From ramen to riches? Surviving and thriving on a residents' salary

By Naveed Saleh, MD, MS | Fact-checked by Barbara Bekiesz
Published March 6, 2023

Key Takeaways

  • One important financial decision to make during residency  is whether to defer student loan repayments or to start paying them in order to accumulate less interest over time.

  • Living on a resident’s salary requires budgeting, which can be aided by using free online budgeting tools available.

  • Residents should start putting money in their retirement funds as soon as they can to reap the benefits of their growth.

Residency represents a transitional financial period during which you are neither borrowing to subsidize a medical education nor being compensated at the level of an attending physician.

The AMA reports that the average first-year resident makes about $60,000 a year.[] Although resident salaries increase with each post-graduate year, this pay increase is determined by the institution—regardless of specialty. Residents may want to give some thought to the following financial insights.

Managing student loans

According to the Federal Student Aid (FSA) website, student loan payments remain paused until the US Department of Education is allowed to implement the debt relief program or the attached litigation is resolved.[] Once the litigation is resolved, payments will restart 60 days later. Alternatively, if the debt relief program has not been implemented and the litigation remains unresolved by June 30, 2023, payments will restart 60 days later. In other words, the latest that student loan repayments will resume is on August 29, 2023.

COVID-19 Emergency Relief and the FSA paused payments on March 30, 2020, making student loans an optional burden. This COVID-19 reprieve, however, was never meant to be permanent.

On the bright side, residents have plenty of time to reconcile their loans and servicers. Offering some sound advice on the topic, the Association of American Medical Colleges (AAMC) suggests the following[]:

  • Visit the FSA website to review and download your loan portfolio, determine who your loan servicers are, and find out your repayment dates.

  • If you can’t pay back your loan during residency due to financial hardship, forbearance is an option (the Mandatory Medical Residency Forbearance).[] Otherwise, if you choose to start repaying your loans as a resident, thus reducing your total loan burden, consider setting up automatic payments to receive an interest-rate deduction.

  • Upload your loan portfolio to the MedLoans® Organizer and Calculator (MLOC) to model repayment and postponement scenarios. 

  • Learn about interest capitalization, and consider paying accrued interest before capitalization ensues.

  • Consider loan consolidation; keep in mind that this step is necessary for certain repayment plans.  

  • Explore possible loan forgiveness via certain federal and public agencies. 

Monitor your credit

The AAMC also advises monitoring your credit report to help prevent identity theft. The credit report details outstanding private student loans and other credit obligations. 

Ways to boost a credit score include paying bills on time, paying down credit cards, and limiting the number of applications for new credit lines.

Budget pointers

To develop your spending plan—which is important for any level of post-graduate physician—the AAMC offers some practical pointers. A first step is to keep track of income and expenses. Once the financial input and output is determined, you can set up a financial plan. Free budgeting software is available on the internet, and these programs can help adjust for profits and losses as needed. One example is the AAMC Financial Wellness program. In addition to offering budgeting software, it also offers tips on milestones such as buying a house or car.

Save for retirement

To a resident, retirement can seem far away. Nonetheless, it’s never too early to prepare for the future. Almost all institutions that sponsor residency programs offer retirement account plans. It’s important to invest a few hundred dollars a month into a 403(b) or 401(K) plan to reap the financial benefits of compound interest.[]

Another financial strategy is to enlist the services of a financial planner, which may be of particular use to residents who spend substantial time moonlighting. This 1099 income can be allocated to an individual retirement plan. For instance, a SEP-IRA can shield up to $24,000 a year from taxes. Moreover, a Keogh plan can permit up to $35,000 a year in non-taxable investment. Two good low-cost brokerage options are Fidelity and Schwab.[]

What this means for you

The financial steps made during residency can set a sturdy foundation for your lifelong financial portfolio.  Budgeting, loan repayment, and savings represent important aspects of any financial plan. It’s also important to keep your credit score high by paying bills on time and limiting new credit inquiries. For physicians able to save more, it may be a good idea to enlist the aid of a financial planner.

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