Medical School Debt and Steps To Financial Independence | Investing Rx Podcast Ep.1

Welcome to my new video series – Investing RX! It’s a show that’s aimed towards increasing the financial literacy of not only residents and doctors, but I think there's a little something for everyone.

I want to talk finance in an open and transparent way. So you’ll see me as an example - I’ll talk about how much I make, my portfolio, my med school debt, and discuss any investments I make as I'm making them. You’ll be able to see me make or LOSE money, and hopefully see me pay off my debts and transition to a high income individual once I finish residency.

So let's start by looking at medical school debt. The average debt of doctors hovers around $200,000! How do we plan to tackle this? Well before that, let's go over the basic steps of financial independence, which are the same for most Americans.

And we can break it into actionable steps. Here they are:
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The first and biggest step: Set a budget. People don’t generally have an income problem, but a spending problem. So make your BUDGET, and make it precise. Here's the Excel tool I use:
https://www.vertex42.com/ExcelTemplat...

This is a great spreadsheet to track your budgets. Again, be as specific as possible to discover your true spending habits.

Alright, next step: emergency fund. Set aside some money for when things hit the fan. This should be a few months of living expenses at least.

Step 2: Contributing to Employer sponsored accounts (E.g. 401k). Some employers will offer you a retirement plan (often 401k) and as an incentive to invest, will match your contribution. This means free money!

Step 3: Pay down high interest debt (Credit cards)
-We'll talk student loans in a subsequent video, but I'm mainly focused on credit cards. Their interest is often in the double digits – so if you pay it off, boom, immediate double digit return which is hard to do in the stock market, real estate, etc. There are couple ways to pay down debt, avalanche vs snowball method. In the avalanche method, you tackle the biggest debt/interest rate first because that’s the one that’s hurting the most. In snowball, you tackle the smallest one, even if that means letting the high interest rate debt grow and grow. Why do that? Well like I said its hard to pay down debt, but if you eliminate even a small one, that’s a moral victory and motivates you psychologically to keep on going.

Step 4: Contribute to IRA
This is an additional retirement account that you can open for yourself (an individual retirement account) or IRA. They have additional tax benefits and limitations - see link for full details. All in all, an excellent method for investing!

Step 5: Contribute to HSA
This is another investment tool that helps you grow money, but instead of using it for retirement, its for health expenses. This tool offers triple tax benefit (except CA and NJ)!

Now after you've exhausted your 401k, IRA and HSA (tax ADVANTAGED) accounts, then you can move to other accounts. These are called TAXABLE, and don't offer you tax benefits. We'll talk more about these in subsequent videos, but congratulations on making it this far! You're further along than most people!