By Dr. Francis Bayes, WCI Columnist
I could not ignore personal finance when I created my residency rank list last year. As I explained in my column about whether MD/PhD was a good financial decision, the opportunity cost of sacrificing clinical time—thereby earning lower income—is the biggest challenge in academic medicine. Meanwhile, my wife’s only requirement was that I match to a program in a city with good Asian food, so most of my programs were on either coast (I invest in my marriage first!). Similar to many memes, the three most important factors for my rank list were family, fit, and finance (in order of importance), but I could not have all three with most of the programs to which I applied.
I had a running rank list throughout the interview season, and the list was divided into three tiers, mostly based on fit. I would have been content to match to the top program of my second tier, whereas I would have been disappointed to match below the last program of my second tier. I started the season with a handful of programs in the first tier, but by the end, I narrowed it down to two programs that I will call Program EC and Program WC.
My most challenging decision was at the top of my rank list. I would have ranked Program EC, which is located in an East Coast high-cost-of-living area (HCOLA), as my first choice without reservations if finance was not a factor. But Program WC—where I would have liked to train even in a vacuum—is located in the West Coast HCOLA that includes my wife’s hometown and is closer to my parents in East Asia. Because family and fit are specific to individuals, I share in this column a list of generalizable financial factors that influenced the top of my rank list.
(I reveal how I weighed the factors at the end.)
#1 Future Opportunities
Based on my mentors’ advice and my impression, both programs would prepare me to become a good psychiatrist and scientist. My mentors advised that Program EC would open more doors—including at Program WC’s institution—than Program WC would. But I have heard from different residents that Program WC was more likely to continue supporting me after residency with or without external funding (e.g., flexible arrangement for clinical time).
I wrote about how I can take advantage of Economic Outpatient Care by seeking once-in-a-lifetime opportunities instead of financial comfort. Regardless of fit, Program EC’s institution is one of the few that attract ambitious physicians and scientists from everywhere, in everything, all at once. This was an opportunity for me to walk the walk.
Verdict: Program EC
More information here:
#2 Average Attending Physician Income
Medicine is one of the few professions in which physician income is higher in LCOLAs than in HCOLAs. According to the US Bureau of Labor Statistics (Table 1), neither California nor Washington state are in the top-five of best-paying states. But San Jose, San Francisco, and Seattle are in the top-five of best-paying cities for psychiatrists (Indianapolis and Kansas City round out the list).
In contrast to West Coast HCOLAs, East Coast HCOLAs such as Boston, New York City, and Washington DC have a mean wage that is 60%-70% of their West Coast counterparts. One possible reason for the difference is that Boston, NYC, and DC are in the top-five of metropolitan areas with the highest employment (i.e., number of psychiatrists). Interestingly, the correlation between the concentration of psychiatrists and the mean wage is weak (< |0.20|), in part because California, Connecticut, and New Jersey pay psychiatrists very well.
Verdict: Program WC
#3 Childcare and Travel Costs
The WCI forum thread on childcare costs was enlightening. My wife’s work is now fully remote, yet she would have to travel for work occasionally. If she switches jobs in the future, not as many jobs may be fully remote. As someone who studied the role of fathers in child development, I will do everything in my power to care for our future child(ren). But despite our best efforts and work flexibility, we would need to pay for backup childcare at some point.
Spending at least $10,000-$20,000 per year, which seems like a conservative estimate in an HCOLA, might be the “cost of doing business.” But it would hurt more if the alternative is living in the same metropolitan area as our parents and paying <$10,000 (i.e., very nice gifts for being backup childcare). Again, the less I feel stressed about “providing for the family,” the more likely that I will pursue research in my career.
Finally, we would save 20%-25% on traveling to my parents in East Asia from the West Coast in addition to saving the cost of travel from Program EC to my wife’s parents.
Verdict: Program WC
More information here:
What Happens If You Don’t Match into Residency and What to Do
#4 Salary and Moonlighting Opportunities
The difference in residency salary will not matter as much as the difference in potential attending income (e.g., $10,000 vs. $100,000, respectively). Childcare and travel costs might also offset any extra savings from greater residency salary and better moonlighting opportunities. Granted, the greater residency salary means more cold hard cash now, whereas the BLS data does not guarantee that I would earn more on the West Coast than on the East Coast after residency.
Could I increase my lifetime income by going to Program EC for residency and then moving to the West Coast? Perhaps. But such a mindset would be inconsistent with Factor #1, because if I am competitive as an applicant to match at Program EC, I should try to succeed at Program EC’s institution for as long as possible.
Verdict: Program EC
#5 Community
Are relationships related to personal finance?
The happiness literature is pretty clear that the way to maximize happiness from spending is to spend on shared experiences with people you care about.
Do more of that and less retail therapy and collecting.
— White Coat Investor (@WCInvestor) March 20, 2023
After seven years, I am leaving my friends and church community once again. Maintaining connections that I made while living in other metropolitan areas has been challenging during medical school. It would only be harder during residency.
My wife and I did not want to have to say goodbye again 4-7 years later. We wanted our next community to be where we would take root. We increased the likelihood that we would stay indefinitely in our new (yet familiar) city by living in the same metropolitan area as my wife’s parents and on the same coast as her closest friends.
Before our parents are too old, we want to maximize our vacation spending with our parents. Before we become parents, we want to maximize our dining spending with our friends. Before we grow too old, we want to maximize our outdoor spending by bringing along our family and friends to the Cascades, Sierra Nevada, and so much more. Before we die, we want to reap the fruits of giving our time and money generously to local causes over decades.
Verdict: Program WC
More information here:
From Fourth Year to the Real World: Transitioning from Med School to Residency
My Verdict: ‘Some Lessons Have to Be Experienced'
The final score for the financial factors was 3-2 in favor of Program WC, but Factor #1 played an outsized role in giving the edge to Program EC (in boxing parlance, this would be considered a controversial judges’ decision). This meant the total score was 2-1 in favor of Program EC because of Program EC’s slightly better fit.
Although I ranked Program EC and Program WC as No. 1 and No. 2, it was more like No. 1(a) and No. 1(b).
I am not being diplomatic!*** When I explained my dilemma to my mentors, half of them advised me to rank Program EC first, while the other half advised otherwise. Until I opened the Match email, I had daydreamed about Program EC only to remind myself why Program WC would be better, and vice versa.
***Residency program directors and faculty who have reviewed my application and interviewed me know that my real name is not Francis Bayes. But I will continue to write under a pseudonym during residency. Anonymity allows me to (1) write about controversial topics like crypto and (2) explain how my interest in personal finance aligns with career goals only during job interviews.
The process of creating a rank list is so personal that it might seem irrational to others even though it feels rational to the applicant. As blogger/podcaster Michael Batnick said, “Some lessons have to be experienced before they can be understood.” I expect everyone—especially those who have already ranked and matched—to disagree with something about my process or final rank list. Still, I hope this column helps readers who will be future applicants.
After all, my wife and I are ecstatic to go to Program WC, and as they say: happy wife, happy life.
What factors did you consider when making your rank list? Would you make the same ranking now? Is there anything you regret? If you're about to make your own ranking list, what factors are most important to you? Comment below!
That’s quite an analysis.
I think mine was about three factors:
Size of program (and by extension call nights)
Availability of moonlighting
Other amenities…like a nearby beach.
I matched into my number one spot in OB/GYN, a choice that was entirely based on familiarity, quality, and location (it was the same city I’d been for four years). All the accepted interns were AOA graduates. I had interviewed at Yale, Duke, Vanderbilt, Johns Hopkins, Cornell, Univ of Pennsylvania, and such…and still chose the tiny program where I went to medical school.
I quit after a challenging year and interviewed for second year spots in Psychiatry. It wasn’t the program. I chose the wrong specialty. The three available slots nearby were in SC, Virginia, and Ohio. I only had five days to interview for all three. All of them offered me a spot. MUSC had 14 residents per level (two nights of call per month), the Dean of the Medical School was a psychiatrist, they were near a beach, and had a free gym membership, and offered accepted moonlighting.
I took the MUSC slot based on these factors: minimal call, lifestyle amenities, and extra money via moonlighting. I made double the base resident wage in year two, and about triple in years three and four.
No one ever cared “where I trained” again. I made 90th percentile wages in my early career and did even better after I took on a side gig about halfway through my 28 years as a full time psychiatry attending. There was no shortage of “Medical Director” positions, chairperson jobs, and eventually, “Chief Medical Officer.”
My first attending job was near my wife’s parents, and was one of the best decisions we ever made, solely based on family ties.
It varies for each person, but all my choices after my horrid OB/GYN internship (horrible hours, quality training ) were about family, lifestyle, and finances. I have few regrets. I suggest you always put your wife and family first. As you say, “happy spouse, happy house.”
Personally, my three factors (in order) for choosing a residency are # 1 the people # 2 the quality of the training and # 3 the location. Financial considerations would definitely come after all that.
In the triad of family, fit, and finance, “fit” was the biggest category that included all the factors you mention. After all, I was looking for research track programs that were within 10 mi radius of an Asian grocery store.
Thank you for sharing your story. I needed such analysis bc I really couldn’t decide between my top two based on other (more important) factors. Now that I’ve explored the west coast outdoors on a near-weekly basis, I’m realizing I might have underestimated amenities. Prestige was a factor for me because I’m considering academia; but I still didn’t want to go somewhere I would later going just because of prestige in case I choose a diff career path.
Thank you for sharing your story. I needed such analysis bc I really couldn’t decide between my top two based on other (more important) factors. Now that I’ve explored the west coast outdoors on a near-weekly basis, I’m realizing I might have underestimated amenities. Prestige was a factor for me because I’m considering academia; but I still didn’t want to go somewhere I would later going just because of prestige in case I choose a diff career path.
If WC = Washington and you plan to stay there after training you’ve left no state income tax off your list. That’s a huge difference with 20 years of future earnings being taxed at ~ 10% in California or New York vs 0% (really 0.5% with the new long term care tax in Washington). With investment returns could be a $500k + difference and allow you to retire years earlier.
May not be the most important factor (pick where you want to live first and offers the best training) but since this is a personal finance blog taxes should be mentioned.
We can complain about a 1% expense ratio being too high for an advisor or 0.3% being too high for a fund but not enough attention is paid to a 9% expense ratio in an income tax state on your income. Of course there are some different taxes in no income tax states but for the typical w2 employee physician on personal finance blogs who is saving a lot, you will come out way ahead paying no income taxes. Perhaps with sales tax you drop down your 9% expense ratio to 6%, still very high.
This is coming from the perspective of someone who has paid 17 years of state income taxes on physician wages in a high tax state (Oregon). Taxes are easier to control than investment returns. You may feel rich coming out of training but family life costs a lot (college, house, etc) so as shallow as it sounds I’d focus on making as much money as possible, particularly if the job is the same and the only difference is how much you keep with state taxes.
Many residency graduates don’t stay where they train, so I left out taxes for this column. Unfortunately, residency programs in states without state income tax tend to underpay their residents to the point that those who train in other high state income tax states (eg, NY) still have a higher take home pay.
Hello Greg, I feel this so deeply as someone who has been living in Oregon like you for the past 3 years since becoming an attending physician (PCP). That 9.9% state income tax is so painful! Yes, I know we do not have sales tax, but still….
Francis great analysis man. coming from a dude who was born, raised, college, med school, intern year in NJ, then residency/fellowship at NYU, then back to NJ, I have to say you made the right choice. I hate dissing my home state, but the taxes are a killer! The problem with the east coast is I have no option really for an income tax free state except for the state of New Hampshire. On the west coast you have Washington, nevada, and Wyoming (excuse my ignorance if wyoming is not considered west cost . . . I’m from NJ . . .) as no income tax states, and other than Cali and Oregon all the other states or very low cost of living and taxes.
An I’m not sure how much a difference a west coast vs. east coast program will affect your career. I don’t know where you applied but programs on both coasts are very comparable in terms of rankings, career opportunities, and research.
congrats dude on matching in the west coast! I’m sure you’ll be mad happy there, financially and otherwise 🙂
No, Wyoming is not on the West Coast. That consists of Hawaii, Alaska, Washington, Oregon, and California. The proper term for Wyoming, Utah, Arizona, Colorado, New Mexico, Montana etc is “The Intermountain West”.
South Dakota, Alaska, Texas, Tennessee, & Florida also have no income taxes. As a lifelong native born Oregonian, no Wyoming isn’t West Coast. Rocky Mountain or Intermountain West region. And yes 9.9 income tax sucks bad!