How I Would’ve Handled Money if I’d Gone Into Medicine

gone into medicineOn my way home from the Middle East in summer 2009, I contracted swine flu somehow during the trip home. Luckily, I had the good fortune of making it back to the US before I found out or exhibited symptoms. In my agony while laying in quarantine, I decided that if I made it through I wanted to see if I could help people. So naturally, I signed up for Bio 1 with all the pre-med students for the fall semester. Thankfully for thousands of potential future patients, I decided to try my wares in finance instead, but what if I had gone into medicine? How would my financial life have looked? To entertain this hypothetical, let’s go back in time to 2011 to meet future aspiring med student Travis, a senior in college.

I would have applied to a smattering of prestigious medical schools, because why not? I’ve always heard you were supposed to go to the best grad school you get into. To pair with these top schools, I would have applied to some state schools and lesser known institutions that I had a good shot at getting some scholarship money. Although it would be an exceptional idea to consider joining the Armed Forces for med school, as they pay for your tuition and give you a small living stipend in return for completing your residency with them, I probably wouldn’t have done it because of the desire to not be limited in my choices for schools or residency programs.

Let’s make the massive assumption that I got into one reach school like a top 10 program, a couple public schools and one of the newly accredited programs. Let’s say I got a 25% scholarship to go to a public state flagship school that was already about ⅔ of the cost of the reach school. The other lower ranked program offered more money and the top school gave me the chance to have prestige with my degree, but I choose the public school to save money.

During the program, since I’m there to study and shouldn’t expect much free time away from the hospital or library anyway, I decide to room with a few guys in the program. We find an older 4 bedroom 2 bath house for $1800 a month since it’s a university town and there are plenty of affordable housing options, and we split it four ways. All in my housing and utilities come in at about $500/month. The $40,000 sticker price for med school is reduced to $30,000 with my scholarship vs the $60,000 I would have had to pay if I had chose my Top 10 reach school.  Given I don’t have the time to work because I’m so busy studying and that I eat out too much to avoid cooking I spend about $3000 a year on food. I keep my beater car that I don’t drive too much so that costs me $1000 a year. Let’s say I have another $2500 of miscellaneous yearly expenses because my life is pretty dull outside of class, studying, and trying to learn everything I can. So my all-in living expenses during med school come in at $50,000. I have some decent savings from undergrad that will cover one year’s worth of tuition so I burn that but for everything else I have to take out loans. I borrow the $50,000 for living expenses as well as three of the four years of tuition so that’s $140,000. Since some of my loans are accruing interest and some aren’t, let’s say I rack up another $20,000 in interest costs, so my total medical school bill comes to $160,000.

Now that I will become a resident, I preference specific places that have lower costs of living but still have good reputations. Because there aren’t as many doctors putting these places as their top choices I am more likely to get matched to one of these spots. I am looking at making about $60,000 a year for the next four years of my life. Since I get lucky and am matched to a low cost of living area my money goes a lot farther. Incredibly, I’m able to keep my living expenses the same through locating some new roommates on Craigslist and by learning how to pre cook for the week. Of my $60k, I’m losing about $15k of it to taxes and have to live off $12,500, so I get to keep $32,500 to deploy how I choose.

I take a look at my loans and realize that they are costing me a little over 6%. At my current tax rate of 25% I’d have to earn over 8% annually to equalize what I could earn by paying these loans down. The $160,000 debt load that I have is costing me almost $10,000 a year in interest, so after I cover those charges I pay an extra $22,500 towards reducing my debt. I feel pretty good after my first year since I have reduced my debt down to $137,500. I continue on with this pattern throughout residency and end my four years with a total of about $60,000 owed.

I decide after so many years without income that I will forgo fellowship and go straight into earning money so I get a pretty decent starting gig where I make $150,000 which will rise gradually to $250,000 over a period of around 10 years. I compared this to going to a surgical fellowship to specialize and since the breakeven period was close to ten years I passed. Since I am making more money I am paying more in tax so let’s assume that I have a 33% effective rate and clear about $100,000. Of that, I’ll use $60,000 in the first year to pay off my loans from school. Out of the $40,000 I have left, since I’m tired of roommates the past eight years of my life, I am getting my own apartment that I’ll rent instead of buy since my life is in flux. My living standard will rise from $12,500 a year to $25,000 a year. The other $15,000 I am going to use to start my first investment account.

Let’s say I gradually increase my living standard to about $30,000 a year, with the rest going into an investment account. Assuming the stock market gives a normal 5-8% return over this time period, I will end up in about the same place when I “retired” from my job in the financial sector by my 33rd birthday instead of my 25th birthday. So the decision to go into medicine would’ve extended my working career about eight years. To achieve complete financial independence, I probably would’ve needed to stay in the medical field until my mid to late thirties. At that point, I would have a portfolio in the mid to high six figures and the opportunity to go a variety of ways. I could keep practicing if that’s what I truly enjoyed, I could go for a year abroad to do medical missions, or I could start providing more pro bono work to poor people in the community. At least I’d have flexibility and control over my life at that point.

What I’ve Seen People Who Have Gone Into Medicine That’s Financially Smarter than Me

I have met two folks that were able to shave two years off undergrad + med school by going straight into a six year program that allows you to start residency at 24 instead of 26. This saves you two years of doctor income so the primary savings is opportunity cost not necessarily tuition savings though they did save an additional $50,000 or so from 2 years of undergrad they didn’t need to pay for. All in all, I think that program saved them about $250,000 of after tax income and about $350,000 in pre tax income terms.

I mentioned it earlier but going into the military for medical school is probably one of the smartest things you can do financially. You aren’t going to cost yourself very much if at all in future income as you can fulfill your five year obligation through residency for the most part and get a bigger paying private sector job after that. The six figure student loans that you DON’T accrue, much less the stipend you get while you’re doing it, make the military a very attractive option for anyone going down this path. I’ve heard there are even options like the National Health Corp and NIH scholarships. I wouldn’t have thought of these but people seem to find ways to finance their education and not go into as much debt.

What I’ve Seen People Do that’s Financially Painful

I heard a story from a pastor friend of mine where grad students would wait all weekend to get Duke basketball season tickets. The peculiarity was the different style each program would camp in, with the law, med, and business school students using expensive RVs, the academic grad students hanging in trailers, and the theology grad students literally tent camping. I think this is a great analogy for the way people spend in expectation of future income when they are in med school.

I’ve heard of people getting expensive apartments, sometimes in excess of $1500 a month in a low cost area. Instead of living like a student the long haul of medical education wears on them, and retail therapy is an easy out with student loan maximums being so high. Not wanting to skimp in the social scene, these folks might go out to the same overpriced bars their peers making real world money are at and buy the same overpriced drinks. This kind of lifestyle in medical school can easily result in another $100,000 added to your student loan balance because frequent but small luxuries add up big time over a four year period.  There’s nothing wrong with spending in expectation of future income as long as you are ok with the prospect of working as a doctor for a 40 to 45 year period.

Because I Couldn’t Figure Out What I Wanted To Do With My Life, I Didn’t Choose Medicine

Being a doctor is a tremendous and worthy calling. I prayed about it to see if that was right for me but never heard a clear calling to what should be called a ministry rather than a prestige occupation. Just from the difference in my early “retirement” alone extending from age 25 to age 33, it’s clear that being a doctor is not a decision driven primarily by the money you can make. Yes you will enjoy high societal prestige and qualify for any loan you want to sign for with your large and stable recession proof income, but it is not worth the slog if you aren’t passionate about it. If you are considering medicine and financial considerations are big on your list, I’d suggest going to a school that’s good but not the best you get into to get scholarship money or go the military route.

After that, do a residency in a high return on investment specialty like orthopedics or ophthalmology. Doing a fellowship is probably only worth it if you choose a specialty within one of these high income areas. If you aren’t trying to make serious money it’s probably best to forgo fellowship to just practice right away.

However, I return to my original advice that it’s not all about the money if you go into medicine. That’s the only way you could rationally approach the field in today’s environment. So if you choose to do a fellowship or pick a lower paying specialty that’s ok. You’ll still earn multiples of the average American worker and can easily save 50% of your after tax pay while still living a very comfortable lifestyle.

If you have any interesting experiences dealing with the personal financial decision making of being in medicine I’d love to hear about it in the comments below.

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