Like so many have written on their medical school applications, I wanted to be a doctor ever since I was little kid. I grew up reading old health textbooks my mom got for free from high school library giveaways. We went to the library every week, where I assimilated volumes about human anatomy and physiology, about the early days of modern medicine, about how diseases affect us, and about treatments of disease. In the days before the Internet and Wikipedia, those children’s books were what kindled my interest in a career in medicine. Being one of the nerds who decided on this path in high school, I began to map out the steps necessary to become a physician. I knew the basics – do well in school, get high test scores, apply to as many programs as possible, write reams of essays, interview well, network with the right people, and so much more – and with some focus, determination, tears, hard work, and Providence, I got accepted into college, then medical school, then residency, then fellowship, then a “real job.”
During this entire process, personal finance management was buried underneath the urgencies of midterms, memorizing the Krebs Cycle for the fifth time, and writing essays about everything and nothing about medicine, as well as making friends, going out on the weekends, and falling in love and getting married. Sure, I knew the basics my parents had modeled and taught me – don’t spend what you don’t have, save up for the future, yada yada. But the practical details didn’t click for me until very recently, when I looked up from the cocoon of my best-laid plans and realized I couldn’t put off my financial management onto “future Kevin” any longer. Call it my “oh crap” moment.
So why the long intro to a list that most personal finance gurus and wealth planners probably can articulate far better than me? Well, it turns out my clueless teenage high school self was and is not alone. In my 3-second, ultra-reliable Google literature search on the subject, there appear to be thousands of articles and websites dedicated to the discussion of introducing more financial literacy to high schoolers (this happened to be the first hit on Google and seemed like a decent intro to the subject: http://money.usnews.com/money/personal-finance/articles/2012/10/09/why-most-high-schoolers-dont-know-how-to-manage-their-money). Also, I happened to be talking with my good friend Josh from Life Is Story, who is starting a series with his high school students discussing this very topic. Since many of the high school students he teaches are considering careers in medicine, he asked me the following question:
For a doctor, or someone going through school wanting to be a doctor, is there something you’ve learned (or wish you knew then) that’s key now?
For those who know me well, it’s probably not much of a surprise that I could not come up with one unifying lesson for these pre-pre-med students…but I could come up with 8.
Now, for the sake of complete disclosure, I do not claim any expertise on personal finance – my entire educational background has been in engineering and medicine. The lessons I’ve learned have come both from my personal experience as well as the collective wisdom I have gathered from obsessively studying (and yes, that’s the term my wife uses) personal finance materials over the past 6 months or so (since my “oh crap” moment). In fact, there is an entire website dedicated to personal finance for physicians and physicians-to-be founded by Emergency Medicine physician Dr. Jim Dahle called The White Coat Investor (he’s also written a book by the same name that discusses the financial strategies unique to physicians and other similar professions) that addresses these issues in much greater detail and with greater expertise than I could ever conjure.
So with all of that now on the table, here are the 7 things I wish I had known about my finances before medical school:
1. It is not worth bankrupting your future (financially) to get training somewhere you cannot afford.
In a way, I stumbled onto this lesson by pure dumb luck. In high school, I had absolutely no stinkin’ idea where I should go to college. I applied to a bunch of places simply because I had heard of them – Ivy League schools, sure, and other “big-name” schools who carried the academic prestige of a name that would make my parents swell up in pride and stir up envy in their friends. And of course, I also applied to one of the state schools, “just as a backup.” I had no clue if those programs had the degrees I was interested in, the true worth of the academic knowledge I would receive, how successful their graduates would have in finding jobs, how practical the education would be (or if it would be primarily academic theory), how well I would mesh with the student population, and countless other intangible things that each university brings to the table. All I knew was that I had the test scores, the GPAs, and I had tons of very intelligent people help proofread my entrance essays, and that should help get my foot in the door. My parents footed the bill on the scale of hundreds of dollars (which is probably incredibly cheap by today’s standards) for me to apply to all of these schools.
Sure enough, I got acceptance letters to some schools. And a few rejections. And a few wait-lists. Then I got the letters that discussed the annual tuition and living expenses. And eventually, once the acceptance (and rejection) packets stopped coming, I sat down with my parents and looked at the options. At that time, pretty much every private school was going to cost anywhere from $30,000-$50,000/year for tuition, books, fees, and living expenses. Today, tuition alone is going to be at least $40,000/year at a private school, according to savingforcollege.com (http://www.savingforcollege.com/tutorial101/the_real_cost_of_higher_education.php). Meanwhile, because of my test scores and in-state status, I was able to secure a full-tuition scholarship to the in-state school I had designated as my backup. My parents, being the awesome people they were, told me I could go wherever I wanted. And out of dumb luck, I decided to go with the state school and graduate from college debt-free.
I don’t write this to brag about how smart I was, nor to put down my alma mater or any other institution of higher learning (as many of my friends who are much smarter than I am have gone to more prestigious programs and have done far greater things than I have). My point is that when it comes to getting a college education, there are lots of other considerations beyond the prestige of a “good name.” Especially now in a day and age where so much quality education is available online, there is no reason to take on unsustainable amounts of debt for superficial reasons.
Between Google making waves about minimizing the worth of test scores and college degrees (http://www.businessinsider.com/google-hiring-non-graduates-2013-6) and President Obama’s stated goals of wanting to make community college accessible to everyone (http://www.pbs.org/newshour/rundown/community-college-tuition-top-theme-state-union-speech/), getting a quality education does not and should not come at a premium cost.
Additionally, for those who are looking at going onto further education and training after college, paying high dollar for college makes even less sense, since the quality and prestige of that undergraduate education won’t carry nearly as much weight as the graduate school/residency/fellowship/post-doc fellowship/etc. where your final specialty training took place will have (as well as who your mentors are and what skills you’ve acquired).
2. Don’t cripple your parents financially.
My parents are great. They love me unconditionally, and are always wanting to help me, even to this day. And with many families, parents will often sacrifice their own financial stability and future to support their children’s future. This seems to be even more common within the Asian culture (in which I grew up), where parents will provide complete financial support for their children to go to the college of their choice and even beyond.
To those who have parents like mine who wouldn’t hesitate to take money out of their retirement savings to make sure I could get a better education than they did, DON’T SQUANDER THEIR MONEY. This means taking ownership of the fact that while the college experience is often full of fun memories and meaningful friendships, the purpose of college is to learn a skill or set of skills that will prepare you for the next step in life – whether that be a career in a skilled field, additional training for a specialty, or anything else. This might even mean assuming responsibility for the cost of education yourself – whether that is by your labor (putting yourself through school by working a concurrent job) or by your academic studies (obtaining scholarships and grants) – so that you not only value the education you receive but also treasure the memories you gain.
Unfortunately, not every person has supportive parents, and not every parents is financially able to help their children through school. To me, that drives this point home that much more – what a dishonor it must be for someone to take their parents’ hard-earned money and flunk out of school by partying all the time and never studying! I think this selfish mindset eventually returns the favor – perhaps their parents will run out of money and become a financial drain, or perhaps their children will do the same thing to them. Either way, this is not a habit that needs to be built.
3. Be proactive at finding ways to get your education completely paid for.
With the Internet, it seems like there are more and more ways to find opportunities for educational benefits. With a simple Google search, you can pretty much find scholarships for any and every type of person – merit-based awards, grants for low-income families, etc. Some scholarships only require a simple essay about a specific topic; others are more involved, such as obtaining memberships to a certain club or performing a certain amount of community service. The bottom line is, any highly-motivated student who is interested in pursuing a high-education career benefits themselves by hustling to find any and every way possible to get their education paid for by someone else.
Perhaps your parents have squirreled away over $250,000 for you in a 529 savings plan. Great! You could still earn scholarships and grants and potentially let the money in that 529 plan continue to grow and gain value that could be passed down to your siblings or even your own kids in the future. Perhaps your parents have already said they will foot the bill for everything regardless of scholarships. Great! See #2. While I can’t say I was extremely hard-working for scholarships and grants, the practice of laziness when you’re young does set up a higher likelihood of failure in the future (and perhaps an appearance on Judge Judy or Dr. Phil).
Scholarships and grants are not the only ways to pay of college, of course. Many people have jobs and work their way through college as well. My wife is a wonderful example of someone I admire who put herself through college by working (at one point she had 3 part-time jobs while being a full-time student!) so that she would not be chained to loads of student loans when she graduated. There are work-study programs and other campus-type jobs that may provide income to put towards your education. An added bonus is the extra experience you can put on your CV/resume when applying for a job.
4. SAVE MONEY.
For the typical Asian, this seems to be ingrained into their DNA. My parents never really told me how much they made, but I never felt like we were destitute, and I never felt like we were extravagantly rich. However, I do remember learning from essentially birth that there is a true difference between wanting something and needing something. I think I learned pretty quickly (though my parents may correct me on this) that tantrums did not get me what I wanted – but if I wanted to save up money that I either earned or was given and buy those Legos with my own money, I would not only get the pleasure of being able to call those things my own but also learn the joys of saving.
Fun anecdotes aside, I think it is incredibly important to learn the wisdom of how to manage money from an early age, because compound interest on money saved in your teens and 20s can build momentum for you to become financially independent at a much younger age – and dramatically affect how you will be able to live after finishing all of your training.
I tried to do this to some degree, but I must confess that in college and medical school (and even residency and fellowship) I did not spend a lot of time saving. After all, the “poor college student” and “poor medical student” mentality is rampant, and while I mostly subsisted on rice and Ramen, I did not think at all about making sure I had an emergency fund or investing any of my excess for the month. Meanwhile, many of my good friends who didn’t go to medical school or assume a ton of student loans graduated college, started working, and started saving their money (many starting when they were 21 or 22). Because I lost about 9-10 years of savings, I now have to save a higher percentage of my income and live even more frugally to not even come close to the same amount of savings. The sad thing is that I even learned about this at the time but always thought that I did not have that opportunity because of medical school, residency, etc. Einstein was right again. J.D. Roth, founder of getrichslowly.com, wrote a really nice article illustrating this concept (http://www.getrichslowly.org/blog/2008/04/02/the-extraordinary-power-of-compound-interest/).
5. Invest early and often and let compound interest work for you.
Based on my amateur research, anyone (even minors) can start investing in the stock market and start the process towards long-term wealth building. In fact, it is probably even better for young people to start investing earlier and learn the basics of investing than to remain clueless until retirement (or some other long-term goal) is just around the corner and it’s too late because there’s not enough time for the wealth to build.
Since my post is not intended to cover the nuts and bolts of investing (plus there are so many resources out there now that explain it better than I can), to my target audience (those pre-pre-med students out there) I want to encourage all of you to open up and start contributing to a Roth IRA and invest in stocks and/or mutual funds if you are making an income, as well as opening a taxable brokerage account and buying stocks and/or mutual funds there.
Just like the previous point about compound interest, the longer that money has time to compound, the greater the wealth that is able to be built. The trick is, most of us either are too afraid of the stock market (especially now that most of us have lived through at least 1 major recession or correction) or don’t know enough about the stock market to put our money there. So that money ends up sitting in a checking or savings account making 0.01% interest (or some other low number like that). That’s basically what my money did for 12 years. I opened up a Roth IRA in college when I had an on-campus job, and put maybe $4,000 in there over two years (contribution limits were around $3k/year at that time). I didn’t put another cent into that account but funneled the rest into a savings account that didn’t make a whole lot of interest. I completely forgot about the Roth IRA until recently when I started contributing to it again. By that point, the balance had grown to over $8,000 just by letting it sit in there and gain interest – and this is including the 2008 Great Recession. I’m a bit saddened that I didn’t continue to contribute during those 10 years, but since it’s in the past now for me all I can encourage you pre-pre-med students to do now is to value these early years more.
6. Pay all of your bills on time and avoid dumb fees.
One of things I’m learning now is how much money can be saved simply by avoiding dumb fees. For example, most banks will charge an overdraft fee if you withdraw more money than you have available in your account, or an ATM fee if you withdraw money from a non-authorized ATM. Sure, maybe it seems like it’s only a few dollars here or there, but that’s all money that is being wasted…might as well have just taken that money and set it on fire (I am not advocating money burning).
Some fees are hidden to confuse people, such as fees on mutual funds, or fees charged to brokerages. Again, the specifics of these fees are addressed by people smarter than me (here is but one article discussing investment fees: http://www.forbes.com/sites/rickferri/2013/05/27/the-heavy-toll-of-investment-fees/). Another big fee area is with credit cards. While many rewards credit cards don’t charge an annual fee, others do – and sometimes the cost of those fees is more than the benefit of keeping the cards. Other times, perhaps like with travel credit cards, the point rewards are greater than the fees that are charged and in the right circumstances may be worthwhile to consider paying those fees. As a general rule though, it’s probably best to stay away from those fees.
In any case, I’m not advocating stinginess, but I do think that we are often too cavalier about these fees and the fact that it does eventually add up. I think it’s far better for us to be mindful of what each dollar we spend is going towards.
7. Be generous and contribute to causes that will have long-term meaningful impacts.
I think generosity is one of the most important investment principles to learn when we’re young (perhaps I should have put this at the top). Beyond donating money to your favorite charity or local church (though that’s important too), being personally involved and invested in the causes you are passionate about puts actions to your words and is part of such a greater and fuller life.
For those who are wanting to become physicians, community service and volunteerism is a heavily-weighted component in medical school and residency applications now, because society is looking for people who are going to be leaders and innovators who have consistently demonstrated a desire for service to others. I imagine many employers in other professions are looking for similar traits. The key is to be heavily involved in a few organizations, rather than to try and split up your time just to pad your resume.
What do you think? Leave a comment!