Finances are shockingly straightforward – it’s just simple math. But what complicates the situation is that, as humans, we are intensely emotional creatures. There’s too much harmful financial advice being thrown around to premeds, medical students, and resident physicians. Here’s the good, bad, and ugly of future doctor financial advice.
We’re going to start in reverse order, first with the ugly, worst advice, followed by the bad, and then summarize the good financial principles of thriving medical students and doctors. This blog is not financial advice and is for informational purposes only.
Ugly Financial Advice
There are three terrible bits of “financial wisdom” touted to medical students that I strongly disagree with.
The first is the scrutinizing focus placed on the daily $3 coffee. We had a supposed financial expert come and give us a talk at the beginning of medical school about how our “sexy coffee” every morning was going to cost us tens of thousands of dollars in the long term. It was so ridiculous it became a meme at our school and any time a student was drinking coffee, we would jokingly shame them for their sexy coffee.
The argument here is that if you were to save $3 per day and invest that intelligently, or use it to pay your loan burden, rather than purchasing coffee, you would be a decabajillionaire in 30 years. The math here doesn’t lie. If you take $3 per day and invest it at an average annualized rate of return of 8%, it adds up to something substantial after several years. However, the focus is misplaced.
Getting through medical school and residency is stressful enough, and depriving yourself of the simple pleasure of coffee to save some money isn’t worth it. I was exceedingly frugal as a premed, medical student, and resident, and I wish I was bit more willing to spend money to purchase convenience or make my life better in small, affordable ways. If coffee does that for you, then by all means go for it. Ideally, you’re able to brew it yourself at home for a fraction of the cost. But if you don’t go that route, purchasing a $3 coffee isn’t going to lead to your financial ruin either. Focus on large financial principles, the large boulders, not tiny pebbles.
The second is the advice to choose a specialty primarily based on compensation. Do neurosurgeons make more money than pediatricians? Absolutely, in fact, they’re on opposite ends of the spectrum, with neurosurgeons making high six figures and primary care pediatricians averaging closer to $200,000. But if you’re the kind of person who would be happy as a primary care pediatrician, you’re almost certainly not the kind of person who would be happy as a neurosurgeon and vice versa.
The most important factor in choosing a specialty is finding something you are truly passionate about and love – something you can see yourself doing day in and day out for decades of your life. If you thought college or medical school was long, understand that once you choose a specialty, that will occupy most of the rest of your working career. Not 1 year or 5 years, but often 20, 30, or more years.
If you love what you do, you’re less likely to burn out, more likely to find the work enjoyable, and more likely to be amazing at your physician job. And if you’re at the top of your game, you will be able to command a higher than average compensation for your specialty.
The third piece of terrible advice is to get rich off highly risky and volatile investments, aka going /r/WallStreetBets YOLO and screaming GME TO THE MOON. Was I a part of that madness? Yes, I have been known to dabble in my ape tendencies from time to time, but only with a tiny fraction of my portfolio and for fun, knowing there’s a high chance I could lose most or all of it. With risky investments, you should only use money that you are willing to lose. And as a broke premed or medical student, you likely don’t have much money you are willing to lose.
Bad Financial Advice
Next up we have the bad financial advice.
The first is that you should choose the cheapest medical school available to you. The argument is that medical schools more or less offer equivalent educations, and attending one school over another is not necessarily advantageous. Therefore, you should seek to minimize the financial hit and optimize any student loan burden.
This advice may be fitting for some students, but for many it will ultimately prove harmful. Even amongst United States medical schools, not all medical schools are created equal. If you want to match into neurosurgery but don’t have a neurosurgery program at your medical school, you’ll be at a substantial disadvantage. It will be more difficult to get involved in relevant neurosurgical research, gain significant neurosurgical clinical experience, and have neurosurgeon mentors who are willing to bat for you and vouch for you during your residency interviews.
You may object that you have no intention of pursuing something competitive like neurosurgery. However, data suggest that over 50% of medical students change their minds about specialties between starting medical school and matching into residency. I was one of those students, initially set on pediatric gastroenterology. Plastic surgery was never even on my radar until halfway through my third year of medical school.
For these reasons, it’s a bad idea to choose a medical school primarily based on cost. Saving five figures in student loans now for a chance of not being able to match into your desired specialty is not a good tradeoff.
Similarly, some suggest choosing a cheap city for both medical school and residency. After all, your living expenses make up a substantial portion of your student loan burden. Again, I’d point to the doors opened as a more important consideration. Beyond that, I’d also add that you need to be in a city you actually enjoy. When you’re not grinding hard on medical school, finding enjoyable ways to unwind with restorative fun is mission-critical. If you’re in a city or environment you don’t enjoy, you’re much more likely to burn out and be miserable throughout medical school. A big part of why I chose UC San Diego over some top 5 programs in the midwest and east coast is because not only is UCSD a strong program that opened many doors, but it’s also in a city I love, and a short flight away from family and friends.
The last piece of bad advice is to pursue service scholarships as a way to save money. It’s not some quick hack, but rather a massive commitment, and you need to make that decision with both eyes wide open prior to jumping in. For example, the Health Professions Scholarship Program, or HPSP through the military will cover your cost of medical training, but there are differences from the civilian medical training pathway and profession that you should be aware of. We’ll have more videos and blog posts covering military medicine in the future to help you decide whether it’s the right path for you.
Good Financial Advice
Finally, let’s talk about good medical student financial advice.
The first being that you should take the initiative to educate yourself on financial and investing basics, even though you aren’t making any money yet. This is massively important. While finances are deceptively simple and straightforward, human behavior is largely irrational and driven by emotion. This is why so many Americans find themselves in debt and in precarious financial positions.
As a premed and medical student, you’re probably taking out loans. Knowing how student loans work, which ones are good, which ones you should avoid, and the effect of interest and compounding long term is massively important. By taking this seriously, I was able to pay my own way through college and medical school and paid off all my student loans not long after graduating. The decisions you make now will steer your future financial outcome. For those of you who are interested in joining a finance course or learning about investing basics as a premed or medical student, keep an eye out for future content that may fit what you are looking for.
The next piece of good advice is to live frugally. By all means, this is fantastic advice and it will only make it that much sweeter in the future when you allow yourself to loosen the purse strings and enjoy some of the finer things in life. For now, while you’re a student, embrace the frugal student mindset. When you travel stay in hostels instead of hotels. Avoid upgrading your phone every year. Be content with less. Some students say that they’re already in hundreds of thousands of dollars of student loans, so adding another $1,000 here or there is just a drop in the bucket. This is nonsensical and a dangerous way of thinking. With the compounding effect working against you, that $1,000 is going to balloon into a larger number. And the greater your loan burden, the longer it takes to pay off, which means the compounding effect snowball grows larger and larger.
Next, the average premed applies to approximately 17 medical schools. Only 40% of applicants gain admission and the average medical student graduates with approximately $200,000 in debt. But as I always say, statistics apply to populations, not to individuals, and you have the power to be the outlier.
If you view medical admissions and financial outcomes through a cost-benefit analysis lens, it becomes clear that applying to too many rather than too few medical schools is almost always worthwhile. I always advise my premed clients to apply to at least 20, if not closer to 30 medical schools. The downside is the marginal added cost for each medical school you apply to, plus the time and effort you put towards writing secondaries. If you’re in financial need, the AAMC has the Fee Assistance Program (FAP) that you should look into. On the other hand, the upside is tremendous. Not only do you increase your chances of gaining a medical school acceptance, and therefore avoiding the added pain, cost, and time of being a reapplicant, but you may even have multiple acceptances. This puts you in a position of power, whereby you can choose the medical school that is best for you.
If you’re a highly competitive applicant and have multiple acceptances, you can even have medical schools try to win you over to attend their program. I did this myself and have helped several of my clients do the same. In doing so, I was the only student awarded a merit-based scholarship that covered my entire tuition and most of my living expenses. This alone saved me over $200,000 in student loans. I took out only about $7,000 in student loans each year of medical school to help cover the cost of living.
This isn’t easy to do, and there’s no guarantee, but unless you’re born into a wealthy family, this is one of the most powerful things you can do to put yourself in a better financial position for the rest of your life. And the way to get there is by being the most competitive applicant you can be – someone who is highly desirable to many medical schools. Don’t be a statistic – be an outlier. At Med School Insiders, we’ll help tutor you to a competitive MCAT score, finesse and bolster your medical school application, prepare you for your medical school interviews, and overall make you a more desirable applicant. We’d be honored to help you on your journey to becoming a future doctor or surgeon. Invest in yourself, work with the best, and put yourself in a position to not only get accepted to your dream medical school but also earn merit-based scholarships to cover the cost.