Wow, thank you for such a kind and comprehensive response!
You make a very good point that eventually a recession will hit. Considering this, maybe the following would be a better plan: putting the majority of my saved money into a high-interest savings account (like you suggested), putting a few thousand (maybe 2-3k) into retirement accounts, and maybe 1k or less into standard investing (probably a mutual fund). With the money in my savings account, I can either pay off my loans or possibly wait until the market crashes and then put as much as I can into my portfolio. I'm unsure whether or not it's a good idea to wait for a recession and then jump on investments, but that seems to make a lot of sense?
I have been doing a lot of research recently to find scholarships and I have found a good bit which I plan on applying to! Also, do you have any personal finance books that you would recommend? I've found a few online that I'm interested in but I would definitely love to hear about which books you felt were most applicable to your situation as a physician.
Thank you again for your answer, it was incredibly helpful!
You're welcome!
I think you're starting with a solid plan, but I would change around a few things.
1: A high interest savings account is a great place to put your money, and where I would hold everything I need within the next 3-6 months. If you're buying a house, planning for a wedding, or have another big expense, you can extend that timeline even longer to, say, 1-2 years.
2: I would suggest using some of your savings to pay for things in medical school. Rent, books, tuition, living, etc. Every dollar you use this way is one less dollar you need to borrow. Of course, If you prefer to leverage yourself and have that debt, you can do that and still consciously limit how much you take out, but I would honestly try to limit my own debt burden if I could go back.
3: You mentioned waiting for a market crash. Thing is, the market WILL crash, but nobody knows when or by how much. Accurately timing the market would make you insanely rich, but most people who try end up buying high and selling low (the opposite of what you should do). Over and over again it's been shown that time in the market beats timing the market. If you're going to invest, take advantage of retirement accounts, limit your costs, and start putting money into it. But I think I mentioned this before, its
possible to make >8% returns in the market, but also possible you could
lose 50%. You're
guaranteed not to lose 6.8% or whatever your interest rate is every year with your loans. Whether you choose to invest of pay off loans is up to you.
As a side note, and why I prefer index funds over individual investments....I've been told I have bad FOMO. Right now I'm a little jealous of my friends who bought tesla 6 months ago and made 4x gains. But I also bought into the cryptocurrency craze in 2017 when I was a resident. Turned $4000 into $400 after plenty of research and spreadsheets and tech analysis, etc. Ouch. But I also started consistently funding a ROTH IRA in residency and turned $5500/year into 6-10%+ more per year every year without much effort. I realized I'm a doctor by trade, and I want my money to grow, but I'm not a stock picker or bubble rider by any means, so I stick to index funds.
Books
I would recommend my own stuff! But It's early days for me and I don't want to heavily self promote, so here are some other suggestions.
I Will Teach You To Be Rich by Ramit Sethi: Doctor or not, I honestly feel like the first steps in figuring this all out comes with working out the things you can control. That's your budget. Your spending. Your credit cards. etc. This was the book that solidified most of those things for me, and the first one I'd recommend. It's more of a week by week guide that breaks personal finance into smaller steps. Just keep in mind as you read it that his style of investing/spending might not be for you. For example, he tells you to chase big wins, like spending 20k on shoes if that your thing, so long as you fill your retirement accounts. I personally prefer a more conservative spending approach to make it to financial independent earlier but still be happy along the way.
The Millionaire Next Door: Another good book. Spoiler: it essentially teaches you that millionaires aren't all flashy lamborghini driving instagram celebrities like people want you to think. A great book for a little perspective.
To understand markets a little better, I highly recommend this youtube video by Ray Dalio.
And depending on how you prefer to learn, you can read blogs like:
Mr Money Mustache - A huge proponent of frugal living and getting by with less.
White Coat Investor - for doctor/high earner financial tips
Physician on Fire - more about Financial Independence, Early Retirement for doctors.
and plenty of others.
Or you can look up youtubers like:
Graham Stephan - Real Estate investor who's gotten big into the personal finance arena
Our Rich Journey - A couple who recent achieved FI on their own.
The Plain Bagel - Excellent place to understand more about markets
Or one of my favorite things, forums and groups:
Boglehead.com
reddit.com/r/personalfinance
Facebook fatFIRE group
Facebook White Coat Investor group.
And here.
In any case, I know that's a lot of info but I think it's a good place to start. I think you're lucky in that personal finance has become a big niche on social medial/blogs/etc. and the community is usually very helpful. Also, more than anything, the best thing you can do right now is start learning about this stuff now, which you're already doing! Which is great!
I hope that helps. Feel free to follow up with any other questions you might have.
