Best Or Worst Financial Decision in Residency

[Mr. MedSchool Money]

Hello,

I am writing a new blogpost on financial decisions when starting residency. I am curious if anyone has any pearls or personal stories of great or horrible financial decisions that they wouldn't mind sharing.

Thanks!

-Mr. MedSchool Money

[adventure]

We had 2 cars get totaled during PGY1. Both hit cashflow.

The first was a large woodland creature. We had to share 1 vehicle for some weeks, as we dealt with our insurance. We came out several $$$$ ahead, and kept the old car. No carpayment here is great!

The second was someone else texting. Thankfully there was a bus to clinic and the hospital until we picked up a replacement car. We bought a brand new car. $500/month car payment. Not ideal from a cashflow perspective. Was a great car though, 0 down, and low low rate.

 

Great decisions:

1. Both set up Roth IRA's. Funded partially.

2. Paid off student loans throughout residency.

3. Kept an old Subaru (no payment!)

4. Spouse worked as PGY', I worked 4 jobs.

5. budgeted so we didn't have to take out loans between med school and residency, nor residency to fellowship, nor fellowship to attendinghood.

6. Got married.

 

Great decisions (in hindsight):

1. Rented for a bit.

2. Bought a house.

3. Didn't sell a house, made a friend, rented to said friend.

4. Bought a new car, had VW buy it back plus extra.

 

[Mr. MedSchool Money]

I like it! Especially the new car that VW bought back plus extra, haha! What payment plan did you do for repaying your loans during residency if you don't mind me asking?

[MPMD]

Best decisions I made:

-rented a pretty terrible studio and lived in it for 2 years

-sold car and took public transit to work every day

-didn't go into CC debt

[SwitchPool]

Spouse and I are still in training (2-3 years left of residency/fellowship left)

 

Best decisions:

Paying off CC balance every month and using rewards to pay for trips

Eating most of our meals at the hospital and/or bringing food home (paid for or heavily subsidized)

Funding Roth IRAs and doing in-service 401 withdrawals + roth conversions before we are attendings

Shopping at the local grocery store and not the organic / fancy food places (West Coast... a lot of people swear by Whole Foods etc)

Signing up for IBR to keep payments low while we are training with little-no interest; ability to just pay off our student loans when we are attendings

 

Worst:

Accepted a high-end car as a gift. While enjoyable to drive, having to pay premium gas and $1000+ "routine service" stuff a year is crazy (previously drove 10+ year old cars with cheap maintenance throughout my life before this).

[pulmdoc]

Best decision: married my wife.

Second best decision: started reading WCI and learning about personal finance.

Worst decision: bought a house in residency. This was 2004, I even ran the buy/rent comparison with 0 appreciation, expected to live there 6-7 years. Instead, I ended up moving for fellowship and took a 20% loss (plus transaction costs) and took nearly 2 years to sell.

[Gamma Knives]

I don't know if it helpful but for me I would say buying a house was my the best and worst thing I did. It was the best because I got very lucky and made a decent profit on the house (even with transaction costs). It was the worst in that I did it without really understanding what I was doing. I would like to say I was brilliant and timed the market. In truth, I was lucky and could have easily been hurting at graduation.

[dayman]

pulmdoc wrote:

Best decision: married my wife.

Second best decision: started reading WCI and learning about personal finance.

Worst decision: bought a house in residency. This was 2004, I even ran the buy/rent comparison with 0 appreciation, expected to live there 6-7 years. Instead, I ended up moving for fellowship and took a 20% loss (plus transaction costs) and took nearly 2 years to sell.

Click to expand...

Funny how that works. I made that same buy/rent comparison assuming 0 appreciation, also decided to buy (2011), and ended up making $50K. I did nothing differently from you other than get lucky with the timing. But buying a house would be on my "best decisions" list.

If you finished in 2004 you probably had lower tuition costs and certainly lower student loan interest rates than me though, so maybe we came out even in the end.

[LizOB]

Best decisions:

- Renting

- Choosing an apartment 15min away from the hospital to save over $300 a month, compared to living downtown

- Driving a paid off old corolla

- Paying down loans (covered interest plus $100-200 of principal per month)

 

Worst decisions:

- Not funding ANYTHING towards retirement. Yes, I improved my net worth some by paying down the loans but I'll never get that roth space back

- Not putting all payments on auto-deduct. Missed some loan payments because I forgot. Landed on my credit report. Probably not a big deal in the grand scheme of things, just stupid because I had the money and there was no reason the missed payment had to happen

[CM]

.

 

[pulmdoc]

For clarification, I bought my residency house in 2004.  Put it on the market in 2008, finally sold in 2010.  Timing is everything.

[Re3iRtH]

Good:

- Military funded education, no debt
- Residency location in great real estate market, enabled me to purchase income producing real estate, profiting several 6-figures in just appreciation
- Didn't have any children with xxxx who would have surely made terrible parents
- Bought house and rentals in residency
- Traveled extensively

Bad:

- Never had a budget
- Did not marry a multi-millionaire (yet)
- Should have bought more rentals during reaidency

Neutral:

- Bought a $25K car cash in residency
- Did not start reguarly contributing to retirement mutual fund accounts until I had a 7-figure net worth

[MochaDoc]

Good:

-Lived within walking distance of the main hospitals. Commuting by car was optional and painless when necessary.

-Being frugal. Potential financial crises were simply inconveniences.

Bad:

- Listened to family who recommended I rent better housing than I could afford because I'd earned it. It was a beautiful place but extremely expensive. Moved out after my first year and saved $800/month off the bat. The new place was actually closer to work.

- Had a luxury car that I received as a gift. Maintenance and premium gas were no joke.

If I could do it over again, I'd set up a budget and work backwards. By this I mean, 1) figure out my after-tax monthly pay, 2) subtract fixed obligations such as my student loan payment and monthly contributions necessary for a maxed out Roth IRA 3) spend the rest on variable living expenses. This would have resulted in maxed out Roth for all years. I probably would have sold the car and bought a beater, and I'd have rented a cheaper apartment because there wouldn't have been enough money left over to do anything else.

 

[jfoxcpacfp]

Beginning to see some patterns here. How have 2 of the respondents so far managed to receive high end cars as gifts? Is there a residency giveaway or just coincidence? Price Is Right?

[Dreamgiver]

Best (mostly during med school):

-Re-characterize tIRA to Roth IRA with overall no tax due

-Divorce my ex before she'd have qualified for alimony

-Made decent Roth contributions throughout residency

 

Worst:

-Paid 23K cash for a car I really wanted (I still have it and puts a smile on my face every time I drive it), and, incidentally, is worth more now than when I bought it

-Decided to keep the house during above divorce (mistake ended up costing me about 20k)