Although I am not a physician myself, my husband is a first-year PM&R attending. We recall all too well that money is often tight during the training years. His final year, during which he completed a fellowship more than 150 miles away from home, was the most challenging financially.
Even before he applied to a program, we knew that I would be staying at our home in Michigan; the fellowship would be only a year, so selling our house and leaving my job just didn’t make sense. Thankfully, the medical training process is predictable and we had known for several years that his best fellowship options would be out-of-state. Having the time to prepare our finances and develop a plan for this difficult year is what got us through.
Affording the Interviews and Applications
For us, this journey began in the fall of 2018. Over several months, my husband applied to and interviewed at nine fellowship programs across the country. As we evaluated fellowships, program quality was the number one priority. With our finances in mind, we also considered other factors, including:
- Whether a program had 501(c)(3) status that would allow him to maintain eligibility for Public Service Loan Forgiveness
- The availability of any retirement matching program and the requirements for these funds to be vested
- The cost of living, including rent, transportation, and lifestyle factors in each city
- Distance from home
Ultimately, he matched to a Brain Injury Medicine fellowship in Cleveland, Ohio—a great program that checked many of these boxes.
Because the 2017 Tax Cuts and Job Act eliminated the allowance of itemized deductions for unreimbursed employee and miscellaneous expenses, the application fees and the travel and accommodation costs fell almost entirely on us. We charged all of these expenses—more than $5,000 over five months—to a credit card that we paid off in full each month.
While we were fairly frugal, I still do not know how we made that work. During this time, we saved very little for retirement and paid only the minimums on our student loans. Honestly, we just got lucky that things worked out at the end of each month!
Interviewing had to happen, and the money had to be spent. Looking back, I’d make two changes to our approach. First, I would increase our retirement savings rates. At the time, neither of us was eligible for an employer match. We used this as an excuse to justify saving very little for retirement and lost out on nearly two years of potential growth in those accounts.
Second, I would look into a credit card with a better rewards program. Even a slightly greater rewards rate could have yielded several hundred dollars in additional cashback throughout the interview process—a good chunk of money for us at that time. A quick search and credit card application could have provided some much-needed flexibility in our budget.
Managing Expenses for Two Households
Although we survived the expenses of interviewing, we remained nervous about managing expenses for what would soon become two separate households. Medical training is long and we used that to our advantage here; we had six full months between matching and the start of his fellowship to get our finances under control. We tracked every dollar that we earned and spent during this time. We did not budget in the traditional sense, but simply observed trends and identified areas to potentially reduce spending.
Using this information, we wrote a financial plan specific to the complexities we’d be facing that year. Now that we had an employer's match, we prioritized long-term savings, stipulating that we would contribute at least the amount required to receive each of our matches to our retirement savings. Our second goal was simple—make sure that our bank accounts and financial goals could survive a year of maintaining separate households. Finally, we outlined our longer-term goals, including plans for increasing our insurance coverage after the completion of his fellowship, a timeline for student loan refinancing and payoff, and a target date for financial independence. We knew this was not a year in which we’d be paying off his student loans or seeing other significant growth in our net worth. Really, we were just hoping to break even.
Preparing for a (Financial) Emergency
Before his move, we reevaluated our emergency fund and determined that we had sufficient savings to pay off my final student loan. Though it brought our savings account to its lowest balance ever, this was a better use of the money than allowing it to sit unused in a low-interest account. Paying off this debt reduced our monthly fixed expenses and freed up some cash flow for us, which created a bit of flexibility to accommodate for unexpected expenses.
Around the same time, we also applied for a Home Equity Line of Credit (HELOC) through our mortgage holder. We weren’t sure what we might need these funds for, but we wanted to be prepared given our reduced emergency fund. And, wouldn’t you know it, the day he was leaving for Ohio, we found mold and water damage in our finished basement.
After the initial shock, we evaluated if this truly qualified as an emergency. We used the space as a gym and second living room, but I was about to be living there alone for the next year; I certainly did not need a nice-looking gym or two living spaces. As frustrating as it was, we decided this didn’t qualify as a true emergency.
We spent a few weekends tearing down drywall, ripping up carpet, and conducting mold remediation. Then, we held off on refinishing it until we were back on more solid financial footing. Our HELOC had a variable interest rate starting at 5% and, while it was reassuring to know we could access the money in case of absolute disaster, the decision to not treat the water damage as an emergency saved us thousands of dollars.
Sticking with the Plan
Despite our preparations, the start of his fellowship was incredibly stressful on a financial front. We did not realize that he would go a full four weeks between receiving his last residency paycheck and his first fellowship check. We found ourselves one paycheck short in a month during which we made our typical mortgage payment, paid rent plus a security deposit, and incurred moving expenses. That delayed pay schedule left a large hole in our budget, and our finances were solidly in the red for the first few months of his fellowship.
Still, as per our financial plan, we began contributing more to my employer-provided retirement account so that we were able to receive the maximum match. We knew we could alleviate some stress by reducing those contributions and increasing our cash flow, but we did not want to divert from our financial plan. Instead, we chose to run a tight budget for a few months to recover from this missed check. Had we inquired about the pay schedule in advance, we would have likely delayed paying off my student loans by a few months to ensure that we had the necessary cash on hand to meet all of our obligations.
As we settled into this new routine, he began interviewing for attending positions in the southeast Michigan area. It soon became clear that he would join a private practice and would no longer be eligible for PSLF. We refinanced his medical school loans with a WCI recommended company, reducing our interest rate from 6.8% to 4.3%. We knew we weren’t going to be making a dent on these loans while he was in fellowship, and our financial plan did not identify this as a priority for this year. With a lower interest rate, we felt more comfortable paying only the $100 monthly payment required as part of the lender’s in-training plan.
The job search was quite manageable on the financial front, and he ultimately accepted a position at the private practice through which he’d completed residency. We quickly learned, though, that the credentialing process would bring significant costs. His new employer would cover these, but would not be reimbursing us until after he started his position.
Between November 2019 and June 2020, we charged over $6,000 in credentialing expenses to an interest-free credit card we had taken out in my name. It was stressful, and carrying that balance each month didn’t do great things for my credit, but his new employer provided a check to pay it off within his first few weeks there. We absolutely could not have cash flowed those expenses during that time and the interest-free credit card (this time, with better rewards) was a reasonable solution.
Breathing a Little Easier
In early 2020, we reached a point at which our available cash accounts were remaining at a steady balance that could cover our expenses for the remainder of his fellowship. After watching our emergency fund steadily decline for the first few months, we both began breathing a little easier after this. And, it was fairly good timing. Though we minimized our expenses throughout this additional year of training, we didn’t stop living our lives and were expecting our first child that June.
We had to pause many elements of our financial progress to survive that final year of training and sticking to our financial plan helped us get through it. We still “live like residents” almost a year into his first attending role, but our financial plan now prioritizes our longer-term goals. Breaking even is no longer the goal; rather, we are striving for financial independence.
What do you think? How have you cut expenses during interview season and in training? Comment below!