Medical Residency Personal Finance

You made it—will your wallet? How to budget in physician residency


AMA News Wire

You made it—will your wallet? How to budget in physician residency

Mar 27, 2024

In transitioning to residency, interns are given considerably more responsibility in the clinical setting than they had in medical school. In life, too, resident physicians are confronting new terrain. That includes managing more complicated finances.

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Follow these four essential bits of financial advice for residents so that you can focus more of your mental energy on thriving in residency.

The average annual salary for a first-year resident is a little below $63,000, according to the Association of American Medical Colleges. But that does not mean that you will have about $5,000 each month to spend as you see fit. According to certified financial planner Chad Chubb, the likelihood is that your net monthly income, after taxes and employer deductions, will be about $1,000 less or about $4,000.

There is across-the-board consensus—from fellow residents who have had experience in living on a comparable salary to financial experts who have worked with young physicians—that it is critical to put together a realistic budget and to stick to it as best you can.

One workable option is the 50-30-20 rule, which divides a paycheck into three categories. The bulk (50%) goes to essentials such as rent, groceries and utilities. Another 30% goes to more flexible—and less essential—spending. And 20% goes to savings and debt payments. 

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Illustration of resident looking at a diagnostic image

An AMA Insurance Agency survey of U.S. resident physicians released several years ago found that the group had numerous financial concerns. Among survey respondents, 34% said they were “very concerned” about paying off their student loans, making it their top financial concern. 

As burdensome as student-loan debt can be, paying it as quickly as possible should not necessarily be the top priority. Instead, some experts suggest saving 15% of one’s income in an emergency fund and prioritizing payment of debt with the highest interest rates—including car loans and consumer debt—over lower-interest student loans.

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McKinley Glover IV, MD, MHS, is an assistant professor of radiology at Harvard Medical School. During his training, he completed his five years of residency in Boston. He was determined to adhere to a budget and “pay myself for retirement,” he said, explaining that it was important to him to save money from the get-go.

So instead of paying up to $2,500 a month to live solo in a studio or one-bedroom in a fashionable part of the city, he opted to share a three-bedroom, one-bath townhouse with two roommates. There, his share of the rent came to $800 a month.

Lastly, if your workplace provides retirement account plans—and almost all institutions with residency programs do—take advantage of them and any matching-funds offered. Try to put a few hundred dollars each month into a 403(b) or 401(k) and watch your savings multiply over time thanks to compound interest.