Financial Planning

Money matters

Managing your financial health

Financing your education

Paying for medical school is the biggest financial investment you’ll make in your career. To help lower your debt after graduation, you can:

• Apply for scholarships. Check with your medical school’s financial aid office for scholarship opportunities. The American Association of Colleges of Osteopathic Medicine will waive fees for students based on financial need.
• Enroll in service programs. These programs often cover tuition and offer a stipend for living expenses in exchange for medical services after you graduate. Programs include National Health Service Corps and the armed services.
• Study your loan options. Federal loans offer perks like fixed interest rates and various repayment options. Private loans tend to have higher interest rates and may require repayments while you’re still in school.

Managing student loans

If you graduated from osteopathic medical school saddled with debt, you’re not alone. A 2016 survey from the American Association of Colleges of Osteopathic Medicine found that approximately 86 percent of graduates begin their careers with an average debt load of $240,000. While paying off that much debt might seem overwhelming, creating a plan to manage your student debt early can pay dividends in the long run. Here are some factors to consider:

• Know what you owe. Create a list of debts and when student loan repayments begin. While many student loans offer a six month grace period after graduation, interest usually begins to accrue during this time.
• Create a repayment plan. Factor in your income, expenses and job status when setting up a repayment plan. If you opt for a plan based on your income, you’ll need to send updates about changes to your annual income. If you work full-time for an eligible employer, such as a not-for-profit organization, you may qualify for loan forgiveness.
• See if refinancing is right for you. You could save thousands of dollars on interest payments and lock in interest rates by combining several loans through Direct Loan Consolidation. AOA members can explore refinancing options with a free refinance analysis and 20% discount on consulting fees through Doctors Without Quarters. SoFi provides AOA members (including residents) a 0.25% rate discount when refinancing student loans.
• Can’t make a payment? You may be able to postpone payments or temporarily reduce your monthly payment amount if you meet deferment eligibility requirements, such as being enrolled in a graduate fellowship program or being unemployed. Another option if you can’t make your monthly payments is to request a forbearance, which temporarily suspends loan payments. Unlike a deferment, however, you’ll still be responsible for making interest payments.

Mapping your financial future

Completing your residency training is certainly a cause for celebration. You’ll want to set the foundation for good financial health by putting together a plan to manage your finances. Setting short- and long-term financial goals can help you prioritize paying off debts and saving funds for bigger purchases like a car or home. To begin, you’ll want to create a budget listing:

• All sources of income
• Fixed expenses, including rent, student loan payments and retirement contributions
• Utilities
• Groceries
• Variable expenses, including dining out and fuel costs.

You’ll also want to establish an emergency fund with enough to cover living expenses for three to six months, and set aside money for your short- and long-term goals. Consider setting up automatic payments to transfer money from your checking to savings accounts.

No matter where you are in your career, living within your means will help you stay on the path to financial solvency. Stick with cash or your debit card when making purchases, and be sure to pay your bills on time to avoid costly late fees.

Making big purchases

It might be tempting to splurge when you receive your first paycheck as a practicing physician. But financial experts caution to hold off on making luxury purchases until higher financial priorities, like paying down student loan debt, are addressed.

Buying a car

When it’s time to purchase a car, be sure to:

• Make sure you can afford it. Bankrate suggests keeping your monthly car expenses (car payment, fuel, insurance) within 25 percent of your monthly income.
• Get a bank loan in advance, then compare the terms to what the dealership has to offer.
• Factor in the true cost of owning a car, including maintenance and repairs. Kelley Blue Book offers a cost-to-own calculator to help you determine those costs.

Buying a house

One purchase that you might not be able to wait to make is purchasing a home. A physician mortgage offers a specialized home loan financing program for physicians that can result in a lower monthly payment compared to conventional mortgages. AOA members, for example, have access to PhysicianLoans, which offers home financing to physicians with no down payment or private mortgage insurance (PMI). Typically, buyers pay PMI when they put down less than 20 percent for a down payment or they refinance a mortgage with less than 20 percent equity.

While forgoing a down payment can help cash-strapped physicians, it also means having little to no equity. If your home’s property value declines, you could end up underwater, meaning you owe more than your home’s market value. If possible, try to make a modest down payment. You’ll also need funds to cover closing costs.