Contrary to popular belief, doctors are not
filthy rich. In fact, finances are a huge stressor for
many medical students, residents, and even attending physicians. Between the opportunity cost, raising cost
of tuition, and increasing interest rates on student loans, it’s easy to see why becoming
a doctor isn’t as financially favorable as it once was. For that reason, being smart about your finances
from the beginning is essential. These are the common financial pitfalls to
avoid as a pre-med and medical student. Dr. Jubbal, MedSchoolInsiders.com. The reason its key to get a grip on your finances
from even your college days is the concept of the compounding effect. In short, interest compounds over time and
either work for you or against you. If you invest at a rate of 7% per year, that
money doubles after 10 years. However, the reverse is true too. If you take out loans at 7%, that money too
compounds with time. With the average graduating medical student
carrying $200,000 in debt, it’s common sense why you want to pay that money off sooner
than later. You must personally take ownership of your
own financial well-being. No one else will do this for you. My family was not wealthy and I had to pay
for both college and medical school all on my own. But by practicing intelligent financial decisions
and saving aggressively, I was able to keep my loans quite low and even pay them off shortly
after graduating. The first and most obvious mistake ties in
with the common misconception that as a doctor, you’ll never have to worry about money again. For that reason, too many students figure
they’ll worry about finances later. Now let’s say a medical student graduates with
$300,000 in debt. That debt starts accruing interest the moment
they take it out in medical school. While they’re making minimum payments in
residency, it’s still accruing interest. By the time they’re an attending physician
and making more aggressive payments on their student loans, that amount is closer to $400,000
– sometimes even more. The average primary care doctor is making
$220,000 per year and the average specialist is making $330,000 per year. Not as much as most people would have you believe. At this point, you may think “so what!?”
it’ll only take 2, maybe 3 years to pay off with such a huge salary. But if we look closer, that’s obviously not the
case. The biggest expense, of course, is going to be taxes, but you’ll also be paying for malpractice, and
living expenses too. And don’t forget, you probably have a family
at this point, which has its own set of expenses. Now you see why, particularly for primary
care doctors, it’s not uncommon to be paying off student loans for a decade or more. And the bad news is that these statistics
are trending in an unfavorable direction. As tuition rises, student loan options are
actually getting worse. Federal subsidized loans are gone, and loan
refinancing has less utility than it did before. Therefore, unless you have incredibly favorable
loan terms, its best to minimize your loan burden. For these reasons, I’m a strong advocate
of educating yourself on financial basics even as a college student. Unfortunately, our modern education systems
do not prioritize financial education, and as a result many students make mistakes that, in the long term,
cost them a small fortune. Our personal finance videos and blog posts
are a great place to start. If you’d like to read further, I highly
recommend The White Coat Investor book, the Personal Finance subreddit, and a few other resources
I’ll have linked in the description below. Students, and often times their parents, prioritize
the prestige of a program too far above other factors. I’ve gone over the relative importance of
college prestige in a previous video. Prestige in medical schools is arguably less
important compared to college universities. I’ve personally seen colleagues or helped
clients from less competitive medical schools match into highly competitive residencies
at highly desirable institutions. That isn’t to say that medical school prestige
doesn’t matter, but it’s of secondary importance. The opportunities available (and the student
making the most of those opportunities) is most important, and these opportunities are
only weakly correlated with a medical school’s prestige. After a certain level, say Top 20 or 25, the
relative importance of prestige drops even further. I’d argue other factors are more important,
including your fit in the school’s culture. Do you mesh well with other students and the
faculty? Do you overall like the school and its location? What about the cost? Have they offered you any financial incentives
and what is your out of pocket cost going to be? These factors will play a much greater role
in your happiness, wellbeing, and long term success than the prestige of your institution. I remember during orientation week at my medical
school, a lecturer presented on finance basics 101 for medical students. In it, she explained anything you pay for
now is costing you 50% more due to the compounding effect of interest on your loans. Small expenses, like buying a $4 coffee every
day at Starbucks, is actually costing you $6 in the long term, and doing it daily adds
up quick. In her words, “skip the sexy coffee” and
brew it yourself at home for a fraction of the cost. While I agree with her logic, there’s a
balance one must strike. Don’t be so frugal that you make yourself
miserable. On one extreme, you don’t need to buy every
new gadget that comes out. Your smart phone can last a few years, trust me. And do you really need new clothes again? You’ll be rocking scrubs in the hospital
most days, and no, the fancy scrubs you see all over social media are not necessary. The free ones you get from the hospital are
fine, and you’ll be much more comfortable getting blood, excrement, and other goodies
on the hospital scrubs anyway. On the other extreme, don’t be afraid to
enjoy yourself and eat Korean BBQ every now and then. Pinching every penny to the point your happiness
is significantly compromised is not a healthy long term solution either, even if your wallet
is better padded initially. Remember that it’s easier to be poor when
you’re young. Practice simplicity and appreciation of what
you have, rather than always longing for something new. Pick up a budgeting app and track your expenses. I recommend Mint for its ease of use. Defer gratification, and understand that you
can have the fancy Michelin star meals and designer clothes when you’re an attending
physician, but they aren’t necessary right now. Living in this manner has its own benefits
– it will make it that much sweeter when you finally earn it and can afford these things. I know several colleagues who didn’t have
to pay a dime in loans because their parents footed the bill. That’s great for them, but practicing my
own self-restraint and delayed gratification was rewarding in its own way. First, I have the satisfaction of knowing
that I earned and paid for my MD on my own merit, and that feeling of paying off the
last of your student loans is hard to replace. And now I know I’ve made it, because I can
get guac in my Chipotle bowl without sweating the extra three dollars. Before committing to anything that has long
lasting implications, it’s obviously very important you understand what you’re getting
yourself into. This applies in two ways regarding medical
school finances. First, understand the different types of scholarships. No-strings-attached scholarships, like the
Med School Insiders Annual Scholarship, are fantastic opportunities. These scholarships provide free money for
tuition and related expenses, most commonly to students in financial need. Some focus on areas of study, like medicine,
and others focus on your religious affiliation, region where you live or grew up, or even
your writing chops. But other “Scholarships” aren’t scholarships
in the traditional sense. For example, the Health Professions Scholarship
Program, or HPSP, are scholarships offered by the U.S. military. Other similar offerings can be found with
the US Public Health Service or Indian Health Services. They pay for your medical school in exchange
for a commitment. These are best suited for individuals whose
career goal is to be a military doctor or rural primary care doctor. If your goals align with the commitment, more
power to you. Otherwise, I recommend you exercise caution. Second, understand the contingencies of various
loan forgiveness programs. For example, the Public Service Loan Forgiveness
Program, offered by the U.S. Government, has a complex mix of requirements. In it’s first year, of the 28,000 borrowers
who submitted loan forgiveness applications, only 96 had their debt forgiven. That’s less than one percent. Purchasing a new PlayStation while forgoing
quality foods in favor of cheaper fast food is not a good long term decision. Yet it’s surprisingly common to see pre-med
and medical students cheap out in all the wrong places. Your health and wellbeing is the highest priority. As someone who has personally experienced
significant medical issues, let me tell you that if you aren’t healthy, nothing else
matters. I’m not saying to go treat yourself to concierge medicine and weekly massages,
but prioritizing healthy exercise and dietary habits will have tremendous compounding effects
long term. The second most important aspect is your education. Missing an extra year or two because you failed
to get into medical school the first time can cost you hundreds of thousands of dollars
in career earnings. Yet so many students skimp out on test prep
or admissions advising because they figure they’ll “see how it goes.” It’s not just a matter of wasting money
on having to retake the MCAT or the monetary cost of applying to medical school once again. The opportunity cost is orders of magnitude
larger. Do it right and do it once. Be the strongest applicant you can be. By working on myself, achieving top scores,
and bullet proofing my own application, I was able to not only get accepted to top institutions,
but was even awarded merit-based full tuition scholarships that drastically reduced my loan
burden. These scholarships are only offered to those
who are the strongest of applicants. By bolstering your own application, you can
optimize your chances to receive these lucrative scholarships as well. Don’t expect to get into a strong medical
school or match into your dream residency program if you haven’t adequately prepared
and invested yourself in your own education. That means doing as best you can on the MCAT
and optimizing your medical school or residency application the first time. If you need help with the MCAT or strengthening
your own medical school or residency application, our top physician advisors at MedSchoolInsiders.com
are here to help. They love what they do, and they’re the
best in the industry. They’ve passed our highly rigorous 5 step
screening process and have excelled in their own medical careers. As you guys know, I’m a huge proponent of
systems generating results. That’s why my team and I have spent months
perfecting our proprietary and systematic processes that ensure the highest quality
service for each and every student. Unlike other companies, you’ll never worry
about being “unlucky” and not getting a phenomenal advisor. Our team consistently delivers an excellent
experience and service, and I personally stand by that. Our results speak for themselves. Learn more at MedSchoolInsiders.com. Thank you guys so much for watching. What other financial mistakes or misconceptions
do you commonly find? I’m going to be making a part 2 video on
finances for pre-med and medical students, and I want your input! Leave a comment below, or shoot me a message
on Instagram. Much love to you all, and I will see you guys
in that next one.