I've noticed an interesting trend in forums and emails, often written by the spouse of a resident. The basic gist of it goes like this:
My spouse is a resident in ABC program in XYZ city. The cost of living here is high, I'm a stay at home spouse and we have 2-4 kids. We spend X on rent, our IBR payments are nearly $0, we drive beaters, we never eat out, we don't have Netflix, and our kids aren't enrolled in any extracurricular activities. Not only can we not save any money, but we're actually looking for the best way to borrow money in order to make it through residency, pay for fellowship interviews, and move to our first job.
Often times the writer is looking for some sympathy, or some budgeting/frugal living advice, or some advice on how best to borrow additional money. At first, I found the whole trend to be very strange and had difficulty understanding it. But after interacting with many people in similar situations, I think perhaps I can finally lend some useful advice for those in this situation.
6 Tips for Financial Survival as a Resident
#1 Best Medicine Is Prevention: Choose a Low COLA Residency
First, I think this issue can be prevented in the vast majority of cases. The resident or spouse often laments that they live in a high cost of living town. While that isn't always true (a recent advice seeker actually lives in a very average cost of living town according to any reasonable index of cost of living), location is a big part of matching into a residency. Sure, the strength of the residency program and your fit with the residents and attendings in the program are probably the most important factors in choosing a residency, but location will usually make the top three reasons for choosing one residency over another.
You may want to live close to family or close to recreational opportunities, but I would also urge you to take the cost of living of the city into consideration. Physician salaries tend to be very similar, whether you are living in a small city in the Midwest or in the Bay Area, and that holds true both for residents and for attendings. But an attending salary has a lot more wiggle room to make up for a higher cost of living in a desirable area.
I remember interviewing for residency at Stanford. The program was pretty good, but I ended up not even ranking it mostly because we couldn't afford to live in Palo Alto on a resident's salary, even with the extra stipend/signing bonus they were offering to use for the deposit on a studio apartment. We ended up in Tucson, my first pick anyway for strength of program and fit with the people. But as you can see with a decent cost of living calculator, $40K in Tucson is the equivalent of $69K in San Francisco. Stanford wasn't offering a $90K signing bonus to its residents.
Some specialties are very competitive and some applicants are not particularly competitive. But for the vast majority of graduating medical students, there is a wide choice of residency programs to apply to. If you are married and your spouse wants to stay at home with several kids, then I suggest you avoid applying to, ranking, and matching at programs in cities like New York, Boston, LA, and San Francisco. Instead, focus your search on programs in the Midwest or Texas or a smaller town. “If Momma ain't happy, ain't no one happy.” And Momma or Daddy isn't going to be happy crammed into a 2 bedroom apartment in a major city with 3 kids, clipping coupons, and trying to get the beater through another 4 years of serfdom. High cost of living residencies are for single people willing to live with roommates.
#2 In Budgeting, the Big Things Matter Most
When it comes to making a budget, the big expenses matter most. That means housing and transportation. If there is ever a time to drive a beater in your life, it's when you are broke. That's medical school and residency. If there is ever a time to live in a cheaper place, it's while you're a resident. You know it is temporary and there is light at the end of the tunnel. Besides, those lessons in frugality will still serve you well once the big bucks start rolling in. A longer commute may save you money on housing, but if you give the money back in gasoline and auto repairs, that isn't doing you any good. Besides, if there is ever a time in your life when a long commute is a really bad idea, it's when you'll be driving a lot when you're dead tired.
As a resident, we lived in an $800 duplex a half-mile from the hospital. It wasn't the best (nor the worst) neighborhood, but it kept our housing and transportation expenses very low. Not only could we get away with only one car, but that car didn't really get driven very often. Cars last a long time when your round trip commute is under a mile, and usually done on a bicycle.
#3 Safe Areas and Good Schools
Many residents and their spouses complain that they have to pay $X in rent to get a “decent place in a safe neighborhood with good schools.” Well, guess what? Decent places, safe neighborhoods, and good schools are expensive. That's fine if you can afford it, but if your salary is $3500 a month and rent is $2000 a month, then you can't afford it. It doesn't matter how good you are at budgeting when you spend 60% of your income on rent. Your children, like those of the other Americans in your city earning the median American household income of $48,000, will have to live in a place that only has “average” safety and “average” schools. Why would you possibly feel entitled to have your children in the best schools and to own a house in the best neighborhood when you have an average income? The “live like a resident” mantra doesn't just apply to new attendings. It applies to residents too.
#4 Get Rid of Entitlementiasis
You might be a doctor, but you're certainly not being paid like one. Most residents are paid something very close to minimum wage, once you take into account all the hours worked. You don't deserve anything. You're not entitled to anything. The degree you have completed really prepares you to do only one thing — to be an intern. Why do you think you deserve a nice car, much less two? Why do you think your family should have two smartphones, or even two cell phones for that matter? Fancy vacations? Forget it. Food from the fancy organic food store? Get real. Cable TV and full-price movie theaters are not a luxury you can afford. 2-year-olds don't need designer clothes. You can keep food on the table, keep the car running, put clothes on the kids' backs, and put a little away for a rainy day, but this isn't the time in your life for European vacations and symphony tickets. Learn to be frugal now, and that time won't be far away, however. There is light at the end of the tunnel, and it isn't a train.
#5 Boosting Income
There have been times in my life when I realized that cutting spending wasn't the answer. Sometimes it is far easier to boost income than to cut back any more. For a resident and spouse, that might mean doing some moonlighting, sending the spouse to work a couple of nights a week, or having the spouse work from home (perhaps watching the children of another resident whose spouse needs to work). Finding a job early in that final year of residency and securing a signing bonus can also go a long way.
#6 Borrowing Money
I think borrowing money should generally be a last resort for a resident. Yes, an attending can probably manage to pay back $20,000-30,000 borrowed as a resident. But I have found that those who cannot live on a resident budget are the same people most likely to rapidly grow into an attending budget. “Residency” or “physician” loans generally carry high-interest rates. Credit cards, even with 15 month 0% deals, are a short-term solution that may come back to burn you. Borrowing from family often comes with unwanted strings attached. Do yourself a favor: Choose a residency in a town where you can afford to live on a resident salary, and then live on a resident salary.
All of these tips, of course, also apply to medical school. I'm getting more and more emails from students with $400K+ in debt. Add on the costs of a family and that number can easily get to $500-600K after 4 years.
What do you think? What did you do right, or wrong, as a resident in order to survive financially? Any tips for those struggling to make ends meet who are already locked into a residency in a high cost of living area? Comment below!