You are in a wonderful position to take much greater control of your debt and build positive net worth much faster than anyone else still in training for the following reasons,
- your new pay is likely 4x to 5x more than what residency program paid you.
- you are in the position (because of your income) to significantly lower your interest rate by student loan refinancing* (companies such as DRB deem most residents’ income insufficient to refi even 20k of student loan, which I learned from personal experience). How amazing would it be to lock into a 5 year fixed interest rate that is half of your current rate? This will most definitely help you pay down/ pay off your student loan much faster than staying with your current 7% interest rate.
- you will qualify for much greater credit line and many amazing cash-back, interest-free credit card offers. Smart credit use here will save you 10’s and 1000’s of interest (which is tax free and guaranteed), and make you a nice chuck of change in 1099 interest income.
- by continuing to live like a resident for a 3-5 years, you can achieve incredible financial goals. I have colleagues planning to pay off 350k of student loans in 3-5 years. Since I have already paid off my student loans, my goal is to pay off my 1st home in 7 years and purchase a 2nd home by 2023.
- you may now save VERY aggressively for your retirement funds. be sure to max out everything if possible (back door ROTH, tax deferred accounts, HSA, 529 etc.)
- if you haven’t bought a house, doctor’s mortgage will help you purchase one.
My suggestions to take full advantage of this financially privileged position:
- live like a resident until you pay off your debts, giving highest priority to the highest interest debt.
- for super savers, aim for more: pay off your debts, your house, and max out your retirement. THEN, upgrade your life style a bit where you see fit.
- start monitoring your credit score. I sign up for experian.com $7.99/mo and get access to helpful tools such as the credit score simulator. (I currently have no financial association with experian and make no money if you sign up with them.)
- keep your credit profile squeaky clean. dispute anything that is fraudulent (unlikely, but it did happen to me once).
- utilize credit for big financial items first (ie. Mortgage, student loan refinancing). The under-writing processes for these large ticket liabilities are much more stringent than those of credit card approvals. So use your high credit score to lock in the lowest rates/terms of mortgage and refinanced student loan interest rate FIRST, before applying and getting inquiries for credit cards.
- After your largest liabilities/debts (mortgage, student loans) are settled, now have your cake and candies with the credit card companies.
- experien.com come in handy here as well, you can search for the credit cards that best suits your needs/wants easily. do you want cash back? interest free money? airline millage? gift cards?
- feel free to apply to several cards at once. Cluster your credit card applications, so the hard inquiries can all fall off from your credit report together in 2 years!
Congratulations for making it through residency!
You ARE where the light is at the end of the tunnel. Pay a little attention to your debts and savings, you will sooner be able to work
“because you want to and not because you have to” 🙂
I can’t wait to join you on the other side in 5.25 years! Wish you all the best.
*DRB student loan refinancing rates. (please check their website for updated rates.)
|Term Option||Fixed APR*||Variable APR*|
|5 – Year||3.50% – 4.75%||1.92% – 3.68%|
|10 – Year||4.50% – 5.50%||2.63% – 3.88%|
|15 – Year||5.00% – 6.00%||2.98% – 3.98%|
|20 – Year||6.25%||3.98%|