First Aid for Personal Finance:

What Every Medical Student and Resident Should Know

Table of Contents

1. START HERE 1.1 About Me

1.2 The 5 Rules for Using This Book

1.3 The Poor MD Journey

1.4 The Poor MD Reward

1.5 Physician Compensation ........................................................................... 11

1.6 Job Satisfaction ......................................................................................... 14

2. THE POOR MED STUDENT—Financial Tips For Med Students 17

2.1 Basic Finance Tips for Med Students ........................................................ 17

2.2 Where to Keep Your Money ...................................................................... 18

2.3 The Credit Card Advantage ....................................................................... 19

2.4 Credit Card vs. Debit Card ......................................................................... 20

2.5 Loans and Scholarships ............................................................................ 21

2.6 Health Professions Scholarship Program .................................................. 22

2.7 HPSP: Deal or No Deal? ........................................................................... 23

2.8 Primary Care vs. Specializing .................................................................... 25

2.9 Textbooks and Supplies ............................................................................ 27

3. THE POOR APPLICANT— Financial Tips when Applying for Med School &

Residency ...................................................................... 28

3.1 The Money Smart Application .................................................................... 28

3.2 The Art of the Away Rotation ..................................................................... 30

3.3 Saving on the Interview Trail ..................................................................... 31

3.4 Congrats, You’ve Matched! Now What? .................................................... 32

4. THE POOR RESIDENT— Financial Tips For Residency 34

4.1 Basic Finance Tips for Residents .............................................................. 34

4.2 The Emergency Fund ................................................................................ 35

4.3 Tax Planning Priorities ............................................................................... 36

4.4 Why Worry About Retirement? .................................................................. 37

4.5 Every Resident Must Have a Roth IRA! ..................................................... 39

4.6 Paying Student Loans During Residency ................................................... 39

4.7 Your First Job ............................................................................................ 40

5. THE POOR RESIDENT—Managing Risk ................. 41

5.1 Insurance for Medical Residents ................................................................ 41

5.2 Disability Insurance for Medical Residents ................................................ 42

5.3 Life Insurance for Medical Residents ......................................................... 43

6. The POOR MOVER--Relocation tips ....................... 46

6.1 Moving Madness ....................................................................................... 46

6.2 Renting vs. Buying..................................................................................... 47

6.3 Map Out Local Crimes With CrimeReports ................................................ 49

6.4 Income Tax, Property Tax, Sales Tax ....................................................... 49

7. THE POOR FAMILY-- Financial Tips for the Med Student/Resident Family

........................................................................................ 53

7.1 Having a Baby During Medical School/Residency ..................................... 53

7.2 Baby Making During Medical Training ....................................................... 53

7.3 What to Expect When Your Loved One is Expecting ................................. 55

7.4 Aid for Medical Student Families ............................................................... 56

7.5 Saving for Your Kid's Education ................................................................ 57

8. THE POOR SAVER—Decrease Spending and Increase Savings 58

8.1 Make Frugality a Game ............................................................................. 58

8.2 Increase Savings 1% at a Time ................................................................. 59

8.3 The 10 Minute Financial Checkup ............................................................. 59

8.4 What's Your Latte Factor? ......................................................................... 60

8.5 Find Deals on the Internet ......................................................................... 61

8.6 Learn to Cook ............................................................................................ 62

8.7 Cutting Cable TV ....................................................................................... 63

8.8 Improve Your Gas Mileage ........................................................................ 65

8.9 Save Money During the Holidays ............................................................... 66

8.10 Never Get Bored With Board Games ......................................................... 67

8.11 Money Wasted on Fun, Is Not Wasted Money ........................................... 68

9. THE POOR INVESTOR—Investing and Seeking Professional Help 70

9.1 What's Your Financial IQ? ......................................................................... 70

9.2 The Best Investing Book to Read .............................................................. 90

9.3 How to Invest My Roth IRA ........................................................................ 91

9.4 Investing in a Bad Market .......................................................................... 92

9.5 Consulting a Financial Specialist ............................................................... 93

10. WINDFALLS, ALTERNATE STREAMS OF INCOME, AND MOONLIGHTING

........................................................................................ 96

10.1 What to Do With a Windfall ........................................................................ 96

10.2 Save That Raise! ....................................................................................... 97

10.3 Alternate Streams of Income ..................................................................... 98

10.4 Moonlighting Pros and Cons ...................................................................... 99

10.5 How to Efficiently Sell on Craigslist .......................................................... 101

11. BONUS SECTION—Be More Productive ............ 104

11.1 The Caffeine Power Nap ......................................................................... 104

11.2 Finish What You Start .............................................................................. 105

11.3 Learning On The Go ................................................................................ 105

11.4 Learning from your failures ...................................................................... 106

12. ACKNOWLEDGEMENTS ...................................... 108

James O. Chang, MD

5

First Aid for Personal Finance:

What Every Medical Student and

Resident Should Know

By James O. Chang, MD

First Kindle Edition, September 2011

Copyright 2011 by James O. Chang, MD

www.PoorMD.com

All rights reserved. This book may only be reproduced in part and in various forms only after

giving credit to the author.

The information found within this book represents the opinions and experiences of the author

only. It is in no way intended to represent professional advice and is not to be construed as

such.

James O. Chang, MD

6

1. START HERE

1.1 About Me

“Trust me, I’m a doctor” -- Dr. Pepper Let us be clear: I am not a financial adviser. I have no special degree or combination

of letters after my name which endowing me any special abilities or rights to give

financial advice. In no way should I be considered a professional or expert in the field

of finance.

What I do have after my name are the letters M.D. which stand for Medical Doctor. A

lesser known fact is that these two letters also stand for Money Dummy, of which many

medical doctors also tend to be.

It amazes me how such intelligent people with so much education, can be so clueless

when it comes to money matters. The training process of a physician does little to

prepare us in money matters and likely hurts us when it comes to finances. We are

victims of our own education and training. How many times have you had to memorize

the dreaded Kreb Cycle in undergrad and medical school? How many times has

someone gone over the importance of “dollar cost averaging?”

The premed core during undergrad drills in the basic science foundation of our

education and establishes our foundation of student debt. Medical school then brings

more science, medical education, and debt as we are trained to live loan disbursement

check to loan disbursement check. During residency, our debt grows as we continue

the trend of living paycheck to paycheck and this trend only continues as our salaries

increase with our first job and we habitually do what we’ve been conditioned

throughout our medical training--live in debt and live from paycheck to paycheck.

Being married and having three kids in medical school and a fourth during residency

forced me to be more money savvy. Living by the mottos, “Never carry credit card

James O. Chang, MD

7

debt” and "If you paid full price then you paid too much," I have since expanded my

interests into the realms of savings, personal finances, and retirement preparation.

Much of my knowledge comes from researching the Internet, reading books, personal

experiences and the experiences of friends and colleagues. I have no special financial

degree or training other than what I've gained from my Bachelor’s degree in

Neuroscience, my Medical Degree, and my residency training. I did some part time

work for Northwestern Mutual as an Assistant to the Financial Representatives, during

my fourth year of medical school and as an intern.

During my time at Northwestern Mutual I managed to glean some financial know-how

and see the motivation for insurance agents. While they provided a good service, at

times the interests of the medical student and agent were not always aligned. Thus I

decided to do my own research and came up with the information contained within this

book.

Currently, I am a radiology resident. The main purpose for my website

http://www.poorMD.com and this book First Aid for Personal Finance: What Every

Medical Student and Resident Should Know is to help extremely smart people with a

heavy debt load (medical students, interns, residents, and young doctors), make wiser

decisions with their precious student loan disbursements and humble monthly

paychecks.

Understanding finances and investing is crucial for physicians in training early on in their careers. You went to medical school to get your MD (medical doctorate degree) but by reading this book and testing its principles you can prevent from becoming an MD (money dummy). In the world of investing and insurance, medical doctors are referred to as "whales"-- high income individuals who know a lot about medicine, but next to nothing about finance and investing. As big clumsy whales lumbering clueless in a sea of finance and debt, we become easy prey for circling sharks to devour. Don’t be a victim of your ignorance and get money smart now!

All I have to offer are just suggestions, but hopefully you find something that is helpful

for your situation. Everything found in this book are merely suggestions that should be

followed at your own financial discretion. I am in no way responsible for the side

effects of following this book which may include more financial stability, security and

the establishment of good financial habits that will last a lifetime.

1.2 The 5 Rules for Using This Book

Rule #1: This book is a smorgasbord.

James O. Chang, MD

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This book is not meant to be read from start to finish. I suggest everyone read Chapter

1, then browse the table of contents and pick the chapters most relevant to you. Here

are some ways medical trainees of various training levels can break this book apart

according to training level:

1st and 2nd year med students:

Ch 2: The Poor Med Student

Ch 8: The Poor Saver

Ch 11: Be More Productive

3rd and 4th year med students:

Ch 2: The Poor Med Student

Ch 8: The Poor Saver

Ch 3: The Poor Applicant

Ch 11: Be More Productive

Residents:

Ch 4: The Poor Resident

2.2: Where to Keep Your Money

2.3 The Credit Card Advantage

2.4 Credit Card vs Debit Card

Ch 5: Managing Risk

Ch 8: The Poor Saver

Ch 9: The Poor Investor

Ch 10: Windfalls, Alternate Streams of Income, and Moonlighting

Ch 11: Be More Productive

Rule #2: Skip the financial jargon if it makes you sick.

You should not need a financial degree to read this book. For the interested, I’ve

included occasional financial details that will make you look like a finance maven

amongst your resident friends when discuss tax saving and retirement strategies at the

next cocktail party. If you ever become overwhelmed by the unfamiliar terms, skip the

section and go back to your pharmacology, neurosurgery or physics of MRI texts.

ma·ven/

Noun: An expert or connoisseur: "fashion mavens"

James O. Chang, MD

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Rule #3: Do your research.

My expertise is in radiology-- reading radiographs, ultrasounds, CTs, MRIs, and

nuclear medicine studies is what I do. Don’t take anything I have to say at face

value. Do your research, go online, talk to your family and colleagues, or enlist

the aid of a financial professional.

Rule #4: Customize it.

What works for me may not work for you. Tailor the advice to fit your needs

and be flexible.

Rule #5: Have fun living a more financially sound life.

This is not a reading assignment or some test prep book. This is about

becoming more responsible with money and improving your financial health.

Live the applicable principles set forth in this book and life’s two biggest

monsters--money and debt will hardly be an issue again.

1.3 The Poor MD Journey

The road to becoming a physician is long and the obstacles many. My road, for

example:

4 years undergraduate education

4 years medical school

5 years radiology residency

+ 1 year fellowship________________

14 years of my life

But the sacrifice is not just in life years spent training. Unless you have scholarships or

rich parents, the cost of an undergraduate and medical school education is costly with

most medical students graduating with well over $100,000 worth of student debt.

When my brother started medical school and I was a few years into my residency, I

contrasted his excitement, goals, and expectations with my experiences in medicine up

to that point.

James O. Chang, MD

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Looking back, both my brother and I had NO IDEA WHATSOEVER the toll it takes to

get through medical school and the subsequent training needed to ultimately become a

practicing physician. I had read about it, talked to doctors and residents, and watched

nearly every episode of the television show ER; but until you actually go through the

process, you don't realize the sacrifices in terms of time, money, and family that are

required of you.

From a strictly financial standpoint, medical school ain't cheap! According to the

AAMC, the graduating medical student debt has been climbing like untreated

hypertension. Those graduating from public medical schools accumulated $120,000

worth of debt while private medical school graduates finished with $160,000.

According to the AAMC, the current projection shows that the debt of both public and

private medical school graduates would approximate $750,000 by 2033.

What do we have to show for all our debt and hard work from medical school? The

opportunity to be a resident-- struggling to keep work hours under 80 hours a week,

sacrificing any sense of normalcy to slave away at the hospital 30 plus hours straight

while on call, treating society's finest of their chronic alcoholism, paranoid delusions,

uncontrolled diabetes, drug abuse... only to have them come back to the ER the next

week with the same old problems?

When I finish my radiology residency and fellowship training, my college buddy who

went to law school will have been practicing law for seven years. The guys who went to

dental school will have been working for six years, my engineer friends will have put in

a decade worth of work while I will be looking for my first real job.

With compensation decreasing and cost of medical schooling increasing, why would

anyone in their right mind go into medicine? Primary care doctors, a fundamental

component of our health care system, earn significantly less than specialists. Because

of the huge and growing debt load medical students graduate with, fewer and fewer

students are choosing primary care stating financial considerations as one of the main

reason for choosing to specialize.

I won't even get into the insurance industry or malpractice. So with the high cost of

medical education, prolonged training period, and shrinking compensation, is medical

school worth it?

The answer is more complicated than a simple "yes" or "no." The decision to go into

medicine is a personal one. The only sure thing is that the fool who goes into medicine

wishing to "get rich quick" will have a mountain of debt and years of sleepless nights on

call to regret their decision.

James O. Chang, MD

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I've painted a bleak picture, but the future of medical education, with its rising costs

and decreasing compensation, has a rough road ahead. While it's not all about the

money, you hope to at least live comfortably after having invested so much into your

training. I feel for the class of 2033 and their $750,000 projected medical schooling

debt. Luckily, if my oldest son goes to medical school, he will be in the class of 2032

with only a projected $747,000 worth of debt.

1.4 The Poor MD Reward

“There’s a light at the end of the tunnel, just hope it’s not a train.” It is no secret that physician salaries are some of the highest of all professions. But if

you went into medicine solely for the money, I’m surprised you’ve gotten far enough in

the game to be reading this book. If you are in it for the money, I suggest changing to

a career in dentistry or an MBA. Both have easier training, don’t require overnight call,

and have higher starting salaries compared to what you make as a resident.

Regardless, we all have our reasons for choosing medicine as a career—that much

was explained on the medical school and residency personal statements we had to so

painfully write. But once your training is complete, hopefully you won’t be so jaded that

you forget why you wanted to become a doctor.

While on an interventional radiology rotation, we were called to embolize a bleeding

bronchial artery in a patient with cystic fibrosis. I had learned in my training that

patients with severe hemoptosis do not die from exsanguination, but rather they die

from asphyxiation or suffocation. The young patient was in obvious distress as he

gasped for air, drowning as his lungs filled with his own blood. Using interventional

radiologic techniques, we were able to localize the bleeding bronchial artery, stop the

hemorrhage and stabilize the patient.

Not many professions can say that they are going to work to heal and to save lives. Don’t forget why you went into medicine and also enjoy the three to tenfold increase in salary when you finish with residency and fellowship.

1.5 Physician Compensation

Professional athletes can demand high salaries because they have a unique talent and

skill set very few people have. Not everyone can throw fastballs consistently over 100

James O. Chang, MD

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mph. In a similar vein, physicians earn a higher than average salary because of the

specialized training and skill sets it takes to make a physician.

For this reason, as a radiologist in training I am particularly fond of the following poster

released by the American College of Radiology to help patients understand the role of

the radiologists…

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Finance: What Every Medical Student and Resident Should Know.

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