We asked our Advisors at MD Financial Management about the most common questions they get from medical students when they meet with us in their final year of school, including the concerns they address most often, and the biggest mistakes med students make with their finances
What kind of questions do Advisors get most often from med students?
Questions about debt, debt, debt — they all want lots of information about debt. Do other people have this much debt? Have you ever seen debt this high? Do you think I’ll ever pay off my debt? The answers to these questions are always yes, yes and yes. It just takes time, discipline and planning.
What’s the first financial step med students should take?
Become more “money aware.” They should start by setting up a monthly budget, and there are different ways to do this. Some want to see the bottom line with everything they need to save, while others find that big-picture view overwhelming. It may help to separate the variable expenses (the ones students can control) from fixed expenses (like tuition and application costs), which essentially creates two budgets: one variable and the other fixed.
How do most med students break their budgets?
Med students generally remain in school much longer than other people do — while they’re still studying for exams and possibly still living with roommates, many people in their peer group may have graduated and started earning healthy incomes. Their peers may be starting their families, buying homes, travelling the world, etc.
It can be hard for med students to see that happening and to find themselves living a much different financial reality. To that end, they sometimes try to justify having things that they don’t really need to compensate. They may want a new car, or to start investing in properties. While those goals are all healthy impulses, and not impossible to achieve, they have to be weighed against all of the med students’ financial burdens and responsibilities.
How can they keep their debt from getting out of control?
It’s a matter of reviewing their variable expenses and their situation, to see where they may be able to reduce costs. They need to take their own unique situation into account because factors like where they are living will affect their budgeting. In a place like Toronto or Vancouver, with higher costs of living, they won’t have the same flexibility in their budget as someone who lives in a less expensive region.
For graduating students, where they live may affect their resident matching costs too. In a normal year, some students have to travel far and wide for their resident matching interviews, while others are able to travel within generally the same area. So travel and accommodation costs, which may be significant, can vary.
To summarize, giving them a holistic understanding of their financial realities often helps med students find a balance between being disciplined and still enjoying their lives.
Are credit scores important at this stage?
Yes. Med students need to pay attention to their credit scores from the very start, before they get too far into debt. Simple things like making credit card payments on time, and not having too much unnecessary credit available, can help them avoid big financial problems in the future. Having a bad credit score can impact a physician throughout their career, possibly affecting their ability to get a mortgage or even to move their line of credit to a different institution.
What do med students need to know about loans?
One important decision for med students is whether to consolidate their government student loan into a line of credit. Students who consolidate their student loan may become ineligible for certain relief programs and for the tax credit on the interest they paid on the student loan.
The other important decision related to loans is whether to purchase disability insurance! How is this related to loans? Med students typically think they won’t need this type of insurance protection. But if they have to leave medical school for a prolonged period, for whatever reason, they’ll no longer be considered a student and their debt will go into repayment. Disability insurance can be cost-effective for students, particularly if they go through their provincial medical association. And when they transition into residency or practice, the disability insurance can be converted without the insurance company requiring a medical exam.
What’s the most important piece of advice for med students to remember?
The importance of having a plan — and having it even before they think they need one! Many students don’t start a plan until they’re into their income earning years (i.e., residency) and find themselves trying to catch up financially for the rest of residency and into early practice. It’s important to reach out and chat with an advisor right around your final year of med school — right before one of the biggest (and most expensive) life and career transitions you’ll make to date: transition to residency!
How and where should a med student start? A financial advisor can lay out all the available options for developing that plan and help their clients make the right decisions for their current career stage and for their future.
So, you’re in your final year of school. What should your next step be?
To get a big picture view of their finances, and develop a smart strategy for managing it all, final year med students can connect with an MD Advisor* — they’ll provide personalized answers to many of the questions above, and help med students figure out how best to address them.
* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.
The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.