Financial Preparedness, Loan Management

5 Essential Financial Moves for Residents | Number 2 of 5: Manage Your Debt the Right Way

May 25, 2017

Manage_debt_the_right_way.pngThe top financial concern for residents is paying off their medical school debt, according to the AMA Insurance 2017 Report on Resident Physicians’ Financial Preparedness report. That’s understandable, given that 50 percent of residents have medical school loans totaling more than $200,000.

But you don’t want to start paying off your student loans without assessing your debt in the context of your overall financial picture.

What you need to do: Evaluate your debts and financial priorities

There are a few big things you need to keep in mind:

  • Find out whether you might be eligible for public service loan forgiveness or an income-adjusted payment. Those factors can greatly affect how much you might owe. The AMA provides information for members, and the Association of American Medical Colleges offers a database of loan repayment and forgiveness programs.
  • Look at your various kinds of debt, and prioritize ones with the highest interest rates. It’s not always a good idea to frontload student loan debt payments.
  • Cash reserves for life’s emergencies are necessary before you start paying your loans back. If something happens, you can’t change your mind and stop paying. It’s usually more important to save 15 percent of your income in an emergency fund (you want to have three to six months of living expenses put away) than to pre-pay student loans.
  • When paying loan debt, you may wish to accelerate your payments if your interest rate is high (e.g., 5 percent or above). If your rates are low, you may want to pay only the minimum amount to free up funds for other long-term wealth building goals (e.g., saving for a home or retirement).

Allan Phillips is a Certified Financial Planner™ with Taylor Wealth Solutions, author of The Guide to Income Protection for Medical Residents, Fellows and New Practicing Physicians and a member of the AMAI Physicians Financial Partners program.

Read financial move No. 3

Taylor Wealth Solutions is not affiliated with the AMA. Taylor Wealth Solutions offers insurance products through Taylor Financial Corp.  Securities offered through Taylor Securities, Inc. (member FINRA/SIPC)  

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Please note:

By clicking "continue" below you will be taken away from the AMA Insurance Agency, Inc. website.

Do you wish to leave this site?

cancel Continue