So, thanks everybody for joining our DO Day virtual conference presentation. I'm Alex Maislach, I'm the Director of Business Development at Laurel Road and I'm joined here today by Dr. Shragj, who is an anesthesiologist at Heinz Veterans Affair Hospital and we're going to share a little bit of insight, hopefully, on financial best practices during residency. I'll let Shragj give his full background, but suffice to say, he is very well versed in finances as well as medicine, so we're excited to have him here today. Shragj, do you want to give a little bit on your very unique background? Sure. I'd love to. It's a pleasure to be here and thanks for taking the time to pay attention and listen to this whole presentation. Alex, as always, it'll be a pleasure to have this conversation with you and the team. So, I did economics and finance in undergrad and I went to Wall Street to work for a few years in healthcare investment banking and after that, I actually went to medical school and residency and did anesthesiology and a fellowship in regional and obviously quite a career switch, but was really happy to do it and I think it was the right fit for me and now I'm currently practicing at the Heinz VA Hospital in Chicago. Well, we're excited. We work with Shragj here at Laurel Road quite a bit. He's one of our advisors. It's just great to have a physician's perspective and especially one that has such a thorough, unique financial background as well as your experience in medicine, so I think the goal here today is to share some things to be keeping in mind financially as you're going through residency. I know this is a unique time in your career, both in your medical learnings as well as your unique financial position with really a good deal of student loan debt, modest salary compared to what you'd expect to earn as a physician, a practicing physician, so what are some of the things you can be doing during this time to kind of optimize? So, we've done a number of surveys of our physician clients at Laurel Road over the years and identified a number of financial challenges that folks face during residency, so we've listed a few here. I think student loan debt probably and residency salary limitations could be one in one egg as well as a number of others on here, trying to save, balancing buying a home, building an emergency savings account. When you were going through your training, Shragj, what sort of stood out to you as some challenges that you faced? So, Alex, I actually faced all of these challenges and some of the interesting ways I overcame them, well, for example, buying a home. I was moving to Chicago and I realized the rent was pretty much the same as a mortgage would be if I had a roommate, so one of my fellow residents and I, so I ended up buying a home using a doctor's mortgage where you can put 0% down and then I had a roommate as one of my co-residents and that helped me pay off my home and not just have rent that wouldn't build any equity or anything tangible for the future. Obviously, the residential salary limitations are throughout the country, $60,000 is not a whole lot of money to live on, especially when you're paying off student loan debt, so the other thing I did was I looked at refinancing my student loan and I came out six, seven years ago, so the interest rate environment was a little different, but I was lucky enough to lock in a really low interest rate and as a resident, you can also just pay $100 a month or some nominal fee. Obviously, this builds your balance up, but during the three, four, five-year residencies, you can use that time to lower your student loan payments and then pay higher after you graduate and have a full-time job. The lack of savings, obviously, it's very real, but luckily, our profession is one of the few where the economy really won't impact us too much and you know that you have a job for life and that kind of consistency is the reason why banks like Laurel Road or Key are willing to give you a mortgage on a home with 0% down, so just using some of those knowledge points to overcome the limitations of your salary was very beneficial to me and I'm hoping that you guys can use those knowledge points to overcome your challenges. Definitely. I think probably safe to say these challenges are very real, but there's very much a light at the end of the tunnel as you look towards what things look like once you become an attending physician and salary obviously goes up significantly and very stable career path in the sense that you're virtually always employable, so it bodes well long-term, I would say. I think just generally, we've done some studies of financial stressors for healthcare professionals and identified 70% of folks felt financially insecure. I think this is a wide swath of healthcare professionals, so maybe less applicable to practicing physicians versus some other clinicians, but doctors specifically, 75% said they always or often feel anxious when they're checking their student loan balance, so that one checks out as well. I mean, physicians tend to have some of the highest student loan debt and consequently about 77% said they've changed financial goals as a result of their student loan payments, so we're not going to go into a whole lot of detail on student loan best practices specifically today, but maybe if you could just talk a little bit about how did your student loans affect how you dealt with some of your other financial initiatives while in training. Yeah. So I graduated with about $200,000 of debt after my medical school at Case Western. To be honest, knowing that I'm in a profession that's going to be fully employable pretty much at all times, it really wasn't to me super stressful. It's something I acknowledged. It's something I spent maybe a few hours every year thinking about or addressing, maybe refinancing or thinking about 10-year payment plans for loan forgiveness or thinking about what the interest rates are doing, so I'm not just stuck with one plan, but there is a light at the end of the tunnel, and as DOs and MDs, we're all going to be just fine, and I wouldn't let it stress you out to the detriment of your practice or feeling anxious. I mean, it's just a fact of life that you went through a very expensive educational path, but one that gives you a lot of stability and one where you'll have the ability to repay that debt even if it takes 10 years or if it's forgiven, anything to that extent. So that was my approach on it, Alex. Yeah, and I love how matter-of-fact you are about it. I mean, obviously, you've seen kind of another side of the working world, working on Wall Street and having a financial background, so you're really well-versed in personal finance, but obviously, a lot of your colleagues have that previous life before attending medical school, so hopefully, that's reassuring to a lot of folks out there. Just talking a little bit about budgeting, and this is a very broad view of how a lot of Americans do or should view their budgets, you know, might differ certainly for residents on a limited income, but a lot of folks look at a 50-30-20 split where you're spending half of your monthly income on needs, things like housing, utilities, paying your credit card, paying your student loans, wants, things like going out to eat, traveling, entertainment, and then trying to save 20% of your income. Is this at all applicable on a residency salary? I assume, you know, these percentages could look a lot different during training. Yeah, I think, especially depending on the city you go into, so for example, I do my residency in Chicago, my rent was a much bigger, or my mortgage was a much bigger proportion of this diagram than anything else. One thing I would strongly advise is try not to take on any credit card debt, for example, saving, you know, $500 a month or whatever, and then having credit card debt just doesn't make sense because you're paying such a high interest rate. So you want to focus on paying off your high interest rate accounts, and then focus on savings. The other thing is, if your hospital offers a match of any sort, instead of having a savings account, it's much more beneficial to make sure you get that match because you're essentially increasing your income, and then you're obviously compounding growth as well in an investment account or whatever facility your hospital has for a 401k or 403b or whatever savings plan they're creating for residents. So think about paying off your high interest debt. Think about limiting your savings if you can maximize other avenues of income. Yeah, I think, you know, is it fair to say, you know, if residents are finding they have $500 a month, like they're looking for the greatest risk-adjusted rate of return on that next dollar, and is that oftentimes, I would think, credit card debt, like 20%, 25%. That's a guaranteed return. It's like you put money into the stock market, and you are guaranteed to earn 20% or 25% on it, which I think a lot of people don't necessarily realize in paying down credit card debt. It's as beneficial to you, if not more, than investing, can be. And it's hard, right? Like, you just paid for a bunch of interviews, for example, if you're going into residency, you're paying for travel, or you have emergencies that come up, and obviously your budget isn't what it will be as an attending. So you do, it can be easy to get into the credit card debt trap, per se. But at that point, instead of taking that 20% savings or whatever number that is, try and pay that off and focus on that as much as you can. Yeah. And I would say, just there are options, I know residency, three, four, or more years, but if you're starting to get towards the end of it, there are 0% interest credit cards for 12, 18, 24 months, that if you just need a bridge, can be a good outlet to do that without the exorbitant interest costs. Yeah. And there's also personal loans and things like that, that are offered by different institutions. That's 20, 25% is way too high to be paying for a substantial period of time. And you're going to be paying three, four, five X on what you essentially used. So that's one thing to be cognizant of. Obviously it's difficult as a resident on a limited salary, but see what your needs really are and try and limit it. And if you even do that as an attending for the first few years, you're going to be in a great financial position. As your income goes up exponentially and paying off your debts, you're going to be able to save a lot more, invest a lot more. The earlier you invest, the better your compounding will be. Yeah. I think lifestyle creep is real, right? When you become an attentive physician and all the trappings that go along with it, it's very attractive to take advantage of, but to the extent that you can continue living modestly for the first handful of years, we'll do wonders financially in the long term. Yeah. I agree with that. And it's tough not to have the lifestyle creep. You see all your friends buying new cars, beautiful new houses and this and that, but living as a resident for a few more years will get you ahead, way ahead down the road. Just out of curiosity, when you were in training, what percentage of colleagues would you say bought versus rented during residency fellowship? You know, I only think about maybe 10 to 15% bought and most people rented, but I also don't think most people know about doctor's loans where you can get a 0% down. You don't have the PMI for a slightly higher interest rate potentially. Most of us don't have 20% down to put on a $400,000 or $500,000 house coming out of med school when you already have that debt. And it's scary to take out a mortgage because the mortgage is an additional piece of debt. So if you guys are with $200,000 of med school debt, or if it's a 100% 0% down mortgage, let's say you bought a $300,000 condo. So you're at $500,000 now. Obviously not all debt is created the same. You have an asset backing the condo and obviously you're going to be building equity towards that asset, but it is scary to think about. But if you are in a long four, five, six, seven year residency, it'll be a huge benefit to think about what city you're in, what the rent is and what the mortgage can be, especially if you can get a roommate to help you offset those mortgage interest rate payments. My take is that it's such a personal decision based, a lot of like your plant, do you think you're going to stay in that area beyond residency? Where are you? You in Chicago, obviously real estate prices a lot higher than if you were in Iowa or Nebraska, somewhere more rural. So that's certainly a factor I would expect in people deciding and time. It's not easy, especially in this real estate market to just go out and buy a home. So the interest rate environment is much different now than it was five, six, seven years ago, which also doesn't help the situation at all. Well I think spices say like a number of factors involved in that decision, but if you found yourself in a more reasonable, modest housing markets could potentially be a good fit with some of those great doctor mortgage options out there. But I think a good segue into, we want to talk a little bit about credit. So as you look to get a physician mortgage, maybe take a personal loan or refinance your student loans, like your credit will be a major factor in number one, being eligible for those lending products and number two, what rate you would qualify for. I think to a lot of people, your credit score is sort of a black box. There's this, I think, general understanding that pay your bills on time, you'll have a good credit score. Don't miss any payments. Don't default on loans. You'll have a good credit score. But there's other factors, some that I wasn't aware of even, but before I worked for a bank that go into your credit score. So I think payment history, first and foremost, everybody's familiar with that. Pay your bills on time. That's 35% of what goes into your score. The one I was unaware of was how much of your available credit you use. So if you're utilizing more than 30% of your available revolving credit, so that means your credit card, let's say you have a $10,000 line of credit, if every month, even if you're paying it off every month, if you're spending more than 3,000 on that card, that's gonna drag down your score because you're utilizing more than 30% of your available credit. So if that were the case and you found yourself consistently using more than that, you would probably wanna call your credit card provider and ask for an extension on the line of credit to the point where you're below that 30% threshold. It's also an aggregate. So if you went and got another card with a $10,000 limit, the credit bureaus aggregate the total that you have at your disposal. And so long as you're staying below the total each month, it'll reflect more favorably in your score. So I think that's a pretty easy low-hanging fruit for folks who are looking to improve their credit score is making sure you're not using more than 30% of that available limit. Did you find that feasible when you were in training to stay below the 30% threshold? Yeah, one thing I did was I applied for a bunch of cards earlier and I just kept them open. So even if I'm not using them, one, it builds my credit history. So like the first day I stepped onto my undergrad campus, there was a Citibank representative doing the classic college intro credit card. And even if I'm not using that credit card, I still have that credit card open. So it does two things for me. It improves my length of credit history, which is I know point number three on the slide, but it also improves how much credit you use because that balance, that denominator is gonna go up with the more credit cards I have. Obviously, you don't go and apply for 20 or 30, 40 credit cards, whatever number it is, but if you have five or six credit cards, you don't necessarily have to close them. You can just keep them and that'll count towards your denominator on the utilization score. And it'll help you keep your credit card balance as low overall. Yeah, I think that's, I've done that myself as well. Like I have cards that I probably had coming out of college that I virtually never use, but if there's $0 fees, it's gonna help with the credit utilization level and number three on here, length of credit history. So the credit bureaus don't love to see a bunch of brand new accounts on your credit report. So having some of those really longstanding accounts, even if they're not really utilized will help your credit score as well. And then new credit applications. I think this one pretty self-explanatory. They don't, the credit bureaus don't love to see you go and apply for five different kinds of loans in a short period of time. I think they view it as sort of like stressing yourself financially, trying to get as much debt as you can. They allow for loan pricing. So for example, if you went and applied for a mortgage at five different lenders, they're not gonna count that as five different credit inquiries because they acknowledge that you're shopping the market. But if you went and applied for a mortgage, a credit card, an auto loan, and a personal loan all in the same month, that would likely ding your score. So one thing to keep in mind, shopping is okay, but maybe do look to take different types of loans over a period of time rather than all at once. And definitely check for errors. They are quite common, and oftentimes disputing them can be really valuable. I know it is a major pain. Have you ever had to dispute anything on your credit report? Luckily, I haven't, but it's really easy these days to check for errors, like you were saying, because almost all banks will give you a credit report on their portal at this level. So like Citibank does that, I know Laurel Road I think does that, Capital One. So pretty much any credit card you have will give you access to your credit score and a credit report. So checking for errors is really low-hanging fruit as well. Yeah, I think you get freecreditorreport.com. You can get one a year as well. Those are available too. So keep an eye on your credit, suffice to say. And I think a nice segue into trying to save as well as building your credit. I know this can be daunting during residency, and we talked about this a little bit earlier, like balancing the concept of saving with paying down credit card debt. Would you say it's safe to say at a baseline, almost irregardless of where your credit card debt stands, you still always need to have a couple months worth of expenses in a savings account as a safety net if anything unforeseen were to happen. So I look at it as like, once you sort of check that box and you have a few months worth of expenses sitting in an account that you can draw upon if needed, then start to tackle the credit card debt. But how did you view this during residency? Again, I know it was hard to save. So I have a non-typical view on this, and obviously I think you should do what feels comfortable for you. But knowing that my job was so stable and that I was gonna get a paycheck every two weeks, no matter what was going on in the world, gave me a little bit of freedom to not have as big of an emergency savings fund. So maybe I would have like one month of salary in my checking or savings account. And the rest I would try and maximize through matches or through 401ks or through investments, whatever it is, or paying off my credit card debt. So I know that's not necessarily what the financial experts will tell you. And you should obviously always do what feels comfortable for you. But knowing that you are a physician, I think there's a little bit more leeway on an emergency savings fund than other professions, in my opinion. I think that's very safe to say, right? It's not like a Wall Street job, right? Where they're laying off some portion. Typically, I know a lot of big banks on Wall Street are reducing the force or sort of trimming the herd, reorganizing 10% of people on a given year, right? So that exists less in the medical world and kind of gives you some good security in that sense. I still think probably, especially if you own a home, I know now owning a home, like these sort of big unexpected expenses can come up. You need a new boiler, a new roof, windows, whatever. Were the other vehicles that you were putting the money in at all liquid to the extent that if you needed five grand, all of a sudden you could tap into them? Yeah, so now I have a high yield savings account. So you can tap into that any point with interest rates being as good as they are. And number two, you can always sell your stocks or whatever your investment is. You just don't know what the market is gonna be doing at the time. And it's very hard to time the market as they always say time in the market is much better than timing the market. But if an emergency like that came up and you had to sell your XYZ shares to pay off something, it would obviously be very worthwhile over taking out credit card debt. Or even if it was something smaller, you could take out credit card debt on a 0% credit card, like you mentioned, Alex. Some of those have a one year, two year grace period essentially. But having liquid high yield savings account is probably one of the best ways to go. So you're not dependent on the fluctuations of the stock market. Yeah, I think just a good pillar of anyone's overall financial pie is having some funds in an emergency savings account. And I think to your point, a lot of it's based on like your level of comfortability. Some folks probably find having one or two months and others say, I want at least six months if anything were to happen just for peace of mind, you know, a bit of a personal balancing act there. So we're starting to sum things up here and wanted to give folks, you know, some items to check in on your overall financial wellness, things to be thinking about as you're going through residency. So we've listed some here and I'm sure you've got some input on this, other things or emphasizing one of these, but creating that emergency savings account. So, you know, you're going to have, folks are going to have different levels of security and I guess, peace of mind in how much they should have in there. But I think you should absolutely have some type of savings accounts to draw upon. Utilizing insurance. I know, you know, the physician and healthcare world very unique in having disability and life insurance and property insurance, auto insurance. So I'm sure you could speak to that a little bit more. I think taking advantage of 401k match is a across the board recommendation to folks. It is free dollars from your employer. So making sure you're getting dollar for dollar maximized from what they're willing to match in your 401k and having a plan for the extra income, whether it's paying down credit card debt, you know, pumping money into your emergency savings account, looking at additional insurance options, you know, figuring out where that next dollar is best utilized. So across all of these, Chirag, what was your like order of operations while you're in training? Yeah, so for me, number one was paying off credit card debt like by far and away is the easiest thing you can do. And then number two for me was taking advantage of the 401k match. I think that's the absolute necessity because you're essentially increasing your income by the match and it's gonna compound over your whole residency and future. And the earlier you do it, the better off you are. I had kids fourth, my fourth year of residency or my fellowship year. And a 529 college savings plan is great too, especially in Illinois, you get to deduct that state income tax. So take advantage of all the 401k matches and guaranteed returns, such as a 401k or a 529. Yep, and you know, meet with a tax advisor, financial advisor, like there's taxes though, a necessary evil to some extent, they're something to be aware of because there's strategies out there to minimize tax burden. And, you know, you have such a unique career trajectory with this modest income early on and then obviously a much greater earning potential as a attending physician. So, you know, what are some things you can be doing during those early years to set yourself up well from a tax standpoint? So there's different ways to approach debt that we wanted to highlight here, or the debt avalanche, which is an approach in which whatever funds are left after your minimum payments are directed towards your highest interest rate debt. So this is actually the most economical way to pay down debt. You're looking at it sort of like a ladder where, you know, you're going to, with any additional dollars you have, direct those towards your highest rate debt first and then sort of move on down the line as you retire each loan. So for most people, that's usually credit card debt first. And then it could be a multitude, maybe a personal loan, you know, after that, maybe a student loan or mortgage. Those probably at this point are pretty similar rates. And that's the point where you start to think of, well, if I'm at six or 7% on these loans, could I do better in the market? You know, are those dollars better placed somewhere else other than debt? But just generally the avalanche approach is targeting your highest rate debt first. And then the debt snowball is more of a, I think a psychological way debt where you would want to pay down your smallest balance loans first to give you some, I guess, wins early on of retiring debt and feeling accomplished and then moving on to the next. I think, you know, both have their merits. Again, pure dollar standpoint, avalanche would be preferable, but how have you seen yourself and colleagues approach debt, you know, using these two different strategies, right? I've seen both approaches, but my strong suggestion and recommendation is to do the debt avalanche just so you have more dollars saved overall. I understand the psychological benefit of the debt snowball method, but just raw numbers and as a finance guy, the debt avalanche just has always made much more sense to me. Obviously everyone has a different mentality and everyone has different risk profiles that make them feel better about one way or another, but my strong recommendation is pay off your highest interest accounts and go from there. I completely agree with that. I think, you know, debt snowball is probably for folks who, you know, maybe struggle to stick to a budget, you know, more impulse driven purchases and you're sort of, you know, reinvesting yourself into looking at your debt. It's great to have some quick early wins. I think fortunately for a lot of people, if you're comparing credit card debt to student loan, credit card debt is almost always lower than the student loan debt. So a lot of times these will align, but I agree the avalanche is definitely best from a dollar standpoint. Yeah, I hope the credit card debt is smaller than the student loan debt. Yeah, you would have had to buy those fancy cars a lot earlier if you had comparable credit card debt. You know, I hope everyone found this insightful. I know a lot of challenges are presented financially during residency, but you know, like we both said, you know, you have such a unique upside thereafter and it, you know, really is sort of guaranteed to the extent that you finish residency, you start practicing and obviously your income is gonna go up significantly. So we were very happy to partner with AOIA on this. We do have a number of physician-tailored financial products that we do offer benefits to AOIA members on personal loans, high yield savings, you know, encourage you to check those out to the extent that they were of interest. But if you had questions for us, feel free to reach out at laurelroad.com slash DO. There's an opportunity to enter some information and get contacted by a Laurel Road representative. I think my personal like parting thoughts are everyone's situation is very different, but there's some core pillars that I think everybody can look at as things that they should be keeping in mind at a minimum as you're, you know, going through residency and allocating what dollars you have to hopefully set yourself up well once you're an attending physician. Anything to add, Chirag, as we wrap things up? No, I think we've covered up most of the high yield things, but pay off your credit cards is definitely number one and spend a little time every year, two, three hours, thinking about your finances. That'll go a long way in setting you up with a nice base for a successful financial future. I like that. A little bit of effort goes a long way in the long run. So thanks so much for joining, Chirag. Always a pleasure. And I hope everybody found this helpful. Have a great rest of your day.

financial best practices

medical residents

student loan debt

doctor's mortgage

emergency fund

financial security