For the FITs | Preparing For Your Financial Success as a Cardiology Fellow

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Congratulations on making it to the next academic year!

Some of you are moving on to more advanced stages of fellowship or graduating to become attendings, armed with cardiology knowledge and confidence. Others are just entering this exciting field of medicine as first year cardiology fellows, anxiously awaiting your very first call night.

No matter where you are in your training, there's a good chance you fall into one of three stages when it comes to your finances:

  1. You have no interest in learning about personal finance and wish your credits cards would magically pay themselves off
  2. You wish you could be interested in personal finance but are paralyzed by the façade of complexity the financial industry creates to make you feel helpless, or
  3. You read one blog about physician personal finance and now you're so deep in the rabbit hole of financial literature that you're spending all your time obsessing about whether you should form an LLC or an S-Corp to optimize taxes on the $900 you made moonlighting

Whatever your stage of financial education, at the start of fellowship there are a few major financial topics worth understanding to increase your likelihood of financial success and to avoid financial ruin.

1. Don't rush into purchasing a home as a fellow.

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But isn't the American dream to own your own home? Also, your friend Jimmy bought a home at the start of fellowship and made so much money in just three years! And isn't renting just "throwing away" money?

When you buy a home, the first few years of payments and expenses are mostly interest, taxes, homeowner association fees, maintenance/repairs and mortgage closing costs. Those expenses are just as much "throwing away" money as any amount spent on rent, if not more.

When you sell your home in three years, you'll be hit with a 5 percent commission to the realtor who sells your home, even more money in the trash. The only way to make money selling a home in less than five years is if you get lucky with a rising real estate market and your home value appreciates enough to cover all those expenses.

There's no guarantee the housing market will rise in value during your fellowship and it could easily decline, resulting in massive financial loss.

Even if you claim you will stay in your newly purchased home after fellowship to increase the likelihood of turning a profit, odds are that you'll want a bigger home once you get an attending salary or that you take a job far enough away that you want to move.

When you decide to rent, you're buying the freedom to move whenever you need to, and to be safe from unexpected repair costs that may be hard to afford on a fellow's salary.

2. Create a comprehensive plan for repaying your loans.

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Student loans can be complex and understanding your personal situation is critical to success. Failure to create a coherent plan for your loans could lead to losing tens of thousands of dollars, if not more. It may be worth paying a consultant a few hundred dollars to prevent the potential massive losses if you make a mistake.

If you're planning to take advantage of Public Student Loan Forgiveness (PSLF), make sure all your loans are eligible and that you are in the best repayment plan for your situation. Use caution when switching income-driven repayment plans, as you can't switch back once your income grows too high. If you make a bad choice, at that point you're stuck with it.

If you plan to do PSLF, don't make extra payments, because they don't count towards the 120 qualifying monthly payments needed for forgiveness. Try to avoid missed payments or forbearance unless truly necessary, as the benefit of earlier loan forgiveness is substantially more than the amount spent on each payment.

3. Make a budget.

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Spending without a written budget is like driving with a blindfold. Putting a budget down on paper might not seem like fun, but it can be a critical step towards financial success. Understanding how you spend your money is the best way to prevent financial mistakes.

First, find your fixed expenses and see if you can reduce them. These include things like housing, utilities, student loans, etc. Some of these are not easily changed, but you might find that you need to spend less on rent to make room for other expenses that are important to you, like social activities or travel, and you wouldn't easily know that without a budget.

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For variable expenses, start by tracking your spending for a few months to understand how you spend your money to get a baseline for your budget. Go through every credit card bill with a fine-tooth comb to figure out just how much you're wasting on things like your daily coffee (that you should really bring from home).

Figure out how much you spend on food, gas, entertainment, and everything else. Make room in your budget for important expenses like disability and life insurance, retirement saving, emergency fund and a down-payment fund.

Retirement savings should be as much as you can tolerate now, then at least 20 percent of your income as an attending. These items will be the hardest to swallow, because the benefit is usually deferred and they can be expensive. However, these types of expenses will ensure you stay on the path to financial success no matter what hurdles you encounter.

Summing It Up

There are countless ways to achieve financial success, but the odds are in your favor if you plan well and make smart choices at the start of fellowship. When it comes to major financial decisions, like the purchase of a home, don't rush into it during fellowship.

As we start this new academic year, take the time to organize your finances, so you can spend your time enjoying life and practicing medicine, rather than stressing over whether you'll be able to pay your bills this month.

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This article was authored by Daniel Kirshenbaum, MD, a cardiology fellow at Boston Medical Center in Boston, MA.

Keywords: ACC Publications, Cardiology Magazine, Retirement, Fellowships and Scholarships, Insurance, Life, Consultants, Salaries and Fringe Benefits, Financial Management, Financing, Personal, Income, Taxes, Housing, Friends, Freedom

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