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% |
For those making the big bucks (becoming attending) this July!
Thanks for the great post.
I found your link through white coat investor. The part I wanted to comment here is, what are your thoughts about doctor mortgage loans you mentioned in this post? It sounds like you do recommend them for those of use not yet able to put down 20 percent down on a traditional mortgage.
I became an attending in July 2014 and have been living like a resident, thanks to advice from WCI and DFD.
Keep up the great work.
Dear Tin,
Thanks for stopping by.
I did use doctor’s mortgage when purchasing my home before starting internship.
I learned a few things and will expand them into a full post as there are several factors to consider.
1. doctor’s mortgage is generally 1% higher than conventional loans (this may more than offset the NO PMI sweet deal doctor’s mortgage has)
2. almost all doctor’s mortgage companies still requires at least 5% down and that 5% has to be your OWN Money (ie not a gift, but money that has sat in your bank account for at least 2 months, because under-writing ask for at least 2 months of bank statements) tho some small banks will literally take 0% down
3. if i had to do it all over again, i would have chosen an ARM mortgage rather fixed rate. my friend went for a 3.625%, 0% down, 5/1 ARM doctor’s mortgage while I was stubborn and got a 11% down 4.375% 30 year fixed mortgage. in less than a year, i refi into a 7/1 ARM 3.375% conventional mortgage by paying down mortgage some more (plus my home value went up 16k) to avoid the PMI. in 20/20 hindsight, i would have went straight for ARM and got the lowest rate possible, having done the calculation and knowing I can easily pay off the entire house when the rate adjusts…
congrats for making attending money yet living resident lifestyle.
you will be in such a fantastic position in a few years.
high income translate into high net worth WAY faster than low income does.
but too many of us simply kill the high income by high expense, hence crawling towards high net worth all our lives.
feel free to ask any other questions, i’ll be writing a post about doctor vs. conventional loan shortly.