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Lives of Doctor Wives: Survivor Saturday--Financing During Residency

Saturday, May 9, 2009

Survivor Saturday--Financing During Residency

This week's question comes from Kim: "I was wondering about financing during residency. It seems that a residents salary is so minimal and that it's almost impossible for us wives to work while the hubby is in residency (those of us with kids at least). What advice do any of you have about how to make ends meet during residency life. Did you have to take loans out to survive?"

Kathi's response:

When your spouse is interviewing for a job, urge him to ask if loan repayment is offered. If you play that poker hand and they don’t bite, ask if they offer a no interest loan refinance. That will save you the interest, if nothing else. If both of those options fail, you’ll have to get creative with financing.

Financing options are different today than in the past, especially in light of today’s economic climate. That being said, physicians have job security and banks are willing to take that into consideration. I suggest you go to banks in your area and ask if they have any “doctor loans” or “private banking” arrangements. Most banks will say yes to the latter and have no idea what that means. If you find one that seems to know what they’re doing, present your loan situation to them and ask what creative suggestions they may have. They may offer to refinance as a signature loan at an extremely low rate with option to pay interest only until your household income increases. They may also offer a more traditional loan, but stretch it out over 15 years. I doubt if they allow second mortgages anymore, but it’s worth asking if there are any loans available that will allow tax deduction (as a mortgage). The important thing to remember is that your financing options are not limited to what is offered to the general public and this is one benefit to all those years of sacrifice and hard work.

Jennifer's response:

A lot will depend on the cost of living where you live, what the PGY pay scale looks like at your program, whether or not you work, whether or not you have kids. I do have friends who took out loans during residency to cover the cost of living. In any case, your finances for the next 3-6 years will likely be tight. Here is what I would advise: be patient. You can make it work. In a few years when his training is done, you will be able to do the things you dream of doing but can’t afford to do right now. Hang in there for just a few more years. There are about 537 reasons I am not a doctor, and “delayed gratification” is right up there at the top of the list. It was so hard for me to be patient during residency, and I am the last person you want to take financial advice from, but I wish I would have been a little more disciplined and a lot more patient during residency. Check into different budgeting plans – Dave Ramsey and Crown Financial Ministries are two that I know of – talk with your husband, and make a plan that works for both of you.

In the meantime, there were a couple of things that I did that made it a little easier. First, I have a very dear friend who I met during residency. Her kids and my kids were born within months of each other, and they lived ½ mile down the road from us. We decided that we were sick and tired of not being able to keep our homes clean (our kids were around 3 and 1 at the time), and of course we couldn’t afford to pay someone to clean our homes (remember what I said about being patient? Very soon, my friend. Very soon.), so we came up with a plan that worked really well for both of us. One day of every week, we would go to one of our houses and spend a couple of hours cleaning it from top to bottom. (We can’t remember where our kids were during this time – either at preschool or plopped in front of PBS – there is so much of those years that I’ve blocked out!) Then the next week, we would go to the other house. We had great fun together, and we had at least one day twice a month when our homes were completely clean, which did a lot to help our sanity.

We also got together and made freezer meals. She had a freezer cooking cookbook, so we’d pick out a couple of recipes, go grocery shopping together, split the cost, then spend an afternoon assembling and cooking. For example, there was a recipe for seasoned ground beef that you could make into meatballs, spaghetti sauce, or meatloaf. That worked well – until the thought of even looking at another meatball made us queasy.

The two of us also took on home businesses during our last year of training – she sold Usbourne books and I sold Pampered Chef. That worked well because we coordinated our home show schedules with each other so we could trade off childcare. The supplemental income helped (though I think we spent most of our paychecks on books and kitchen tools), and it was a fun way to get out of the house.

Amanda's response:

Your need for financing with loans during residency will depend on where you'll be living and what type of pay scale the residency will be providing, which is pretty much what Jennifer discussed. My husband and I were lucky because he was able to finish undergraduate school without any student loans (a combination of a very good scholarship, working through the summer, and some help from his parents). He did get loans while in medical school, and we lived off those as well as any money I made while teaching or working in medical offices. I remember getting a seasonal job for Victoria's Secret one Christmas because my teacher's aide job paid hardly anything at all! Once he started residency, we found that we were able to live well off of what he and I made combined (I worked as a receptionist in a radiology department at that time). This was possible because we lived in apartments during his medical school years, kept a very low entertainment budget, ate most of our meals at home, paid off our credit cards every month, drove vehicles that were hand-me-downs from parents and/or already paid off, used hand-me-down furniture, and tried to live within our means as much as possible. Because we lived this way while he was in medical school, we were able to purchase our first home when he started residency. Again, we tried to keep our expenses at a minimum. We bought a small, relatively inexpensive (for the area) Cape Cod home with one bathroom and a tiny kitchen. It was a major fixer-upper, but because my in-laws have experience with flipping houses, we were able to make it comfortable and livable over the course of my husband's four-year residency. We continued to eat most of our meals at home, paid off our credit cards, and did other things (like joining NetFlix) to keep our expenses minimal. We had our son at the beginning of my husband's third year, partly because at that point, his program allowed the residents to apply for a medical license and begin moonlighting at other hospitals in the area. As soon as our son was born, I became a stay-at-home-mom, and my husband started moonlighting one or two evenings a month. He actually made more money in one moonlighting shift than I did in two weeks working in a medical office! We saved a lot of money by not needing day care for my son, I found a great play group that helped me get through those first couple of years of being a new mom, and we tried to do a lot of free and inexpensive activities for fun as a family. Unfortunately, when it was time to move and sell our home, we were in the midst of the housing crisis, and it didn't sell for as much as we had hoped. We're happy that it did sell, though, and we are grateful for our current living situation, which is above and beyond what we'd ever imagined. And, my husband has only been out of residency for about ten months! I know that not everyone is as lucky as us when it comes to being able to live comfortably during residency, but I wanted everyone to know that it can happen, if you're careful and live within your means.

We hope our responses answer your question, Kim! Thanks so much for the great response we've had, so far. Please keep leaving questions for us in the comments section. We're so happy to be able to share our experiences with all of you!

Kathi, Jennifer, and Amanda--aka "The Survivors"

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Blogger Laura said...

I agree with your response, Amanda. The key is to live within your means! I know a lot of residents wives have the philosophy that they will be making a lot more in a few years, so they can pay off the debt then. My husband is about to start his fourth year in residency. We live pretty frugally and have not accumulated any debt while he's been in residency, except for the mortgage. I stay at home with our 3 kids and we're still able to make it. I know it may not be possible in every situation. The cost of living is pretty low where we live.

May 9, 2009 at 9:08 AM  
Blogger Melisa said...

We moved from low cost of living to high cost of living. And to add insult to injury, he isn't allowed to moonlight until he is a PGY4, which means we'll have over a year to be living off of nothing in a big city. I'm just sick about it all. A family of 5 in a big city living off 40K. Ridiculous.

May 9, 2009 at 9:59 AM  
Blogger Alexandra said...

I totally agree with Laura and Jennifer and especially Amanda. There are many families worse off then ours and many with a lot more children in them and they use what they were blessed with wisely and frugally. I think the biggest problem most people have, that I have met from school and other things, is that they don't realize that their spouses aren't doctors yet, but they live off credit cards/savings/salary like they are making $100-300k. I know that everyone has different circumstances but if most would just be more patient and live within their means now, they would be able to enjoy that huge salary hike when it came not NEED it to bail them out of their problems. It's also nice to know that 10 months out of residency you guys are very, very comfortable with your financial situation. This is a relief to me as student loans really freak me out. It's comforting to know that all that sacrificing/waiting paid off and that other people are living that way like us. Sometimes it feels like we are the only ones not eating out, buying things we don't need but just want, or charging things like crazy. Thanks for the encouragement ladies!

May 9, 2009 at 11:36 AM  
Blogger Kathi Browne said...

Melisa, You're not alone in your frustration. I'm a very conservative spender but I didn't earn enough to support the family and make payments on my loans AND his (he borrowed tons). We finally gave in and refinanced our loans to interest only until he started making money. Took 15 years to pay off everything and we celebrated by buying his first new car and some dirt in Costa Rica. Know what's laughable? Two of my three boys want to be doctors and college is only a few years away. We're revisiting this topic all over again. (sigh) If medical school (and college tuition in general) continues to be this expensive, doctors are going to have to be paid more or reimbursed in some way or they're going to have a doctor shortage similar to today's nursing shortage. My soapbox statement.

May 9, 2009 at 11:49 AM  
Blogger Tasha said...

I'm glad that I'm not the only one who's frugal. It's tough to see other med student's wives get tons in government help (food stamps, housing, medicaid, etc.) and spend like there's no tomorrow. [I'm not against government help, I just hope most people don't abuse it.]

I'm worried because I will be starting PA school in the fall, which means even more student loans in addition to Jeff's. I hope to have kids as soon as school is done and would either cut down my hours (a lot) or stay at home, but I'm not sure if we can afford it.
Does anyone know how often interest capitalizes after it goes back into repayment? I've called several loan companies (including the dept. of education), but still haven't gotten a straight out response.

May 9, 2009 at 1:07 PM  
OpenID joz1234 said...

(I'm typing this and hoping that it comes out right...Tasha, I only comment because I can understand why you feel the way you do. This is not meant to be offensive at all.)

I think the key here to getting government assistance as a person trying to get by in medical school is that we are citizens who will more than pay for that assistance later once our husbands are practicing. When we first did it, I didn't feel good about it. We only used Medicade for pregnancy and for the boys healthcare once they were born. We could have qualified for other assistance, but chose not to use it for our own personal reasons. We took out private loans and student loans to get through med school. Now my husband is about to start PGY 4 and we live off his income and my part time income ( I tutor online from home and work in a flexible-mostly from home admin position for Avon). We have friends who used other assistance programs, but many of them were couples where the wife would not have been able to find a "work from home" type of job with kids.

Ultimately our tax rate will be quite high and we will be paying for those government programs. Also I truly believe that government programs were designed for people like us who are arming ourselves with the ability to not only get off the programs, but give back to the programs.

This is not the way I looked at it before though.

May 9, 2009 at 2:46 PM  
Blogger Kim said...

Thank you for all of the responses!! The finances of starting residency in a year do stress me out. Mainly b/c I have my own school loans we are paying off monthly and partly b/c I look at the high cost of living we have now (southern CA). We may end up somewhere with a lower COL and then it probably won't seem as bad. However your responses have helped ease the stress. It will definitely be an adventure in frugality! Thanks again ladies!

May 9, 2009 at 4:09 PM  
OpenID justanotherstayathomemom said...

do the best you can with what he makes and charge what you have to and don't think twice about it. life moves on...you WILL pay this off, one day..don't look at the interest..it will make you insane! use coupons, eat at home, go to the park, take prozac (just kidding) check out the dollar stretcher dot com for some great tips and articles on saving money.

May 9, 2009 at 4:28 PM  
Blogger Amanda said...

I realize that I forgot to mention that I took out student loans while in undergrad, and of course, I had to start paying them back as soon as I graduated (though I paid interest on them while in school), whereas we were able to defer my husband's medical school loan repayment until he graduated (I think we had to pay interest, but I can't remember). I ended up consolidating my student loans when he was in residency because the payment kept escalating. I know that the repayment plan is for a lot longer, but we can also start paying more on them now that he's practicing. We just refinanced our mortgage to a lower interest rate, so we'll be paying less on that as well. I think consolidating loans and refinancing things like mortgages are a great way to help your finances during your spouse's medical training, and I wish we had done some of it a lot earlier during his medical training.

May 9, 2009 at 9:07 PM  
Blogger Tasha said...

Just a response to Joz1234's comment. I'm not at all offended and I know many who are on govt assistance. I merely disagree with those who use the money to go clothes shopping at high end stores. My sister-in-law had six kids before her husband finished residency and I'm sure they needed (and used) govt assistance. I suppose I'm just annoyed that we're funding their many shopping sprees (and I really wish I was exaggerating about how much and how often they spend). I'm grateful for govt assistance and would have used Medicaid and such too if the need arises. I just think being a good steward over the money/assistance given is important.

May 9, 2009 at 9:34 PM  
Blogger Amanda said...

Hello Ladies!
I am new to your blog. My good friend Kim passed it along to me. My husband is a MS3 soon to be MS4 (YAY). I am loving reading all of these questions and incredibly helpful advice. Thank you all for this. My question is about Match Day. I am actually reading a book right now on the topic titled Match Day. Highly recommended it. Though I am wondering if any of you have experience with the DO match day instead of the MD one? The book is about the MD match day. My husband is a DO student, though planning on doing the MD match(this is rather confusing for me). From the book, it sounds as if the MD match day is basically a ceremony at their respective schools where everyone is to open an envelope at the same time containing the name of where they matched and this takes place at the same time at every medical school across the country. Is it really like this? And then if any of you have experience or know of a DO student doing a MD match, what was that like? Is it the same? Different?
Thanks again ladies!

May 12, 2009 at 10:30 PM  
Blogger Amanda said...

Amanda, as far as I know, the MD Match Day is pretty much like what you described. When my husband's medical school had their big day, there was a nice luncheon for everyone. Then, each student who matched somewhere was called up to a microphone, given an envelope with their match location inside, and given the opportunity to announce where he/she would be going. Unfortunately, I can't help you with the DO Match Day in regards to similarities/differences.

May 12, 2009 at 11:24 PM  

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