This post is inspired by a story shared with me by a friend on 10 Financial Milestones Successful People Hit Before They Turn 30. While many of the milestones mentioned also apply to healthcare trainees, our unique career choice and the sacrifices we make demand a different set of priorities. Here are what I consider the 5 most important financial milestones for healthcare trainees to hit before they turn 30.
- Have a plan for your student debt - according to the AAMC, 84% of all 2014 medical school graduates owe education debt with a median value of $180,000. For many of us, our student debt is the largest liability in our young financial lives. While it is unlikely for a medical trainee to generate enough income to pay off such a substantial amount before age 30, you should have an idea of how you can pay it off in the future. Whether you are planning to refinance, enter a loan forgiveness program, standard repayment plan, income based repayment plan or one of the other payment options, it will serve you well to establish a plan.
- Know your assets and liabilities - while your student debt may be your largest liability, we all have other obligations as well. Part of planning for the future is knowing where you are today. Luckily for us, both assets and liabilities are relatively easy to track: your assets are your income, your car, your house, computer etc. Your liabilities are your student loans, mortgage, car loan, credit card debt and any other bills. Do not be discouraged if your net worth comes out to a negative value - your student debt will likely overwhelmed all of your assets. If you don't feel like adding everything up manually, mint.com offer a free service for keeping track of all your financial accounts.
- Have a monthly budget - A budget is a spending plan for your monthly income. Knowing your assets and liabilities gives you a snapshot in time of your financial health. A budget will give you an idea of how that will change. The relationship between the two is much like the relationship between speed and acceleration - it's important to know that you are going 60 mph, but it's equally important to know whether you are speeding up or slowing down. If you are looking for a free and simple budgeting tool, check out EveryDollar by Dave Ramsey.
- Have an emergency fund - You should have an emergency fund. Most of us are well insured against car accidents and illnesses. However, every insurance plan has a deductible. An emergency fund does not have to be a large amount of money but it does have to be readily accessible. I recommend at least $1,000 in a simple, no frills savings account.
- Started a 401k/403b/IRA or any other investment portfolio - investing has been a recurring topic on the White Coat Money blog. Whenever I speak with a medical student or resident about investing, the reply I often get is "after all the expenses, I just don't have anything extra left to invest with." However, the reason why you should invest now is not the absolute dollar value your investment will generate, rather it is to start a good habit - even if it's only $100/month. Like one of my Interventional Radiology attendings always say referring to planning and patient positioning prior to a procedure - "get in the habit of setting yourself up for success."