It’s impossible to walk down the street or even just be in an OR without hearing someone offering unsolicited financial advice in some form or another.
The sheer amount of “fool proof” advice that one can find on the internet or cable TV is incredibly overwhelming. In fact, it’s designed to make you feel overwhelmed and like self-managing your finances is not viable. This is to the advantage of those same people talking on TV or writing online articles.
I’ve said many times that managing your own finances is not too hard.
I went from clueless to managing my own in about a month. Don’t get me wrong, I’m still learning. But the mistakes I will make in my life are much cheaper than what I would pay for questionable advice and bad investments.
But…it’s always nice to have like-minded people who you can discuss questions with and seek advice from. You just want to make sure the advice is good. I’m certainly not opposed to paying a fair price for good advice (that rhymed).
But where are these like-minded people with good financial advice?
I’ve provided a list of the sources that I used and continue to use in my financial education here.
Today, however, I’d like to focus on a great source of information from a destination that many may find unlikely…PubMed.
I know that, as a majority of you are plastic surgeons, this is like telling you what water is, but for those who don’t know, Plastic & Reconstructive Surgery is the premier plastic surgery journal in the field. They also have a fantastic open access sister journal – Plastic & Reconstructive Surgery – Global Open. (I have no current relationship with them but I was a resident ambassador for PRS in the past. I also continue to publish and review for both journals).
I’d like to highlight an article from 2019 in PRS – Global Open entitled: Five Financial Pearls for Medical Students, Residents, and Young Surgeons by Louis Poppler, Ketan Sharma, Donald Buck, and Terence Myckatyn.
Let’s get into it…
This article has excellent financial advice presented in a very digestible manner. If there is any criticism it is that some topics don’t go into much depth, such as why passively managed funds are the best. However, I respect the need to keep things basic and clear for those reading the article at the beginning of their financial journey.
I also think that they sell themselves short by limiting themselves to offering the advice for only med students, residents, and young surgeons. I know that there are many more mature surgeons that could very well use this advice.
Where I agree and disagree with the authors
I’ll review some of the biggest pointers and offer some of my own thoughts as well.
First, learning about and managing your own finances
I know that every physician, let alone a plastic surgeon who has gone through at least 6 years of intense training, has the smarts and discipline to manage his or her own finances. If you don’t believe me, look at these prior posts and then tell me you can’t do that.
But, I do respect that there are some people who just do not want to take this on. Even so, it is extremely important to at least be able to tell good advice from bad advice and what fair payment for each is.
No one will care for your money like you will. But, if you’re going to let someone else watch your money, at least do your best to keep them honest.
Next, the authors discuss the financial implications of your career choices
This is obviously a huge one.
With any job or set up, there is always wiggle room to make more or less income. However, the initial contract you sign and situation that you set up will create the foundation of how far you can go in the future. Each situation is unique, so no one can tell you one is inherently better than the other.
They also hit on the important point of location as related to cost of living and taxes. No real explanation needed there.
Thirdly, making a plan to pay off your student loans
I’ll be discussing my specific student loan plan in a future post. However, the authors hit on the major options to go about this.
One being to pay income-based repayments while working in a qualified institution and seeking forgiveness after 10 years via the PSLF program. Other main options include refinancing privately or using the REPAYE income-based repayment for federal loans (usually the best option but every situation is unique).
This is an area that requires a lot of thought. In my opinion, your goal should be to pay off these loans in an aggressive fashion. Every $1 you pay to your loans is $1 that your net worth increases. You won’t get that 1:1 ratio with anything else really.
This is one area that I would potentially recommend seeking advice from a student loan advisor that offers a fair, flat rate, especially if your loan situation is on the complex end of the spectrum.
Fourth, they bring up the idea of making a budget and sticking to it
They are really hitting all the points here. I am a big fan of a budget. I see it as a tool to guide me towards my financial goals, not as a restrictive thing but really as a permissive thing. It is what is permitting me to become financially free.
They are on point in suggesting that you allocate for your necessities first in addition to establishing an emergency fund of 3-6 months income. Contributing to your employer’s match in tax-protected retirement accounts is a must, otherwise you are leaving free money on the table.
Next, it’s all about priority in my opinion. Each dollar has a job and how you assign these jobs determines your priorities. I prioritize savings, investments, and assets that put money back in my pocket rather than liabilities such as cars bought on loans.
Last but not least is being careful in buying property
I feel the need to qualify this one a little bit.
They are talking about buying a primary residence. Especially in medical school or residency, I think there are rare instances when buying a house makes sense.
One exception may be that you are in a longer than average training specialty, like plastic surgery. Like the overall stock market, the overall housing market, in general, goes up over the long term. Therefore, buying a home responsibly and selling it in 6-7 years is not the worst bet.
However, the best reason to buy a home in residency is if you buy the home thinking like an investor.
This could mean buying a duplex, living in one unit and renting the other unit with the rental income covering your mortgage/taxes/insurance/etc. You are essentially living for free. Then, when you move on, you can just rent the unit you used to live in and have a cash flowing investment property. You have to be smart though and make sure the numbers make sense beforehand.
Those 2 examples are for students and residents. If you don’t fit into either one, and really even if you do, renting is likely the best option.
For young surgeons/attendings, buying a primary residence can and often does make sense. But you have to be responsible.
Some general property-buying guidelines:
- It’s best only to buy after you’ve been at your job awhile and know it is a good fit
- Don’t buy a house that is greater than 2x your annual salary in value
- By having a budget, you will know exactly how much you can spend per month for mortgage service, taxes, and insurance along with expected repairs
- If you don’t find a house you love, don’t compromise
- It’s better to rent a house or great apartment for a year or so rather than become house poor
Overall, this article is a fantastic resource with excellent introductory financial advice for any high income earner but especially for plastic surgeons.
Kudos to the authors and to PRS-Global Open!
What do you think? Have you followed these 5 general pearls of advice? Do you have a budget? Did you buy property as a student or trainee? Know of any other great financial papers in the medical literature? Leave a comment below!