[Editor's Note: Registration for the 2023 Physician Wellness and Financial Literacy Conference (WCICON23) is now officially open. The CME-eligible conference, which will run March 1-4 at the stunning JW Marriott Desert Ridge in Phoenix, has sold out quickly multiple times in the past. So, if you don’t want to be left out of one of the best medical conferences of the year, where you’ll learn how to create financial freedom as you recharge your mental batteries, make sure to register for WCICON23 ASAP! You are worth the investment.]
By Dr. James M. Dahle, WCI Founder
With doctors averaging a salary of more than $250,000 per year, we know that a physician's income is one of the best ways to accumulate wealth and get started on the path toward financial independence. But it likely will still take many years to reach those financial goals, especially if a medical student has to take out hundreds of thousands of dollars in student loans to get the training they need.
It's not an easy path, and since getting to the point of drawing an attending's salary will take years of sacrifice, it's worth giving some financial advice for pre-meds and medical students to make that journey just a little bit easier and more fruitful.
Here are eight tips for pre-meds and medical students.
#1 Choose the Cheapest Medical School You Can Get Into
The decision of which school to attend will have a greater impact on your finances for the next 5-20 years than any other decision, other than who/if you marry and what specialty you choose to practice. Choose wisely. I’ll give you a hint—most medical schools in this country provide a pretty comparable education. Most of what you learn in medical school will come from what you teach yourself and the pearls dispensed to you freely by interns, residents, and other doctors you come into contact with. Little of that learning is dependent on the school you choose. Thus, choose the cheap state school if you can get into it. After all, the less you spend on medical school, the less likely you are to graduate with a massive debt that will affect your happiness, lifestyle, specialty choice, and job choice.
Don’t forget that costs aren’t limited just to tuition and fees but also to the local cost of living. That school in Boston, New York, or San Francisco is going to cost you a lot more than the one in Omaha or Albuquerque.
#2 Consider the Merits of ‘Scholarship' Programs Carefully
There are several organizations that would like to pay for your medical school in exchange for a commitment. The military Health Professions Scholarship Program is the best known, but the US Public Health Service, Indian Health Services, and other private deals also exist. None of these programs is a “scholarship” in the traditional sense of the word, and many of these “scholarship winners” have later realized they would have been much better off, personally and financially, if they hadn’t received it. As a general rule, use these programs only if your career goal is to be a military doctor or a rural primary care doctor. Choosing them for the money is almost surely a mistake you will regret.
More information here:
Life as a Military Physician—10 Things I Loved About Being a Military Doctor
#3 Minimize Your Student Loan Burden
Student loans suck, and they’re getting worse. At the beginning of this century, medical students had access to much lower tuition they could pay with subsidized loans which they could refinance at a low rate shortly after graduation. Now, tuition has skyrocketed, and more than ever, you must minimize your loan burden. Every dollar you spend of loan money is like $3—since that is what you will need to earn to pay for that dollar of consumption. Take out as little in loans as you can, and spread it as far as you can.
More information here:
Time to Get Serious About Student Loans Again
#4 Live Frugally as a Pre-Med and Medical Student
When I was a medical student, I did not have much money, and neither did any of my friends. We used to drive to Red Rock, outside of Las Vegas, to go rock climbing. We would drive an economy car, bring and cook all our own food, and sleep in a ditch out in the desert for free. We’d climb hard for a couple of days, and then drive home. Now, if I go to Vegas to climb, I can afford to arrive in a gas-guzzling SUV, stay in a swanky hotel on the Strip, eat at expensive buffets, and go see $150 shows after the climbs. The whole trip costs me less than a day’s work now, but it would have been a vast sum of money as a student.
Now is the time in your life to learn how to live cheaply. Learn how to do without—to budget and to defer gratification. There IS light at the end of the tunnel, but wait until you get there before you start spending it. Living frugally kind of stinks. But it is far better to be young without money than old without money. I’m reminded of this every time I interact with a local doctor who hates his job and is old enough to be retired. He’s obviously working because he has to, and that’s an awful way to live out your golden years.
More information here:
#5 Apply to Many Medical Schools
Some people—especially pre-meds, but also medical students—cheap out in all the wrong places, such as getting into medical school. Missing a year’s worth of earnings as an attending may cost you several hundred thousand dollars in career earnings. Yet many pre-meds only apply to one or two medical schools because the applications are so expensive. Or they take the MCAT the first time without doing any practice or a prep course “just to see how they’d do.” Do it smart. Do it right. Do it once.
Getting into medical school is a numbers game. Don’t be innumerate. If you didn’t get enough interviews that you’re having to turn some down, you didn’t apply to enough schools. If you feel like there’s something else you could have done to prep for the MCAT, you didn’t prepare enough. Sell your car if you need to, but don’t expect to get into medical school if you only applied to one of them, applied late, or didn’t prepare for the only objective measurement available to medical schools.
#6 Send Your Spouse to Work
Don’t underestimate the benefits of splitting living costs with another person, especially one who has a job. Now’s the time for your spouse to work full-time. If they can cover your living costs, then your loans will be limited to just the cost of tuition. Even if you’re not married, get a roommate or two to help save money. Better yet, live in your parent’s basement. It is a little-known secret that it is possible to hold down a job for much of medical school. I even had a job as a fourth-year student doing histories and physicals at a local surgicenter. If you’re taking out enough loans to support a family of six for four years in addition to the costs of education, you will be limited in your specialty choices and future practice opportunities.
More information here:
Maximizing the Benefits of the Lower-Paying Job
#7 Begin Your Financial Education
I advise residents and attendings to read one good financial book a year. You might as well get started as a student. While I wouldn’t recommend you worry much about investing until you get out of medical school, learning about insurance and budgeting could yield some hefty dividends.
#8 Pick a Medical Residency in a Low Cost-of-Living City
There’s a lot that goes into how to make a rank list of residencies. Residency pay is pretty similar, no matter where you go. But don’t forget to consider the cost of living in the town where you will do residency. I had friends who could easily support their family of five in a Midwestern city and others who couldn’t support only themselves in the Bay Area.
There isn’t a lot you can do to improve your financial situation as a pre-med and while in medical school. But don’t let that stop you from doing these eight things that will improve it. Decades later, as you hopefully enter the land of financial freedom, you'll be thanking yourself for being so smart.
Student loans and the many programs and options are challenging to navigate. If you need help, check out StudentLoanAdvice.com, a WCI company.
What do you think? What financial moves are you making as a pre-med or med student? What do you wish you had done? Comment below!
[This updated post was originally published in 2012.]
Wow, was not expecting this. Thank you again!
I disagree about the military only if you think career military.
I’m not sure what you disagree with. Do you believe joining the military to pay for medical school primarily for the money is a good idea?
Found the book list through this post. Two stood out to me as particularly interesting – the Randy Johnson book on a home mortgage and The Successful Physician Negotiator. I noticed both were a little old, and wondered if you had a sense of whether they still seemed as relevant to you today, or whether there were things I’d need to keep in mind as different now if I were to read them?
I’ve seen lots of good mortgage books out there. This one is still just fine in my opinion. But if you want to try a newer one, check out Mortgage Confidential. I haven’t read it but it looks interesting from skimming through it.
The guy who wrote The Successful Physician Negotiator has an updated version called The Physician’s Comprehensive Guide to Negotiating.
Thanks!
no thats not what i meant. I think if you are speaking just dollars alone that you likely could do better. As an overall situation however, i think it has advantages. Ive always found having served opens doors for me. I think most shouldnt do career but just a 4-8 year stent. I just dont think you need to be military career minded in order to pursue it.
You don’t need to plan to stay in for 20 years for it to work out, but you do need to actually desire to be a military doc for four years. Way too many don’t, at least once they realize what that entails (which is usually a few years after signing the contract.)
thats the same stat on most 1st jobs for graduating students/residents. I completely agree you have to think you are willing to be on active duty for 4 years. Nobody knows what its like until it happens (like other jobs). I dont think most people should stay longer than their commitment but i think its a decent starting point.
Not only do they not know what that job is like, they don’t know what the alternatives are like. You sign the contract as a college senior, then 8-10 years later you start the job. You’ve changed and the job has changed in that time.
For a soon to matriculate medical student who is financing their medical education on their own with zero support from family, do you have any tips on how to use the dispersed loans from a refund check? Is it advisable to take out extra loans to have a certain balance on the bank account to feel comfortable? Just trying to get a financial plan together before I begin. Thanks
I don’t think extra loans to have a certain balance is a good idea. I’d minimize loans as much as possible. But if you end up taking out credit card loans because you didn’t take out enough student loans, well, that’s probably not smart.
I’m not sure what you’re asking regarding the dispersed loans from a refund check. Refund of what?
Do you have this post elsewhere? It seems that the blog you wrote for has been down for a while.
Thanks!
Just updated the post.
Thank you SO much!
Thank you so much for all the great posts. They are easy to read, down to earth, and informative. I agree with most of what you said. I totally agree with you that medical education is similar in almost all schools. I might argue that clinical education is probably better at the smaller schools/state schools than the private schools (have you experienced the joy and excitement of attending a 3 hour lecture on the proteasome vs. actually learning relevant clinical material?).
However, I think one difference that people should consider if they are choosing Harvard/Columbia/Stanford vs. Omaha/Albuquerque is the availability of high impact research opportunities for students interested in pursuing an academic career. In my opinion, the opportunity to do research/get published in a high impact paper is much easier at these institutions compared to smaller schools where clinical skills are emphasized more. Almost all attending physicians will have some form of project going on that you can work on/write up (as promotions emphasize publishing) + these institutions are much more likely to have larger clinical trials going on + more likely to have basic science faculties who just do research and no clinics. Therefore students are much more likely to get published in NEJM/JAMA/Nature/Science and help them get into residencies that places a lot of value on research/academics.
Many state schools do have these facilities/faculties and therefore it makes much more sense to go to UCSF vs. Stanford as a CA resident but even if you will end up with $125K in debt by going to Harvard (they offer FA on tuition + living expenses) vs $??? for Omaha, it may be worth it in the end if you want to do academics.
But for the majority of medical students who end up going to private practice, I agree that it really does not matter which medical school/residency they go to therefore going to the cheapest possible one is the right answer (and they will get paid more anyways if they end up practicing in the smaller cities). But you know where to go if you are interested in proteasomes ;).
I agree that the name of your school matters a lot more in an academic career than a private practice one.
Great post. I have a question regarding my first job out of residency. I keep going back and forth between working in the private sector versus working at the VA. As everyone knows the VA will pay you half of what you could make in the private sector. However, the VA offers a pension plan that vests you after 5 years and nobody offers pensions anymore. Also, the lower VA salary also lowers your tax bracket and therefore your tax burden. My question is at what point or salary does working in the private sector outweigh the benefits of getting a pension at the VA? For context I would be working as an EM Physician.
Well, you can run the numbers and compare apples to apples. Add in the value of the pension, adjust everything for taxes, and see how they compare. Don’t forget to include benefits.
I’ll think you’ll find that like everywhere else in corporate/gov fascist america, the degree to which the private sector exists is largely overestimated or frank fiction. While there is no doubt you can “make more” in the “private sector”, this comes at a HUGE cost of stress and lifestyle, compared to comparable gigs at the place you mentioned. Then we get to talk about the tax (dis)incentive, as you did – smart.
I can go on, but it depends a lot on how much you value an easier job and less stress vs more money, and that can change over the course of a career. I think you can tell that I don’t consider the stress and higher litigation as a result (more volume) of having to work more/harder worth it. I mainly state that because most doctors end up working forever and more than overdoing their spending on wives and kids, etc. Take the easier job and thank me later.
Great list and definitely would echo the importance of your last tip: “Pick a residency in a low cost-of-living city.” As a 4th year medical student about to graduate next month and soon starting a primary care residency, I can’t tell you how glad I am right now to have chosen to stay in the midwest for residency training. I was conflicted throughout the interview season about pursuing program “prestige” vs. quality of life. Not that these are always mutually exclusive, but there was certainly going to be a lifestyle difference between my resident salary in the northeast vs. the midwest. Don’t get me wrong, I really enjoyed my interview days at some of those big-name programs, and the ego in me thought “wouldn’t it be so cool to say I trained here?!” But when I looked in to COL, differences in resident pay (not significant, but still something), and the difference in taxes (again, not huge but something) between the northeast states and where I am in the midwest, the stress of it all didn’t seem worth it to me, personally. I also am married and have family here so that factored in of course. Granted I don’t plan to do academic medicine or research so that was less important to me. Perhaps if my career goals were to stay in academics or be a big name in the research world, I may have decided differently. And of course, those pursuing different specialties or planning on fellowship may make different decisions based on their intended field. But it really feels good right now to not be stressing about living expenses unlike some of my classmates who are searching for apartments in Boston or Seattle at the moment.
Huge fan of the blog and glad to have found it! Planning to continue to follow along throughout residency and as an attending one day.
Thanks for the tip that when one feels that one should have prepared in advance in order to pass the MCAT and get accepted in medical schools, one should go through such preparations in order to increase the chances of passing the MCAT and entering into medical school. After medical school, do these same rules apply? If I were a licensed medical professional, I still find it important to undergo training in order to increase one’s skill set and be able to heal patients better. Thanks for the great article on how to manage finances as a pre-med and medical student.
Question: Can I take the max. Federal Financial Aid I can get (which would leave me about $4,600 extra after tuition) this semester in Med School (I am a first-year med student) and use that $ to pay off an existing undergrad Sallie Mae private loan that I have at 8.75% interest (which otherwise will continue to accrue until I graduate)? Is that a good idea or not? And more importantly, is that considered a “misuse of funds?” I don’t really see how since it’s all my debt but I certainly don’t want to get in trouble down the road. Any thoughts would be MUCH appreciated.
Sure, I don’t think that’s dumb. I’d do it.
Loans can be used for room, board, relevant educational expenses; not just tuition. It’s hard to believe that the school would certify need greater than total cost of attendance, but if they did, Federal Master Promissory Note, 13 b, is very explicit about use of loan proceeds. Makes perfect financial sense, but I don’t know that you want to risk it.
https://studentaid.gov/mpn/grad/subunsub/preview
Thanks so much for all this info. I’m an incoming MS1, and am very fortunate to have family covering a portion of the non-tuition costs. Is there a reason why I shouldn’t take the max federal financial aid, cover my tuition, and then invest the remainder in a brokerage account so that it has the potential to grow?
Three.
# 1 Your returns may be lower than your cost of borrowing, especially after tax and once adjusted for risk.
# 2 You may run into cash flow issues servicing the debt.
# 3 Behaviorally, most people have a hard time “investing the rest.” They get that money in their account and they’re far more likely to at least spend some of it.
Personally, I wouldn’t borrow more than I absolutely had to.
Thank you for this post! A quick question:
If someone is interested in competitive (i.e. higher-paying) specialties and is choosing between an upper-tier medical school (~30-40% match into those specialties) and a much lower-tier medical school (~5-10% match into those specialties), is paying an extra $25k/yr for the upper-tier school worth it for the much greater chances of matching into a better-paying field? My reasoning is that the $100k extra in cost of attendance would be quickly made up for in salary differences in the near future, but I’m not sure if this would hold true.
I’m skeptical of the accuracy of your data.
I guess the answer to your question, however, is maybe. Maybe if the data is right. Maybe if you don’t change your mind on specialty. Maybe if you’re in the 30-40% but not the 5-10%. And maybe if the 5-10% at the crummy school is not the exact same caliber student as the 30-40% at the good school.
I don’t know of any specialty with a 40% match rate though, especially from a top notch school. Which specialty are you thinking?
Sorry, let me clarify. By looking at a school’s match list, you can see what specialty the people in their med school class. If you calculate the percentage that match into something such as ortho/plastics/derm/neurosurg/urology/ENT (the fields that I’m interested in), around 30-40% of the graduating class each year pursues those fields at the upper-tier school while only about 5-10% of the graduating class each year pursues those fields at the lower-tier school. I’m asking if the increased chances of matching into a competitive (and higher-paying) field at a much better med school are worth the extra $100k cost that I’d incur by choosing that school, i.e. balancing the significantly increased odds of matching into a higher-paying field with the extra upfront cost in tuition.
Thanks for your replies!
Ha ha. That’s probably more a reflection of their student loan burdens than the caliber of the education! Wrong data to look at. What you care about is how many people that wanted to go into (whatever you want to go into) actually matched. My school had a “primary care focus” and plenty of people matched just fine into ortho, ophtho, plastics, derm etc.
No, I wouldn’t pay $100K more to go somewhere that more people become urologists and ENTs.
Dr. Dahle is right on. One of the bigger tragedies of medicine is knowing that you fit in, like certain things about it, but find that most of the specialties just aren’t for you in terms of choosing a career/commitment for 20-30 years. What’s more, there’s no guarantee you’ll get it. Let me tell you, I disliked most specialties and got lucky to match a more difficult one, and this was before they changed all the soap and matching business after the fact. I came from a premier med school but wasn’t a kiss a$s so I wasn’t rated high or AOA. In the last couple of decades, medicine has been far more about playing the game or getting lucky than any time before. Take Dr. D’s advice and try to do it all with the least cost to you possible, especially since now schools overcharge and your future with CMS payments and insurance is as bleak as ever.
So if someone pursued a specialty they were interested in, but ultimately couldn’t secure a match into said specialty, what should be done? I can’t imagine someone will just go into a specialty they hate for the rest of his/her life. Would joining academics or becoming a consultant the next best options? Thanks
It’s a tough question. I probably would have done some business thing or consulting yes, but the problem is also that you aren’t a real doc until you do some residency. A lot of people interested in business or TV/broadcast did stuff like PMR, if not something they liked. A friend of mine did consulting for like 2 years before then going to do an ER residency to legitimize a doctor role in a business and then made bank, but it took a lot of work and a lot of scheming with other business types. Not worth it in my view.
I wonder what Dr. D would say to those who didn’t really like any specialty. I’m curious, as that’s always the problem with medicine – you’re all in by MS3 and for many, medicine turned out to be a slog that wasn’t all that interesting. By that time you had six figure debt and can’t look back anyway, since what else are you going to do in America when medicine is still pretty good otherwise?
I generally recommend that if one can stand it that they finish med school, residency, and then practice for a couple of years for exactly the reason you stated. But I have met a few that went looking at industry jobs just with an MD.
If I have some cash available to me (~40,000), should I use that 1. Right up front and reduce my first year loan, or 2. Spread it out and reduce what I borrow over 4 years, or 3. Save it and invest it for the 4 years of med school and then use it for living expenses or to pay down debt right away?
I wouldn’t do # 3. I lean toward # 1. But I guess if spreading it out would help you avoid private loans or something, I might spread it out to do that, i.e. # 2.
Next level premed 4D chess: get a citizenship in any other country and go to Med school there (Canada, Mexico, SE Asia). Myself and several others at my institution were lucky enough to have this and graduate with no debt. 5-10 year head start.
The tricky part is matching back in the US after attending there.
Yep. Little known fact, Canadians who are dual citizen and board certified can come to USA without even doing USMLE. Source, me. Probably a very small population though. I was able to have a positive NW by PGY4 without parental help. Very lucky though.
We all have our advantages and disadvantages in the financial game. Take advantage of yours!
Very interesting. Would you ever consider writing an article on the Medical Scientist Training Program (MD/PhD Program)? For those looking to practice medicine as part of a research-heavy career, it can be a financial boon. I think too few students are even aware the programs exist.
From what I understand, people who are in MD/PhD programs will usually end up doing research a majority of their careers. Someone please fact check me. Thanks!
One of the WCI columnists, Francis Bayes, is actually doing a MD/PhD program. https://www.whitecoatinvestor.com/francis-bayes/
From what I understand, people who are in MD/PhD programs will usually end up doing research a majority of their careers. Someone please fact check me. Thanks!
A few weeks ago, you posted about transferring the ownership of the auto your child is driving, to their name. I totally understand the liability issues. Are there any tax consequences like sales or gift taxes?
No sales taxes on a gift, but when they go to register it I’m not sure what your state DMV will ask for. As far as gift taxes, you can give anyone you want < $17K a year without filing a gift tax return. You can use up your entire estate tax exemption ($12M+) before you have to start paying gift taxes.