|Thanks to Becca for the picture and rhonnadesigns for the font.|
1. Choose your school/residency carefully.
If you have options for medical school/residencies, Becca suggests really thinking through the costs and benefits of going to, for example, a top-five school in an expensive city versus a top-twenty school in a less expensive area. I think she brings up a really good point about weighing costs and benefits. Sometimes, when we see something that is good (especially something as sacrosanct to many of us as higher education), we tend to think only of the benefits, when really we need to take a step back and do a cost-benefit analysis (which should include both financial and non-financial factors). Does this mean you should never choose the expensive school? No. What it does mean is to take a moment to seriously consider how necessary that pedigree is for your career, and if that pedigree will outweigh the increased costs.
For Becca and her husband, Tyler, it did. "If you have certain career goals that can only be attained by attending a top-tier med school, then there's your answer. But an expensive school in an expensive city is something you're going to carry around financially for many, many years. We have come to terms with our debt and aren't weighed down or depressed by it anymore, but there are definitely still moments of 'Wow. We're going to be paying this off forever.' But for us, the opportunities we've been able to have because of Ty's school choice (Stanford) have been worth it." Tyler recommends having a conversation with the financial aid person at each school where you've been accepted to get a better picture of the financial situation you'd be in at each school.
Futher Reading: "How Important are Medical School Rankings?" Veritas Prep. usnews.com. March 12, 2012. It suggests that medical school rankings are less important for an aspiring medical student than, say, someone applying to business school. It also notes some exceptions (such as M.D./Ph.D) and outlines some of the factors by which to judge your school choices.
2. Track your debt balances consistently.
I think it's important to be aware of what your debt situation really is. Ignoring it will not make it go away. Instead of having it be a scary unknown, confront and monitor the numbers, and use them as inspiration to live frugally.
This especially applies to couples who get married after his/her spouse has started medical school. Ashley said, "I wish we would have sat down together and both understood exactly what loans we had, how much the interest rates were, when the interest started accruing, etc. We had been married at least six months or so before I really knew how big the loans were and how much interest had already accrued. It was eye opening to see the numbers!" I'd recommend checking in at least once a month, as Lisa discusses in our first Budget Boot Camp. Ashley further expanded on the importance of tracking debt balances and interest rates when asked about the biggest financial mistake they had made. She said, "It relates a lot to . . . just not being fully aware-- we did a few silly things. For example, while interest on huge loans was accruing at ~7 percent, we put a chunk of money in a CD earning 1.5 percent interest. We obviously should have used that to pay off the higher interest loans."
3. Set your budget consciously.
Now that you know the numbers, it's time to take ownership of your financial future by budgeting consciously. Easier said than done. Budgeting with an insufficient or non-existent household income is extraordinarily difficult-- but it's also essential (and doable!) during these years. It will help control your spending, put you and your spouse on the same page financially, and create habits that will help you pay off your debt as quickly as possible after you get your first "real" job. Follow our free Budget Boot Camp online if you want to get some help with your budgeting skills and check out this post.
Control your spending. Whether it be an MBA, medical training, or some other graduate program, many have trouble finding motivation to control your spending. What's the point in making yourself totally miserable when you will most likely have a high income upon exit? What difference does it make to try and live frugally when you already have a ton of debt? And how do you even figure out what your upper limit is for spending when you don't have an income (or a sufficient one) to match it against? There are valid aspects to all these questions, but here are my thoughts.
What's the point in living a miserable low-spending life when you will have a high income upon exit? First, I'm not suggesting that you live off of ramen noodles and live in a storage unit. The point is not to be miserable-- the point is to limit your spending to a reasonable level that is workable for you. You should probably feel some financial squeeze, but it doesn't have to be a death grip. Second, I think there's a lot to be said for the peace that comes from knowing you are doing your best to be financially responsible. Third, have you heard the adage, "If you live like a doctor when you're a student, you'll live like a student when you're a doctor?" Creating a frugal lifestyle now will enable you to achieve much greater financial success in the long run.
What difference does it make to try and live frugally when you already have a ton of debt? For starters, this speaks to the same point as the above question-- it creates a lifestyle that will help set you on the path to pay off that "ton of debt" as quickly as possible. Second, as Ashley said, "Once I saw what we owed, I got on a much tighter budget because I figured that every bit of the cost we could pay up front (or use to pay down the loans) would make a difference." When you pair budgeting with an awareness of the actual numbers, any amount you save will make more of a difference to you. A vague awareness rounded to the nearest $10,000 or $50,000 will not motivate you to save an extra $50 here or there. Checking in on the real numbers to the $1 every month will.
How do you even figure out what your upper limit is for spending when you don't have an income (or a sufficient one) to match it against? In this situation, income minus savings goals = expenses is not going to work. You'll have to work backwards, starting with expenses and use discipline to prioritize and cut them. When Ashley made her budget with her husband, she said, "It helped us to sit down together and make a list of everything our money would be going to, starting with the least expendable and make cuts in every place we could." Your budget should be both frugal and livable. If you make it impossible to live by, your budget will be worthless. If you make it too generous, then it's really not doing its job of helping you manage your money during the lean times. Beyond the quantitative benefits of the budget, emotionally, it really becomes a liberating tool, because it gives you freedom from guilt when you purchase needs and wants within your budget. You should include some fun money to lubricate your budget, but it doesn't need to be a lot. For example, when my husband and I first got married, we only got $15 each a month, and that worked for us.
Get on the same page as your spouse financially. When finances are tight, smaller expenses are bigger issues, and the potential to have financial disagreements is high. I think it's really critical (and will make your lives much easier) if you and your spouse take some time to get on the same page financially both at the outset of your journey as well as once a week throughout to stay on the same page. This doesn't mean that you and your spouse have to end up with identical financial views. What it means is you each need to communicate your views clearly, and find a position in the middle that you both can respect and feel good about.
4. Research government and other programs to help with loans and repayment.
Research and consider if there are any government or non-government programs to help with loan repayment that are a good fit for you.
- Working in a "Health Professional Shortage Area" such as a rural location.
- Loan forgiveness after working for a non-profit
- Subsidized Stafford loan
- Loan consolidation
- Some positions will help with loan repayment as a job benefit
- Not loan related necessarily, but do you qualify for government assistance programs for basic living expenses (like housing, food, utilities, etc.?)
You'll be in a much better situation in the long run if you continue to live frugally after you get your first "real" job instead of immediately matching your expenses to your income. David said, "Live as if you are still in training the first year of your "real" job." I'd add to that to escalate your lifestyle slowly even after the first year. It makes living on a budget much more palatable if you're scaling your lifestyle up slowly, rather than having to scale back later.
And all of that effort to be wise during medical school and residency will have helped create a lifestyle that will set you up well to pay down the debt quickly. Becca said, "Even if it's purely psychological, to be frugal throughout medical school and residency has given me the confidence that we're doing everything we can to be wise and to pay down our debt as quickly as possible."
6. Know that you can do this!
It's a long journey, but worthwhile and hugely important to everyone in our society. Becca says, "There might be six figures staring you in the face, and that's a little daunting, but going into medicine is a wonderful and admirable decision. It's not easy, and it's a huge time commitment for the whole family, but it is rewarding. The more you complain about the journey, the less fun it'll be. It's also not classy to whine to anyone who will listen about how hard it is. I'm surprised by how many people do this. You made the decision, own it! :) Have fun!"
A special thanks to Ashley, Becca, Tyler, David, and Gina for all their input!
Please share any advice you can add to how to get through graduate school or medical training financially!