less time than you spent
in school as that ratio moves toward 2x
meaning you owe twice as much as your
gross salary things become much harder
now you might have to put fully half
your income at the debt for five years
as you move toward three to four X we're
talking about spending half your career
living like a resident just to pay for
school and beyond 4x this is pretty much
impossible if the only way for you to
become a professional whether that is a
physician or a vet or an attorney or a
nurse or whatever is to borrow 4x your
eventual income that is not a good
investment you should not do that you
will dig yourself into a hole where your
only option is to throw yourself on your
fellow taxpayer and beg for mercy do not
assume that you'll be able to get rid of
that sort of debt using public service
loan forgiveness or similar programs
they are far too legislatively tenuous
to make that kind of a bet so if you're
looking at a potentially high debt to
income ratio you would be best if you
could do something to adjust that ratio
that might mean avoiding a low-paying
specialty I know it sounds like
blasphemy this is your
dream you're supposed to do what you
love but guess what if you borrowed
$600,000 to go to school you can't
afford to be a pediatrician much less a
veterinarian you just can't you already
closed that door when you chose to
borrow that much the other side of the
ratio is keeping that debt level down
that means living frugally this isn't
the time for expensive vacations or
restaurants if you're married send your
spouse to work if you're not get
roommates or live at home to cut
expenses buy used books and equipment
and only what is absolutely necessary
remember that everything you buy really
cost three times what the sticker says
the third thing I wish I'd known about
paying for medical school is you don't
have to take out all of your loans in
August it only takes a couple of weeks
to process a student loan so you can
wait until later in the year to borrow
money for the second semester in fact
some students put their expenses on 0%
credit cards for up to a year and then
take out the student loan to pay off the
credit card that six to seven percent
Interest starts ticking as soon as you
take out the loan so delay that date as
long as possible to minimize the size of
your loans the fourth thing I wish I had
known about paying for medical school is
that there are scholarships from medical
school well they're much less common
than undergrad scholarships they still
exist and should be applied for I keep
running into medical students on a
full-ride scholarships that I didn't
even realize existed when I was a
student in fact the white coat investor
now has a scholarship program that you
can apply for each summer last year we
gave out over $60,000 in cash and prizes
the last thing I wish I had known about
paying for medical school is that many
scholarships are missed named for
instance the Military Health Professions
scholarship program in the National
Health Service Corps scholarship program
these aren't really scholarships it
would be better to call them contracts
in essence you are getting money now in
exchange for working for these
organizations later since these
organizations generally pay you less
than you would make as a private
practice physician it is all about the
same in the end if you want to be a
military doctor then by all means take
the hpsp contract like whites for the
NHSC but don't mistake this for free
money they will get their pound of flesh
out of you the most important thing to
know about the military hpsp contract
before signing up is how the military
match works especially with recent
cutbacks and non wartime specialties
basically everything but emergency
medicine
no surgery orthopedic surgery and
anesthesia you may find the military
match to be far more competitive than
the civilian match those who don't match
will be put into an internship then
serve out their military commitment as
general medical officers before being
able to attend residency overall medical
school is a wonderful experience and the
profession of medicine is still the
greatest profession but has very real
financial consequences that can have a
dramatic effect on the rest of your life
if you need help with financial issues
come on by the white coat investor and
the whole community will do what they
can to help you start your free trial
today at osmosis org
you