Premedical student advice

[PRS doc]

Hey everyone, I would love some financial guidance on my next steps going into medical school. I am pretty self-sufficient with a full time research position, and use this income to pay my rent, bills, and other expenses. I want to minimize my financial burden on my parents as much as possible given I come from a low income background.

However applying to medical school and interviewing has been expensive and I have a growing cc balance on a 0 apr credit card (approximately $3500; interest begins next summer). I used my savings to pay off another cc (felt amazing), and currently have ~$800 in an emergency fund. I contribute about $90/month to a Roth IRA through my job, and am paying just a bit more than interest on a $12,000 college loan. I have taken on part time work, and I also tutor to supplement my income, and I have about $450/ month in extra funds to put to savings, pay down credit, or spend.

I have 3 questions in particular:

1) Where should I allocate the $450? Building e-fund, paying down credit, spending on enjoying life before medical school, invest in retirement, etc. If I should do multiple things, how much in which?

2) I want to do more fun things (travel on weekends, have memorable experiences, improve my wardrobe), but I feel I can't afford it currently. However I also feel like I will always feel like this, since I will have a minimal income in medical school and possibly more loans, so I should live some more. Any advice on finding balance? I pretty certain I will choose a high income specialty; not sure if that matters for your answer.

3) What should I do with my Roth IRA once I begin medical school?

Extra info: I am a regular reader of this site and often read books on investing and personal finance (not enough apparently). I am also a blogger one or two calibers below POF and WCI though.

[MrsIMDoc]

Do you have an emergency fund yet? I would recommend getting the credit card debt down as soon as possible. Otherwise you will start paying that off with student loan money which is not a good idea.

You said you come from a low income family. I would start having conversations now with family about expectations regarding money.  Start showing them now how expensive it is. Remember that you can only really be generous with you money until you have taken care of yourself.  Read the Millionaire Next Door if you have not already. The biggest drag on my finances was my non-nuclear family.

 

[Peds]

wait so have you been accepted yet?

1) get rid of the debt. save the rest.

2) medicine is mostly delayed gratification.

3) nothing, you leave it alone till retirement.

[PRS doc]

@MrsIMDoc My emergency fund is my savings right now. From what you and Peds said, I am thinking I will save approx $2000 then use everything else toward cc debt to pay it off before school starts. Thanks for that advice about conversations and prioritizing my financial situation. How was your non-nuclear family a drag?

@Peds No I haven't been accepted yet. I understand your answer to 2, but I'm looking for specifics as to where the balance lies for someone starting graduate school in the negative. There is a lot of detail on how to "live like a resident." I guess I am asking how to "live like a medical student" or "premedical student." Does this really mean delayed gratification in every respect?

As for the Roth TSA (not IRA sorry), should I actively try to contribute to it during medical school or simply leave it until residency.

[wideopenspaces]

I would not accept any money from your parents as they likely have nothing to spare and should be focused on funding their own retirement so they are not dependent on you. This means you will take out loans and that is ok. Go to the cheapest medical school you get in to - state schools are great! At this stage of the game, because you have credit card debt, I would stop saving for retirement ( but keep your current retirement account in place, just don't add to it until residency or you are an attending) and focus all funds on paying that off. Then work on a small emergency fund. Absolutely make time for fun experiences at this stage of life. We did plenty of cheap trips when I was in college and med school. But I wouldn't put it on credit cards and if that is the only option I wouldn't go.

[Dreamgiver]

You cannot contribute to an IRA while you have no income, so during med school you just do nothing. I would not do Roth contributions now. Do pretax contributions and convert to Roth while in med school. Just my 2 cents. Granted at your current contributions level is peanuts but still...

[artemis]

Dreamgiver wrote:

You cannot contribute to an IRA while you have no income, so during med school you just do nothing.

Click to expand...

Once you're in residency, though, you can probably resume contributing to it directly.  As an attending, you'll still be able to contribute to it via the backdoor method (unless that loophole is closed by then).  So the Roth IRA you already have is valuable!  Just leave it alone during medical school.

I agree with the others:  try to pay that credit card debt ASAP.  It's too expensive once the 0% APR teaser expires to hold it long-term, and you don't want to get in the bad habit of running up credit card debt because you're spending too much.

And look for fun activities that are cheap.  Whatever you do, don't compare yourself to friends who are working "real" jobs and can afford to pay for expensive clothes, electronic gizmos, or fancy vacations!  That is the path to discontent.  You have a decade or more to go before you'll be earning significant money (although you'll be able to afford a bit more as a resident - but you'll be too busy to do a lot anyway).

[Craigy]

Best thing for you to do right now is focus on getting into medschool.

$450 is pocket money.  Try not to carry any credit card debt, so if you have extra money pay that off as you can.  But once that's gone, keep your cash for things you might need or want.

As said above, best thing you can do, once the acceptance letters come in, is pick the cheapest school you can go to.

 

[adventure]

welcome!

1. Stop racking up debt on credit cards. Sounds like you were 0 for 2. Glad you fixed one of them - congrats. Fix the 2nd one ASAP. You should never have a credit card balance again. (life happens, I get it, but no longer an excuse)

2. Are you currently a student? If so, aren't the student loans in deferment? If so, refocus those funds to eliminate credit card debt. CC debt is the 1 area where a 0% interest rate is too risky to even pretend its acceptable.

3. When do you think you'll be accepted and start in school? Do you have a monthly cashflow and or budget until then? You should. (simple excel or google docs spreadsheet works!)

4. How are you comparing medical schools? Are you factoring in tuition? fees? room and board? Rent? Ability to walk to class for 2 years (cheap rent, no car, get coffee at school for free, etc)? Think about the whole financial picture here. ... if you have other goals for medical school (aside from #1: get MD/DO...), then make sure you consider those, and really be sure you'd like to have such goals.

...

regarding your #2 question - desire to have more fun. I found fun in other (less expensive) items. For example, I have some great haberdashery from Goodwill places. Classy stuff. Also, as much as I love jetsetting to Europe for a week. I've become a road trip person. You can stop anywhere! You never have to pass a donut shop, you can stop at all of them. We also (now, and during college/med school/residency/fellowship) would plan trips in advance, so we could look forward to them. That helped.

---

And, just to set good habits, I'd:

1. add $10/month to Roth.

2. add $25/month to eFund.

3. Pay something (even $10/month) to student loans. Just set the habit to keep paying.

4. Put a note on your calendar for the WCI scholarship for next year. There are others too - I viewed them as "work income" meaning... I can do some essays and snag a cool $1500, or 20k or something. That's not chump change. More motivation than lit class ever gave me.

 

[LizOB]

1. Your first priority should be to pay off that credit card in full before you start paying interest. That's where I would put the extra $450. Then work on the emergency fund.

2. You can do fun things on a small budget. But there's always a balance. Would I have had fewer loans if I NEVER went out to dinner, movies, etc as a med student? Sure, but that would have been a pretty lonely 4 years. Moderation in all things

If I were you I would go to the cheapest med school you get into. However, before you decide you should absolutely apply for financial aid for everywhere you've been accepted. Your parents' situation will not make a difference for federal loans, but many schools (esp private ones) have grants that are need-based so you will need that information before you can decide which is really the cheapest for you.

Also, work during med school if you can. I know not everyone agrees with me on this, but I taught MCAT classes throughout most of med school (not 3rd year!) and it was SO nice to get gas and groceries on the way home from teaching knowing they were paid for with earned money, rather than on 6.8% interest.

[MrsIMDoc]

In response to your question of how my family was a drag on my finances:

My nuclear family now is husband and kids.  As I reread my response I realize that my parents and siblings are also my nuclear family.  Regardless, my parents and siblings all had the expectation that as a future rich doctor I should help them out. I helped with cell phone bills, emergency computer breakdowns, paying a lawyer for a family member's divorce all while I was a medical student.  That was CRAZY.  I now know that, however back then I did not.  The money I gave them is money out of my pocket now which means less time with my kid and more time working.

I wish someone said to me, "Do not give any family members money".  If they are about to become homeless you can consider letting them crash on your couch but otherwise do not give them money.  All of them were able to spend money on other discretionary things while I was killing myself in medical school and living on loans.

[PRS doc]

Thank you all, your advice has been so helpful and I learn so much from you reading your forum posts and replies. I think I was growing a debt tolerance, especially for credit card debt (in spite of all the warnings against it), and it's been a strong message hearing this reiterated by all of you. While I may not be able to pay it all the way down now (relying on the 0 interest to make it to interviews), I know I should have it paid off before the interest begins to accumulate. Hopefully I'll remember to post an update here when I accomplish this! @MrsIMDoc thanks for sharing your personal experience, and to @wideopenspaces, @LizOB, @adventure, and @artemis I'll keep my eye out for cheap trips!

[DMFA]

• Getting into med school comes first


• Try to limit debt, though you may need more apps/interviews to guarantee getting into med school so this might be kind of hard; try to drive instead of flying, stay with friends, etc


• Once in med school, succeeding in med school comes first


• If you're succeeding well in med school, if you can get some side money teaching MCAT, being an anatomy lab TA, doing prosections, etc then great


• Being sane is key to succeeding in med school; you need to have some balanced inexpensive fun along the way or your brain will explode


• Once you're used to living reasonably within your means as a student/resident, it should be easy to carry that forward through a few years of large attending physician paychecks while you dig out of the hole which was necessary to create in order to get to that point

Good luck!