You and your spouse are investing a significant amount of time, energy, and money into medical training. You’ve take on this investment with the expectation that it will pay off in the long run, when your spouse secures a well-paying position post-training. Given the length of training necessary and the often very large amount of debt accrued during that training, doctors and their families find themselves in a unique financial situation. It is important for you to protect yourselves financially to set yourselves up for not only success, but for as much financial freedom as possible.
Last month, we discussed the first three rules of the 5 Rules for Protecting Your Family’s Financial Future. Rule #1 encouraged you and your medical spouse to shift your perspective and “get your head in the financial game” by discussing the importance of dealing with your finances, instead of ignoring them and hoping they’ll figure themselves out. Rule #2 discussed the importance of learning financial basics so you are knowledgable when making decisions, and so you will be able understand various guidance from professionals. Rule #3 addressed paying off those student loans.
As I mentioned last month, please consider attending any financial presentations provided by your medical school and take advantage of the services offered by your program, such as specialized counselors to discuss loan repayment, insurances, and investing before graduation. Whether you are interested in these topics or not, they will begin to become important, and inescapable, as you and your spouse move into residency and eventually, a job post-training.
Now, let’s talk about Rules #4 and #5 and get you continuing down the right path for protecting your financial future!
RULE #4: GET INSURANCE.
As you approach the end of medical school, you will start to hear about all the insurances out there and you’ll have companies vying for your business. Do you need insurance? Why? And what kind?
Insurances can be confusing. Life and disability insurances will be the most needed going into residency. There are other insurances post-training that are related to practice, but for the purposes of this article, we’ll only discuss life and disability insurances.
Considering that your medical spouse has just accepted hundreds of thousands of dollars of student loan debt, you and your spouse are hoping to be able to pay off those loans and to have a certain standard of living post-training. It’s important to protect and insure yourselves in the event of something unexpected happening. If your medical spouse gets injured and can no longer perform their job, or worse, has a fatal accident, you’ll be in a difficult situation financially. Insurances protect you in case of the “what ifs,” and the importance of that protection cannot be overstated.
The challenge is accepting the fact that these insurances can actually apply to you. No one likes to think about their spouse dying or becoming disabled, but the fact of the matter is that if this was to happen, you will have the additional injury of being financially devastated as well. There are countless stories of people finding themselves in financial ruin because they didn’t buy insurance and something tragic happened. Don’t leave yourself open to this very preventable kind of financial catastrophe.
So where do you start with learning about these insurances, companies, and policies? A great place to start is with The White Coat Investor (WCI). The site has numerous articles that give clear and detailed information on the topic of insurance. The author also provides recommendations and personal opinions. I recommend reading the articles to educate yourself and then doing your own research on companies and actual insurance products. Your medical school may have a speaker (or specific business) come and do a presentation for your program. Talk to them to hear their recommendations as well. Then use your own judgement on what makes the most sense for you.
Purchasing disability insurance is a bit complicated, as there are more variables and it tends to be more expensive. However, disability insurance is used much more often than life insurance, so it’s incredibly important to invest the time in researching this topic and then put some type of policy protection in place.
Regarding life insurance, it’s much more straightforward and you really have to make three main decisions—term or whole life insurance, which company, and how much. WCI is very much an advocate for term-life insurance. You will likely hear discussion about getting whole life insurance as a form of investment, which WCI strongly opposes. That being said, there are some really good arguments in favor of whole life insurance for certain individuals, and it could possibly make sense for you personally.
The articles below provide an introduction into the options. Please do more research yourself, or talk to someone who you trust to guide you on what is right for you, in your situation.
Disability Insurance Introduction (The White Coat Investor)
What You Need To Know About Physician Disability Insurance (The White Coat Investor)
How To Buy Life Insurance (The White Coat Investor)
RULE #5: INVEST. DO IT.
During medical training, medical school especially, you’ll feel like you don’t have much (or any) money to put into investments. It’s a classic conundrum; do you invest or pay off debt?
How can you invest when you’re living off of loans or limited income? It’s a good question and you’ll find varying advice on how to approach debt payoff vs savings and investing.
Please take any advice and put it through the lens of your situation. Doctors have a unique position in that their training can take up to a decade to complete and the amount of debt accrued during this time is significant. Precious investing years will be lost if you wait to invest until post-training or after the loans are paid off. Financial experts have varying opinions on this subject, but most of them can agree that at least some investing, even when you have a lot of debt, is important.
Again, WCI has numerous articles on this topic—just search “investing” on the website. Also, author Ramit Sethi in his book “I Will Teach You To Be Rich,” provides a sensible and adaptable approach for your particular situation. The bottom line is this: find a way to do at least a little investing during training. Don’t waste the years your money could be growing for you.
Not sure where to start? Begin with a Roth IRA and 401k type of retirement plan. One of the best things you can do is to simply set up an automatic investing system, with monthly deposits into your investment accounts. This method is called “paying yourself first” and it’s the surest way to find enough money to get started with investing. You might not be able to max out your IRA contributions each year while you’re in medical school or in training, but a little bit still counts. The earlier you start, the better, and even if you’re putting in a very small amount each month, it’s something. With automatic contributions, you honestly won’t even miss the money.
Another way to protect yourself financially is by using the big B word—Budgeting. Click here to read my previous article on this topic. Do what you can in this regard. Budgeting is easy for some, and a real struggle for others. The main purpose of budgeting is to be aware of your spending habits and work toward being intentional when choosing where to spend your money.
Finally, below are a few more short articles that can help you start a discussion with your spouse and figure out a plan. If you take anything away from these articles, it’s this: don’t ignore this very important aspect of your lives. Learn the basics and take action to put at least some automatic investing and some insurance protection in place. Your future selves will thank you!