Residents and fellows: Don't fall prey to these 5 money mistakes

Published October 18, 2023

Key Takeaways

Many residents and fellows make common money mistakes during training, primarily due to poor planning and living above their means.
Some of the biggest mistakes include spending too much of your paycheck on housing, not having a plan for student loan debt, and accumulating credit card debt to cover everyday expenses.
One key thing residents and fellows can do during training is to save money for emergencies and plan ahead for large expenses.

It’s no secret that our time in residency and fellowship can be quite stressful. There are long hours, low pay, and limited time off for several years, requiring more sacrifice than we ever could have imagined. Although we graduate with better skills and more knowledge, one of the things we may not learn is personal finance.

Here are some of the top money mistakes residents and fellows make in training.

Paying too much for housing

Whether it’s buying a home with a large mortgage or getting an apartment that’s too expensive, many trainees spend a significant amount of their income on housing. Oftentimes, their monthly payment can be over 50% of their take-home pay—before accounting for other costs such as utilities, insurance, taxes, and fees.

Paying too much for housing is a mistake because it decreases the money we have for other financial obligations, like car payments or student loans, and reduces the amount of money we have left over to spend on things like food and groceries. Although the cost of living in certain areas is beyond our control, we must still be mindful of costs. When I was a resident, I lived with a roommate to save money on rent for the first two years.

"When I finally decided to live on my own, I opted for a cheaper place with a discounted rate instead of paying hundreds of dollars more for a newer apartment with a high-rise and a rooftop pool."

— Lisha Taylor, MD, MPH

While we all want to live in a safe area that isn’t too far from the hospital, finding ways to keep housing costs down is paramount to our financial success.

Not saving for emergencies

Despite our best intentions to plan ahead and prepare for things to come, life can be unpredictable. Perhaps your car breaks down and you need to get it repaired. Maybe your computer stops working and you have to buy a new laptop. Or, maybe you have a family emergency and need to purchase a last-minute flight back home.

Sometimes things happen that we don’t expect and we incur expenses that we didn’t plan for. One of the best ways to handle these unexpected expenses is to save money in advance in an emergency fund.

That way, we have a way to pay for costs arising from an unforeseen circumstance without going bankrupt or accumulating credit card debt—and tons of stress in the process.

Not having a plan for your student loans

Data shows that over 70% of medical students graduate with student loans and that the average student debt accumulated is over $200,000.^[]

"While I don’t expect anyone to pay off their student loans in training, having some sort of plan in place is crucial."

— Lisha Taylor, MD, MPH

Without a plan, we may act on bad advice to put our loans into deferment or refinance them—both of which can increase our loan balance, exclude us from loan forgiveness programs, and cost us a great deal of money in the long run. Don’t let this happen to you.

While I realize you have other things you’d rather be doing with your time than learning the ins and outs of each student loan repayment plan, I’d encourage you to spend a little time coming up with a reasonable repayment plan (or paying someone to do it for you) to prevent making a six-figure mistake.

Living above your means

Our time in training can be stressful, and sometimes we just need to treat ourselves. Whether it’s a fancy dinner, drinks at happy hour, or a weekend brunch with friends, we all splurge every now and then. Unfortunately, I see many residents and fellows who are splurging a little too frequently.

Although these outings, individually, may not make or break us, they can add up to quite a bit overtime, especially when combined with other larger expenses. Many residents book international trips during their vacation week, decide to buy a home, or purchase a brand-new car. While each of these things on their own isn’t unwise, when done altogether they can be a recipe for financial disaster and lead to substantial debt.

My point? You can treat yourself to a few things, but you can’t treat yourself to everything all the time. Pick the things that matter most to you and cut back on the rest.

Failing to save for large expenses

Whether it’s Christmas gifts for family, an upcoming vacation, or board exam fees, there are some large expenses that you already know are coming. One of the biggest mistakes I see residents make (and one of the biggest mistakes that I also made in training) was failing to plan for these expenses ahead of time.

I was good at keeping my spending in check on a day-to-day basis and tried to stock up on free food from the hospital as much as I could, but one of the things I didn’t do very well was plan ahead for larger expenses. And this is what got me in trouble. I’d go on vacation and underestimate the costs. I’d overspend on Christmas gifts. I didn’t save enough money for moving expenses, and the list goes on.

I see many residents and fellows making the same mistake as well. The problem with doing this is that these large expenses can really derail financial progress.

More importantly, they can cause us to accumulate credit card debt that can take months to pay back and result in hundreds of extra dollars in extra fees and interest payments.

Don’t let that be you. When you get paid each month, save a certain amount (I’d suggest $500) into a vacation fund or short-term savings fund. That way you can use this money for upcoming large purchases and avoid accumulating even more debt.

If you’ve made any of these money mistakes in training, it’s important to consider what you will do differently going forward to avoid making the same mistakes again.

What this means for you

The typically low pay and long hours of residency lead many physicians-in-training to make common money mistakes. When it comes to your finances, the most important things to remember are to avoid spending too much on housing, to regularly set aside savings for an emergency fund, and to create a plan for student loan repayment.