What questions are actually on the minds of residents when it comes to their finances—and what guidance makes the biggest difference during training?
In this episode, Daniel Wrenne and Hugh Baker reveal the most common financial concerns they hear while speaking to residency programs.
Student loans, PSLF uncertainty, choosing benefits, understanding retirement accounts, and the pressure of upcoming income changes all show up again and again.
Listen in as they walk through the themes that consistently surface in these conversations and share how residents can approach the big decisions ahead with clarity and confidence.
You’ll also hear their take on physician loans, contract questions, saving vs. spending during residency, and what it really means to build the habits that support financial freedom.
—————————————————————————————————————————
Transform your financial outlook today! Access our exclusive free resources for physicians and conquer financial stress. Access here. P.S. We value your opinion! Share your thoughts and insights with us. Your feedback helps us improve and tailor our content to your needs. Click here to give us a piece of your mind.
Links
- Course: Vitals Check: Your Money Game Plan for Post-Residency Life
- Connect with Hugh Baker
- Contact Finance for Physicians
- Finance for Physicians
- To schedule a call with one of our awesome planners, book HERE.
Full Episode Transcript:
Hugh Baker: Stick with this graduating group. Let’s say you’re on the cusp of graduation, probably four out of every five that I talk to are thinking about buying their first home at this stage.
And I think this is a really important stage where you have to decide, “Do I want to be wealthy or do I wanna look wealthy?”
Welcome to Finance for Physicians, the show where we help physicians like you use money as a tool to live a great life. I’m your host, Daniel Wrenne, and I’ve spent the last decade advising physicians on their personal finances with the mission to help them understand that taking control of their finances now means creating a future where they can practice medicine where, when, and how long they want to.
Daniel Wrenne: Hugh, how’s it going, man?
Hugh Baker: Great, Daniel, how are you doing?
Daniel Wrenne: I’m doing good. We talk a lot, but it’s been a little bit since we jumped on to record a show, so I’m looking forward to talking about—Hugh has been on the speaking circuit a little bit here lately. So he’s been speaking with residency programs, personal finance 101 kind of stuff, so we thought it would be good to dig into some of the questions and those talks. You get a lot of questions, right? Like it prompts a lot of questions, typically really good questions, that come up. And so we’re gonna be digging into some of those most common questions, and hopefully you guys listening can gain some from what we’re gonna talk through.
We’re gonna try to hit the high level of these. Each of these questions could be like a show in itself, so we’ll try to get through a few. I think there’s a bunch on our list. I don’t know if we’ll get through all of ’em. We’ll do our best.
Hugh Baker: Sounds good. Sounds like a good plan.
Daniel Wrenne: All right. Okay, so we got a lot of questions listed on our agenda, but I thought it might be good, Hugh, on your end to start, was there most common question or was it just like in the last batch of them that you’ve done, was there a theme of most common questions or was it just all over the place?
Hugh Baker: Yeah, so I’ve done this four times over the last couple of months for a particular group, and it was always a range of residents. So they’re not all first years, they’re not all third years. It was a mix. So when you have a mix together, you definitely get a wide range of questions.
But I think one of the very common themes across the board was questions around student loans. So that affects most people. So a lot of you have six figures of student debt when you’re in training. So that was a very common one. Lots of questions about student loans.
Daniel Wrenne: Like PSLF, should I pay, make payments, should I pay it off forbearance? Like that kind of stuff?
Hugh Baker: Yeah. And one of the most common or probably on people’s mind is PSLF still public service loan forgiveness? Is that still going to be a thing for me? Of course people are gonna think about that. That’s a lot of money, right?
It’s a big dollar amount that you might have been planning on working 10 years for a nonprofit and getting forgiven. And I think my answer to this group was, I’m pretty confident that Public Service Loan Forgiveness would still be a thing for this group that I was speaking to. And in part that’s because what makes student loans so complicated is because every time they change a role, it’s always for borrowers going forward.
So I would feel pretty confident in thinking that, if you’re already in this stage, you already had your loans for more than a few years now, you’ve gotten through med school, you’re in residency. Those rules in my mind seem pretty locked in for you. Of course. Rules could change, but I’m fairly confident that’s still a thing and you should at least operate under the assumption with the decisions that you’re making that this is still going to be a thing for me. Let’s try to optimize that. There are ways to lower your payments and try to get the most you can forgiven, but hey, at the same time, know that that is a possibility that you might have to pay those loans back. You might take a different direction with your career.
Always keep that in mind when you’re making big purchase decisions.
Daniel Wrenne: Yeah. There was the latest tax laws that went through, I guess in some ways kinda reinforced PSLF. Also, there were some tweaks to the rules too, but PSLF—I think it was originally acongressional thing and in order for it to get turned over, they would have to do it through Congress, which seems to be more challenging to get things through there.
But the latest tax rules, like I said, kinda reinforced PSLF. And then there was another thing that was a big deal that was potentially on the radar was to not count payments in training. That would’ve been a big deal for the group we’re talking to today. But fortunately, they ended up like taking that out.
So in other words, payments in training do count towards PSLF ’cause those are the real valuable ones is when that income is low.
Hugh Baker: Exactly. And so that kind of leads into another question. There were a handful of people, and thankfully, they were willing to raise their hand and ask the question we could talk about a little bit more.
They’re still stuck on the SAVE plan, right? So they’re not making any payments, what do I do here? And yes, there is the PSLF buyback program. I haven’t seen anyone that I know of that’s applied for it, actually get credit for that yet. So I wouldn’t rely on that. But for most of you, if this is your situation, probably right now is the lowest payments you’re going to have that would count toward public service loan forgiveness.
So as sooner you can get back on a plan and making payments based on your intent, your income as a resident, let’s say that’s $300 a month, you might be comparing that to $3000 a month as an attending. So comparing your first six months payments or your last six months payments.
So if that is —you’re in training, you’re stuck on SAVE Plan, probably makes a lot of sense for you to get on a plan that does qualify for PSLF credit and just start making payments now. I always have to give the caveat. There might be something in your personal situation, maybe a spouse got a big stock option payout that affects your income, and maybe your tax return looks way different.
So you always have to keep that in mind. But for the general resident population, if you’re still on SAVE, it probably makes a lot of sense to get off of that, start making payments at a much lower rate.
Daniel Wrenne: Because it doesn’t count towards PSLF and you could switch to another plan that would start counting and that’s the key.
Each payment that counts. You gotta make 120. That’s it’s simple. So every payment has the same impact. So whether it’s $3000 a month or $300 a month, you still get the same credit towards it. So it’s like I’ll take as many 3$00 a month as I can get.
Hugh Baker: That’s right.
Daniel Wrenne: Kind of the idea. So anyway, yeah, you gotta be careful with those student loans.
And I think that’s also one of the things where I would look for advice, like try to maybe consider hiring help, or especially if your situation’s complicated. Or if you’re working with us, we can help with that. But there’s also some dedicated student loan planners that can really dig into your situation.
It’s just a big, I mean unless your balance is really small, but I’m assuming most people in training have big balances on the student loans, so it’s a pretty impactful decision when you’re talking about student loans.
Hugh Baker: Yeah, sure. Yeah, sure is. One of the things I was sharing with them too is filing taxes separately versus jointly.
Just throwing that scenario out there and showing how to think about that. It’s not just the student loan payment, but it’s also about the tax cost.
Daniel Wrenne: That’s a tricky one too.
Hugh Baker: Yeah. That’s a good one to hire help with.
Daniel Wrenne: Yeah, definitely. If you’re talking about filing separately versus jointly, especially bigger balances—especially if both spouses are in training and both of ’em have loans and it gets complicated quick.
Was there another more common question that came up?
Hugh Baker: Ooh. Like for across the board? I’d say probably student loans is really takes the cake. All things student loans.
There’s a million different questions around student loans.
Daniel Wrenne: Let’s split it up into segments. I think it’ll help if we split it up. So let’s say the younger crowd, like the first or second years crowd, like versus the later career crowd. So if we started with the younger crowd, like what were some of the more common questions that came up in that group?
Hugh Baker: One of them was—this might be their first time selecting benefits, or this might be their first time having an investment account. One of the questions was, “Hey, what’s the difference between this 403(b) plan that I have through my residency program and a Roth IRA?” I keep reading, “I should invest in a Roth IRA, and you have this 403(b) plan. What’s the difference?”
For this question, 403(b), that is your workplace retirement plan. High level. The biggest difference between the two would probably be the amount you can contribute, so you can contribute a lot more to the 403(b) for this current year, it’s about to change, but for this year it’s 23 and half thousand.
For a Roth IRA, it’s $7,000. But the also, another difference there is the tax consequences or implications of these contributions. So with a Roth IRA, you’re choosing to pay the tax now. So you’re paying it on the seed rather than the tree when it grows. And then with the 403(b), you have an option.
So you could contribute pre-tax, meaning you are going to decide to let this contribution amount lower the income number that you pay taxes on, that your student loan payment might be calculated on if you have federal income-driven student loans, think going for PSLF. Or you also have the option to make a Roth contribution, where you’re not going to take the tax break.
Now you’re gonna pay the full rate and it’s all going to be tax-free on the backend. And then the third difference might be the investment options that you have. So within the 403(b), you’re gonna have a menu to choose from, which is not necessarily a bad thing, but with a Roth IRA, it’s more open platform you can choose to invest in basically anything.
Even Bitcoin, crypto, right? There’s ETFs for that now. You have a more wide range there, but. I’d say that was a common question. More just around the basics of, hey, what are these types of things? How are they different?
Daniel Wrenne: Which one’s better?
Hugh Baker: Well, It depends. I think for most residents—
Daniel Wrenne: I mean, I’m telling them, let’s say the bulk, the majority.
Hugh Baker: For most residents, let’s first make sure we’re getting all the free money that we can, right So if your program offers a match, then you wanna make sure that you’re getting all you can with the free money there. So contributing however much you need to do that.
I guess you could make a case with a Roth IRA, right? There’s the five-year roll. So the sooner you get one open and get contributions going. There’s some benefit to that.
Daniel Wrenne: But we don’t want ’em to be able to take it out?
Hugh Baker: That’s right.
Daniel Wrenne: I mean, if I’m talking to my future self, I don’t want my current self to have the temptation to take it on.
Yeah. So I would say for the majority of residents, like the 403(b) is the better choice. For starters, you can actually do both too. But the 403(b) is more flexible. Like you can do either or Roth or pre-tax and it’s easier, like the accountability. Like when we encounter people down the road of their career, it’s more common for us to see sizable 403(b) balances than it is for us to see sizable Roth IRA balances.
And that’s purely because of the psychology of saving. It’s more difficult to have the discipline to save or set up the mechanism to save for the Roth IRA.
You gotta do some things and maybe update things over time, versus a 403(b), you can be like automatic—auto through payroll. And you can or do pick a percentage and dial it up over time. Or you could even click a button on the front end and set it to auto-escalate sometimes. So there’s really good accountability built into 403(b)s, and it’s got the choice of one, pre-tax versus post-tax.
But you have to make—you and I were talking about this before we started—you gotta make sure you set it up as a Roth, 403(b), or I guess you have to make sure that your plan even offers that there are—It’s rare. I don’t know. I haven’t seen one for a while, but there are there, there could technically be a 403(b) that doesn’t allow Roth.
Hugh Baker: Yeah, those are less common now. Most have a Roth option, at least from what I’m seeing, but I think the biggest thing like you were alluding to, it’s on autopilot. There’s already an evidence-based, reasonable investment option set up for you. You don’t have to decide. When you put money in, it automatically gets invested.
Daniel Wrenne: Yeah.
Hugh Baker: I have seen. Probably more than a handful Roth IRAs that are, they never chose the investment. They’re like, yeah, I got a Roth IRA at Vanguard. You put money in, but you never chose an investment. So it’s just sitting in cash, not growing.
Daniel Wrenne: We sometimes forget ’cause we do these things for clients, but if you’re doing it yourself.
With a Roth, you gotta like trade when the money goes in, you have to put the money in and do the trades unless you’ve set up some sort of automatic trading, automatic investment, which is another step to set up if you’re doing that. But most people are in there having to trade every month when they put money in.
So it’s just more of an administrative responsibility to manage your own Roth. Ideally, you do both. I mean, that’d be great if you could, but that’s a lot of money in training. Most people aren’t gonna be able to save 23, 25+ seven. That’s a lot of money. Now, if your spouse is in practice, that’s a different story.
Hugh Baker: Yeah. Yeah. Then you might have a lot more saving capacity there for sure. But I think for the later end, I think you get more people, let’s say we’re talking November 10th, 2025, so maybe in seven months you’re going to graduate. For that crowd, I’ve been getting a lot more questions around say, physician loans versus regular mortgages.
Starting to think about maybe you’re at this time you’ve signed that big contract, right? And you start to see those dollar signs and start to think about how you wanna put those to work or put them to use. And a lot of questions around buying a home.
Daniel Wrenne: Like how much—did anybody ask, how much should I spend on a home?
To me, I feel like that would be the question you typically would start with, but I’m curious, did anybody ask that specific?
Hugh Baker: Somebody asked, “How much should I save versus spend as a general rule of thumb?” but not for homes in particular. The questions were more based around the financing.
Like what are these physician loans like? What’s the dirt? Are they bad? Maybe they’ve gotten targeted or sold something already. So they’re already thinking about do they label this physician loan ’cause they’re trying to take advantage of me? But, in my mind, physician loans really are just a product that recognizes.
You’re not like the typical American that gets an incremental raise over your career. You get a huge sudden raise, and you have the income to support a mortgage at some level, but you just haven’t had really any excess money to save up for a down payment with all the education you’ve had to go through, and now you’re probably 30, maybe 35, finally about to start earning the big bucks.
So I think it’s just a product recognizing that, yes, it’s often that the rate will be adjustable. So that’s one of the differences. Not all the time. You can find 30-year fixed mortgages as a physician loan. Physician loan, meaning the other piece too, I didn’t explain most of the time, they don’t require a large down payments.
Daniel Wrenne: Or any.
Hugh Baker: Right. Or any, so most of what I’ve seen, it’s no down payment required. Up to a million bucks. Over a million, maybe they require 5%, something like that. But for not having to put that down, payment down, you don’t have to pay private mortgage insurance, which may be heard of, depending on the loan balance, could be a couple hundred dollars a month.
But with these physician loans, that is waived. If it’s a regular mortgage and you don’t put 20% down, then you might have to pay private mortgage insurance. So those are some common differences.
AD BREAK
Daniel Wrenne: Let’s take a quick break to talk about our firm, Wrenne Financial Planning.
The goal of our podcast is to empower you to make better financial decisions, but sometimes the best financial decision you can make is to work with someone who understands your financial goals and has the expertise to keep you on track to reach them. That’s where Wrenne Financial Planning comes in. We are a full-service financial planning firm that works with over 400 physicians and their families across the country.
We charge a transparent monthly flat fee for our services and offer virtual meetings you can take from anywhere. Best of all, you’ll get to work with a team that specializes in working with physician families. So whether you’re starting out and wondering how you’ll balance your student loan payments and saving for a home, or you are established physician trying to figure out how to pay for your kids’ college and how much you need to save to reach financial freedom, we can help.
I’ll put a link in the show notes to schedule a no-obligation meeting with one of our certified financial planners. Wrenne Financial Planning, LLC is a registered investment advisor. For more information about our firm, please visit wrennefinancial.com. That’s W-R-E-N-N-E financial.com.
AD BREAK END
Daniel Wrenne: I used to do these talks a lot and I would sometimes rephrase it and say, “Those are all good questions, but like the question you really should be asking is a little bit different.” Or maybe we could look at it this way. We get to work with a bunch of physician families. “Have you ever seen anybody get into major financial trouble because they chose a physician loan over a non-physician loan?”
I don’t think I have ever seen that blow their circumstance up. I guess it could, but it’s. I don’t, I can’t think of a single person that the decision of choosing the physician loan over the traditional loan got them into a major pinch.
Hugh Baker: It’s the purchase amount. It’s going to have a big.
Daniel Wrenne: So the real question is, how many people have we worked with?
I can think of multiple people that have gotten into major financial trouble because the amount got outta hand in terms of how much they’re spending on the house. That’s the thing that blows up their financial situation. And it’s pretty common. I know how common it is in people we’ve worked with, but I would say in the general population, I guess of, or the physician general population, I bet it’s fairly common and it’s not like people brag about—people don’t talk about this at like dinner parties.
It’s like, when I say getting into trouble, I mean it’s extremely stressful and like it causes burnout at work because they feel like they have to work to earn the money to pay for the house. And so you might not see it necessarily unless you know the person really closely.
Maybe you do see it in that they really blow up. But that’s a more common problem, is I think not really thinking through the total purchase price. And I try to like, that’s a hard one because people are not asking that question.
Hugh Baker: Yeah. So let’s stick with this. Stick with this graduating group. Let’s say you’re on the cusp of graduation. Probably four out of every five that I talk to are thinking about buying their first home at this stage.
And I think this is a really important stage where you have to decide. “Do I want to be wealthy or do I wanna look wealthy?”
Do I wanna have this pretty house that looks like it was on Pinterest and the cool car or whatever?
Or do I really want to be wealthy? And to me…
Daniel Wrenne: What is the difference between be wealthy and…
Hugh Baker: Yeah. Well, I think, look wealthy is the stuff. It’s all the stuff you can see on the outside, right? But you have no idea what their stress levels are like, what their bank account and investment accounts look like.
You just see all the amount of money that is definitely not in those things like the bank account and the investment account. For me, being wealthy is you have the ability to do the meaningful things outside of work. You can pay to minimize inconveniences, aggravation, disappointment. You can use money as a tool to remove those things.
Now, I’m not saying that—I’m in a privileged position to be talking about this, but it’s not gonna be like overnight. It’s gonna take some time to get there. And this all exists on a continuum.
Daniel Wrenne: So do you live in a shack, like a one-bedroom shack?
Hugh Baker: I don’t live in a shack, but I can tell you we have made decisions to not renovate things, bring things up to the trends because we’ve got other things that are more important to us.
And it’s really the house, cars too, but I think that, especially that first house, can really change your trajectory on things because you can cut out going out to eat, you can cut out some of these other things, but aside from refinancing, you really can’t change that mortgage payment that’s coming up.
And then all the other surprises that come with owning a home. Like we had to spend a not insignificant amount of money on pipes, right?
Not something I would’ve rather spent that kind of money on. I would’ve rather spent that to make our kitchen look like it’s not 2005, but at the end of the day, I really dealt, that’s really not gonna move the needle for us.
So I think being smart about those things and really thinking at this stage as you’re graduating, “Do I wanna be wealthier? Do I wanna look wealthy?” Because this is going to be your first time earning the big bucks. And everybody knows the more you save early, the compound interest, how that’s going to work for you.
And giving yourselves opportunities, like you might want the opportunity to reduce your FTE. That’s a very common thing. You might want the opportunity to—maybe your contract’s going to end and you’re going to move. Yeah. Maybe my contract ends July 1st. Maybe I don’t wanna start till October 1st.
Take some time off. It’s like, when else am I ever gonna be able to do this in my life? And if you’re running things like paycheck to paycheck, or maybe it’s not paycheck to paycheck because you’re like maxing out retirement plans, but if you’re not giving yourself that excess, what are you gonna do?
You’re not gonna be able to take advantage of these opportunities. And I would bet that there are probably some other cosmetic things that maybe with that first asset could have been different. You didn’t have to pay for that. It could have given you maybe these other more fulfilling opportunities.
But that’s just me. Those are just the things that I value. But I think this is just a really important time to be very intentional about these things.
Daniel Wrenne: Yeah. I did a talk once on stewardship, and one of the statistics I brought up was the average home size in the 1950s versus today and then the average debt in the fifties versus today. I don’t remember the specific numbers, but the gist of it, it was in the fifties.
The average home size was like, I don’t know, 1400 square feet or something. And then like today it’s 2,900 square feet, like more, maybe double or more. And then debt is five times more. Basically, both of those have accelerated a ton. So then the question is over the same period of time, have people become happier because of that?
And I’m talking about the broad scope of people, and I think most people would argue no—it’s hard to draw a direct correlation to those things, but I definitely think that it does cause—it’s a part of the equation. ‘Cause what happens, we see it real time, like when clients get aggressive on the house, too aggressive on the house, and they’re starting a new job and you never know what you’re gonna get on the job and say it’s a more than they expected in terms of commitment.
And then the house at the same time is also a little more than they expected. And so they’re stretched thin at work, and they have to work to keep the house going. And then the fact that they’re so stretched thin at work causes burnout. And then they got no options because they’ve already earmarked all the dollars.
And that’s when you see people that won’t admit it. They’re like, I’m not burned out. I’m good. I’m good. ‘Cause it’s hard to when you’re in the—so ideally you get hit that on the front end. I know we’re digging into the weeds of the house decision, but it’s just so commonly the root of a lot of problems that we see.
Hugh Baker: Yeah. Happiness is reality minus expectations, I’ve heard from somewhere. So maybe let’s just not have our expectations with a mansion for your first home.
Daniel Wrenne: Yeah. And you could always get one later or ease into one or, it’s a slippery slope.
Hugh Baker: Sure is. And I understand. Like we recently went to a birthday party.
They got the house on the water. We’re like walking around man, this is nice. I’m playing ping pong on the back table. Got the bay out there. I’m like, no, this is awesome. That was a couple weeks ago. And I remember coming home thinking, man, this is just like this stuff that I talk about, like now I wanna live on the water.
That was awesome. That was really cool. And but here, two weeks later, I’m like, eh, no big deal.
Daniel Wrenne: Yeah. It fades fast.
Hugh Baker: It eventually fades.
Daniel Wrenne: Yeah. Comparison is the thief of joy. That’s what my wife likes to say. Anytime we’re feeling the temptation of, ’cause you always are. We go through the same thing.
We’re like, “Oh, we would like to do what the Joneses down the street are doing” ’cause we’re comparing and then we go experience it and we’re like, that’s cool in the moment. Or you’re like, “I would look nice in that nice car.”
But, okay. Any other common questions for the later stage group? Like nearing transition and practice?
Hugh Baker: There’s some general, like, how much should I save versus spend student loan questions about like rising income-driven payments. Ways to lower that, right? So think your pre-tax accounts, maybe you’ve got a 403(b) through work, maybe now you have a 457(b) that you’re gonna have at your next job, right?
So all of these different ways. Maybe you’re having kids, dependent care, flexible spending accounts. So that’s a use it or lose it type of account. So make sure that you’re going to use those dollars. That’s another way to lower that income number that’s going to drive your student loan payments, save you some money on taxes.
So they’re looking for maybe taxes, I suppose, come into a little bit more of a focus there as well when your income’s about to jump.
Daniel Wrenne: So somebody asked about saving versus spending?
Hugh Baker: So yeah. So somebody asked, so it’s a general. Yeah. Of course, I give a, it depends, but I think what I stressed was, so a nice general rule of thumb is 20%, right?
So there are various goals. It’s gonna be much more dependent upon what you want out of your life, all the different things that are unique to you.
Hugh Baker: But if you really have no idea, 20% is a good place to start. However, I’ll say that while you’re a resident, maybe you’ll push back on me a little bit for this one, Daniel, but I don’t think that rule applies to you as a resident.
I know you’re gonna have a much higher income in the future. I know right now time is your most limiting factor. You don’t have a lot of time. So with any extra money that you do have, if you can pay to get some time back. Think if you had somebody come help you with cleaning once every two weeks or once a month even, whatever it is, things like that, to buy some time back, buy some sanity back.
Not do the things that you dread doing, and then maybe you just save what you reasonably can after that, which I wouldn’t normally say to an attending. It usually doesn’t work that way to let’s spend what we spend and save what’s left over. You should probably do the opposite, but I think as a resident, the difference being you can make up for that later if you’re intentional, but we just need to survive.
Keep your head above water. Stay sane at that stage. Get the free money from your workplace retirement plan, and don’t go into personal debt. Do not go into credit card debt. That is very hard to dig yourself out of. I think as long as you’re doing those things, I think, you’ll be okay as a resident.
But what do you think, Daniel?
Daniel Wrenne: I think everybody’s got an opinion on this, but my opinion is, I look at it like, what would I tell my kids? Because it is just a broad brush approach we’re talking about here. So I think a broad brush approach would be save 20, give 10, pay the taxes, and spend the rest.
Because that’s what I do tell my kids. I think the sooner—so this is where I would disagree with you a little bit, not—I know in circumstances this would be—there’s circumstances where that I would agree with you, but in general I would—my opinion is that the sooner you can develop the habit of saving, at least I’ll say at least 20%, and giving at least 10% and spending the remainder, the better off, you’ll beat it.
Nobody is frustrated about that discipline they developed at a young age. Like I don’t ever encounter people that’s “Man, I wish I hadn’t saved so much money, “or “I gave too much money away.” It’s extremely common for people to be like “I spent too much money.”
So I would lean heavy on as soon as you can develop the discipline to save ideally as much as you can, like 20% is a good rule. But if you can get more, that’s great. And then I’m a fan of giving, I think giving has a lot of return and just the habit of it is a good, it’s same thing, it is a similar thing as savings.
Like spending is easy. Giving and savings is very difficult and you have to develop the habit early. And I was talking to a friend of mine the other day and we started talking about money and he was telling me when he started working, when he was like 12 or 13 years old, he was saving a ton of it and putting it in the stock market and buying like index funds, and now he’s 41 or two or something like that, which is what we would tell everybody to do.
Like he was basically doing, he was saving as much as he could starting at a young age and using diversified investments. And now, I mean he’s continued saving for the rest of his life, but he was telling me that his money that he saved from pre—he’s a pharmacist—but pre like school is worth more than the savings that he saved after.
And he’s not young. I mean he is not old, but because he did the things right really early in life. So that’s the—they attribute it to Einstein. The quote of compound interest is the eighth wonder of the world. I’ve heard people say. So it’s like when you can get in the habit of investing, saving young, it has huge effects when you get older, and it’s very difficult.
’cause when you get in a—and I’m talking about even ideally before training but as soon as you start having kids and like life happens, it’s really hard to do, to say.
Hugh Baker: Yeah, I like that you added giving in there and then just building the habit of saving is extremely important.
Daniel Wrenne: Yeah, ’cause it really is a habit.
And you don’t have to—I don’t mean to shame everybody that’s not giving and saving everybody’s different. This is where the personal part comes in. So the nice thing about finances is you get to decide what you’re personalized approaches, and it should, ideally, it’s based on what’s most important to you and not like necessarily what we’re saying, and you don’t have to do it overnight.
So you can do 2% and then 5% and then 7%, and then dial it up over time. So it doesn’t have to be an overnight “Oh, I’m gonna save 20% starting tomorrow.” So it’s like anything, the discipline like that, getting that routine going is the main thing. So anyway, I’ve gotten off on a tangent on savings.
Put me on my soapbox there for a minute. Other big questions that came up with the later career, I think when I used to do them, people would ask about contracts and jobs and that kind of thing. I don’t know how many of them were later career than most recent groups you talked to.
Hugh Baker: Yeah, I did get some questions around contract and employment, and I think my biggest advice there was to work with a professional third party that knows what they’re looking at can help you review that. And we’ve had a client have some success with getting a retention bonus added in just because the duration of the contract was typically a duration where there would be some sort of retention bonus. And it wasn’t originally offered, but.
Hey, you ask and you shall receive $50,000 over the life of the contract. So that’s amazing. And then even so some other things like I think I maybe mentioned on this podcast before, just non-monetary things, but like my wife was able to get worked in her specific office location with her contract because the employer was notorious for moving people around and we were going to live about a mile two miles away from the office, so that was extremely important, so things like that.
Daniel Wrenne: I would say the one thing I have piece of advice I would add and or just maybe consideration is when—this would be before the contract phase, I guess this would be when you’re looking for jobs—is beware the highest paying job listing and the listings.
I don’t know if people actually do that, but there’s plenty of jobs that sound good and financially look really good. And then there’s also some that you’re not sure, but anyway, no matter independent of what they’re paying, what I would do is go in there before I accept a job, I would really do my homework and focus more on like the people you’re gonna work with or the culture you’re gonna work in, because there’s a lot of like toxic culture, toxic workplaces in every profession, including medicine.
And you can usually feel that out if you spend time a few times interviewing or if you can go hang out with one of ’em in a personal setting. And they’re all awkward and you’re like “What’s wrong?” And they’re like, “I haven’t actually been out of the hospital in 10 months,” or they’re working a ton or something or everybody’s divorced in the practice or something.
It’s like what’s going on with that? I’ve heard people mention those kinds of things when they’re interviewing. I’m like, that would cause me to pause and think, is it the culture possibly? Is it their values?
And say you’re the average of your five best friends, or I would say you’re the average of the five people you spend the most time with. So if you’re hanging out with people at work a lot, you’re gonna, they’re gonna rub off on you.
So it’d be good to I think about that kind of stuff before you commit. And then when you’re going through the contract phase, you can also look for those sorts of things, like more values, culture-based things like, “Do they have maternity leave or whatever?” That’s one we’ve looked at in our workplace recently.
So that’s a signal that they’re family focused.
Hugh Baker: Yeah, those are good ones leading up, and then one of the other common questions was, “Should I pay extra toward my student loans or invest the money?” So that’s one where answer probably depends on your situation in general.
So student loan-wise, hey, if you’re somebody that’s PSLF eligible even if you don’t think that you’ll go to work for a nonprofit or some type of academic setting—maybe you’ve got a contract with a private practice—let’s maybe leave the door open for the first year. Because, like you were saying, a lot of times, first jobs just don’t work out for one reason or another. So I’d say leave the door open for that.
Maybe don’t rush out ahead and pay extra toward your student loans. Even if that is the case, we’ve used with people that we work with an account that will even nickname student loan side accounts. So it’s just an investment account, not a retirement account. You can access it for whatever reason and any extra money that you would’ve paid toward that student loan, let’s just put it in this investment account.
And if that is the case, when the balances start to meet each other, your investment balance grows. Your student loan balance decreases as you make payments over time. When those balances are equal, maybe we have a conversation, maybe you think about it, and see if you want to pay those off.
It’s also helpful to retain access to that money. You can’t go and ask SoFi for your money back. If you’ve been paying extra all along, if life throws you a curve ball, if you have access to that money in account, then maybe you’re able to weather those emergencies that pop up or those big surprises or even a discretionary thing, like time off between jobs, which may just help you stay sane and improve your quality of life rather than the 10 grand you might have saved on interest.
So I think there’s a lot of benefits with that, but you also have to make sure that you’re disciplined and going to invest the money. You’re not going to take the money out and buy a car that’s maybe more discretionary. Like your car wasn’t dead, you just wanted a nicer car.
So there are some things that can get in the way with that. Know yourself. If you’re not going to do those things, you like the idea of the guaranteed interest rate of paying down that private student loan, maybe then, hey, go for it. But those are some things that I would consider before taking that move.
Daniel Wrenne: Yeah. Especially cautious with federal loans, right? Private loans are different ’cause they’re typically a higher interest rate or you look at, you could look at refinance too.
Refinance your private loans, see if you can get a lower interest rate. Student loan refinances are a thing. If you’re not aware, so that can also be a—’cause if you get the interest rate lower, then you might lean more towards investing the money. I’ve had many families I’ve worked with over the years that have said they’re a hundred percent sure they’re not gonna be at a PSLF type employer end up at a PLSF type employer.
Hugh Baker: Yeah, I know I’ve had some things lately I’ve said a hundred percent not the case and they pop up.
Daniel Wrenne: So you start saying 99. I don’t know.
Hugh Baker: Yeah.
Daniel Wrenne: Alright, we got through a good chunk of questions. I think this was a good swipe at it. Any parting thoughts you on your end for that career stage as we’re working through that training phase of life?
Hugh Baker: Yeah, just on the—I already mentioned it earlier, but whenever you’re approaching graduation, you really gotta think, do I want to be wealthy or do I wanna look wealthy?
And wealth isn’t a number, it’s not $10 million. It’s more of a mindset of being able to weather whatever’s thrown your way and be comfortable. I would say that, and on the earlier end, like Daniel said, just establish the habit of saving. Maybe add in some giving there. It’s really about building habits.
At that stage, you’re not, probably not going to become a millionaire by your 403(b) by the time you graduate. So it’s more about building those habits, getting things set up as a nice foundation for that transition, and go into it eyes wide open, ask good questions whenever you are interviewing with prospective employers in shadow.
Daniel Wrenne: Yes. I think the way, what I would add is do your best or get in the routine of starting to look at things like we’ve talked about through a values lens. So for example, we were saying, the savings and the job decision and the house decision. It’s tempting to just look at those in isolation.
But ideally, what we’re trying to say is look at those from the view of what’s most important like across all of the things in your life? And revisit your values and look at, for example, the home decision. Like how does it fit in the context of all my competing values, is it the most important thing?
Where does it rank, and how much emphasis do I wanna place on it? Because that’s oftentimes a really good reminder that maybe you— ’cause it’s emotional, those all these things get emotional, and you get caught up in the heat of the moment and make a rash decision. So the values view can help bring you back to reality.
Oh, the other thing I was gonna throw out is if you have interest in digging into some of these things, if you’re in the career phase yourself and you have interest in digging into this type of stuff even more, we have a course that I’ll try to make sure is a linked in the show notes that is like a walkthrough essentially of a lot of these key things to be thinking about, particularly in the transition from in training into practice.
And so we will link up to that as well. And then if you’re in a program that is looking for financial wellness education, make sure to reach out to Hugh. He’s a baller. He does a good job. And it’s something that’s been fun. I used to do it more often myself.
I’ve phased out of that, but I really enjoy doing it. I know Hugh does as well, but it’s a fun way to give back a little bit. And my favorite part about it was always the Q&A. It was just fun to talk through questions, and then you see people’s—the light bulb goes off.
That’s always a good moment.
Hugh Baker: Yeah, it was a lot of fun. Love to do it. Love to keep doing it.
Daniel Wrenne: Alright, Hugh. I appreciate it, man.
Hugh Baker: All right. Thanks, Daniel.
No guests or clients appearing on the podcast received any form of compensation for their appearance and obtained no other benefit from us. It should not be assumed that every client has had the same experience.
