A net worth of zero.
For most people in the working world this would spell trouble, a sign that something has gone wrong and money has either been too hard to come by or it has been horribly mismanaged. You should feel like your hair is on fire, and start taking steps immediately to budget and save!
For those of us early in our medical careers, a net worth of zero is instead a huge accomplishment, the sign that we have clawed ourselves back to square one and are ready to start building wealth like most of our peers in other professions have been doing for the past 10 years.
This can be a hard goal to focus on. Building up a portfolio that is large enough for you to retire has obvious tangible benefits. Even having just a few years worth of expenses should make you feel pretty good about where you are in your financial life. What does a net worth of zero feel like? Add to this that medical students are trained to be experts in tolerating debt and in feeling comfortable with a negative net worth. A 2017 AAMC survey found that 75% of graduating medical students carried educational debt, with a median debt loan of $192,000. Holding a job and making decent money during one’s premedical years and especially during medical school itself is near impossible, so it’s not like this debt is balanced out by an investing portfolio.
Residency doesn’t allow you to fare much better. The average PGY3 salary is about $65,000 per year (this number will be less for earlier years in one’s training and more for later years, if applicable). That’s about $4,500 per month after federal taxes for an individual filer. Sounds like a decent amount; after all, the median household income in the U.S. is about $60,000. But remember that $192,000 in loans? At 6% interest, that number is growing by $960 per month. That’s nearly $1,000 that you would have pay every month just to tread water, much less make any progress into paying off the principal.
And so we use the various income-driven plans that are offered to us, to make the slow march deeper into the hole easier to tolerate. The interest is still accruing, but only having to shell out a few hundred bucks per month makes the problem seem less real.
This math can get very ugly very quickly, especially for those folks who have considerably more debt. I have a colleague who – between her and her also-anesthesiologist fiancé – owe $1,000,000 between the two of them. Putting aside the fact that this is pretty irregular, even in the world of crazy medical school debt, that is a pretty astounding figure. At 6% that is $5,000 in interest accrual per month. How do you even begin to start tackling that level of debt?
The real answer is you probably don’t, and you probably start considering a forgiveness plan that will leave that debt hanging over your head for the next 10 to 25 years, and may or may not involve a tax bomb when you pay it off.
Those of us who plan to repay our debt, however, need to find a job that makes us a decent income, make a budget, and start chipping away. My plan is to have my debt paid off by two years out of fellowship. And I plan on doing this while funding at least my tax-advantaged retirement accounts. At some point before the two-year mark my investments will exceed my debts, and for the first time in 16 years, I will be back to broke.