How to Start Your Financial Journey In Med School in 5 Practical Steps
Most medical students avoid thinking about their financial situation because of the sheer pain of running more into debt. Even if you make changes today, you still have to borrow more for next semester. So what's the point of sparing a few drops when you know another bucketload is up next?
This was my own thinking for the first year of medical school. Necessity ripped me out of that mindset, and I am thankful for it, because there are things that I can do today that will change my situation tomorrow.
1. Arm Yourself with Knowledge
One of my all-time favorite sayings. Knowledge is powerful, and money is powerful too. If you have over $100,000 in debt, you need to consider how much your current level of knowledge matches that dollar amount, and I'm not just talking about your scientific knowledge. You need to pursue financial knowledge, and I would personally encourage you to pursue a paradigm shift in the way you approach money. For me, that happened when I read "Rich Dad Poor Dad". I previously thought if I worked hard that the financial stuff would just work itself out- I learned in that book that my view was very naive.
2. Meet with your Financial Aide Advisor
Lay down your pride. I'm not saying you aren't smart enough to learn this stuff, but go to the person who LIVES this stuff everyday. Be kind and explain that you have gained interest in learning more about your loans, the different types of loans you have, and how to minimize incurring more cost in the future.
I won't waste your time explaining all the different types of student loans you may have. There are plenty of other websites who have already done that for you and your advisor will do the same.
One word of caution: Financial Aide Advisors often deal with students that have borrowed a ton of money and they spend a lot of time finding creative solutions for these people. So if you meet to talk about your loans, they will assume you want to find out how to borrow more. You need to be very clear in your objective for the meeting to discuss how to minimize loans in the future, not maximize them. Specifically ask which loans will cost you the most money in the long run.
If you don't have a budget, now is the time to start. It is the foundation of financial health. If you can't budget, don't bother investing, buying real estate, or anything else that has to do with money. It should only take you 2 hours a month if you do it right.
4. Emergency Fund
Nothing has saved my wife and I more heartache and arguments this last year than having a budget where we set aside a small amount of money for our Emergency Savings Account. I would highly recommend setting aside money to the tune of 1-2 months of expenses. This isn't money you invest or even touch unless there is an emergency. For example, something in our home recently broke overnight, and the system had to be replaced. It cost us $415. If we didn't have an Emergency Fund, we would have been forced to borrow that money, either from next month or from a credit card. By having an Emergency Fund, we happily paid the bill, and over the next few months, the Fund will easily recover that cost.
5. Envelope System/EveryDollar App
I also don't get paid for this, but we LOVE the EveryDollar App. After an atrocious month on my surgery rotation, I ended up spending >$120 on coffee and food inside and outside the hospital. At the time, I didn't know I was spending so much. I knew I had about $80 for the month to spend on restaurants and coffee, but I had no way of telling where I was on a day-to-day basis.
It was after that (and other missed budget snafoos) horribly embarrassing month that we decided to switch to the envelope system. The envelope system comes from Dave Ramsey and you put hard cash into different envelopes at the beginning of the month for each section of your budget. Everything except bills and gas. Such a stupid little thing. Switching from a plastic card to hard cash. Our spending immediately corrected. My wife was amazed how having the cash changed her grocery spending habits.
We have since switched tot the EveryDollar App because we are using the credit card mentioned in another post to get free Skymiles for residency interviews this coming year. Our spending habits are still solid. I love how I can look at the app and see exactly how much money I have left to spend in a category for the month.
There's a little starter package for you! Have you tried switching to the envelope system before? It's so weird but it works! Let me know what you think!