Residency is one of the most financially complicated periods of a doctor’s life, and also one of the most financially neglected.
You are finally earning a salary, but it is a modest one relative to the debt you are carrying and the cost of living in most cities where residency programs exist. You are working long hours with very little time to think about anything outside of medicine. And the financial decisions you make during this window — or fail to make — have consequences that follow you well into your attending years.
We are still medical students, so residency is a few years away for us. But the more we read and learn, the more we appreciate how much it matters to arrive there with at least a basic financial foundation already in place. Here is what we think every resident should know.
Your Loan Balance Is Probably Growing, Even If You Are Paying
This is one of the most important and least understood realities of residency finances.
On a modest resident salary, many people enrol in income-driven repayment plans that set monthly payments based on income rather than loan balance. For a typical first-year resident earning around $65,000 to $70,000, those payments can work out to a few hundred dollars a month. [1] The problem is that a few hundred dollars a month is often less than the interest accruing on a large loan balance, which means the total amount owed is quietly increasing even while payments are being made.
Understanding this dynamic matters because it changes how you think about your options. If you are planning to pursue Public Service Loan Forgiveness, income-driven payments during residency are part of the strategy and the balance growth is less concerning because of eventual forgiveness. If you are not pursuing PSLF and plan to pay off loans as an attending, knowing that your balance may be meaningfully larger at the end of residency than it was at the start helps you plan more accurately. [2]
Either way, knowing what is happening to your loans is better than not knowing.
Lifestyle Inflation Starts Sooner Than You Think
We have written about lifestyle inflation before, but it is particularly relevant at the start of residency because the income jump from medical school to residency — even though the salary is modest — is the first real paycheck most of us have ever seen.
After years of living on loan disbursements, even $65,000 a year feels like a lot. And the temptation to upgrade your apartment, buy a new car, or simply spend more freely is completely understandable. [3]
The thing to be cautious of is making financial commitments at the start of residency that lock in a high cost of living before you have figured out your actual budget. A car payment of $400 or $500 a month on a resident salary is a significant chunk of take-home pay that is no longer available for anything else. [4] The same goes for a premium apartment when a more modest one would do. The decisions you make in the first few months of residency set a baseline that is hard to walk back from.
Budgeting Becomes More Important, Not Less
When income arrives, a lot of people assume budgeting becomes less necessary. The opposite tends to be true.
In medical school, most expenses are straightforward and the disbursement model forces a degree of planning. As a resident, you have a monthly paycheck, a more complex set of expenses, tax withholdings to factor in, and potentially loan payments starting up — all at once, right as you are also trying to adjust to one of the most demanding jobs of your life. [1]
Setting up a budget in the first few weeks of residency, before spending habits get established, is one of the most useful things a new resident can do. It does not need to be complicated. Knowing your take-home pay, your fixed costs, and roughly how much you have left for everything else is enough to avoid the most common problem — arriving at the end of the month with less than expected and no clear understanding of where it went.
Disability Insurance Is Worth Getting Early
This is one that tends to get pushed down the priority list during residency because there are so many other things demanding attention. But it is worth understanding why it matters at this stage specifically.
As a resident, your most valuable financial asset is not anything you own — it is your future earning potential as a physician. If something were to happen that prevented you from practising medicine, your student loans do not disappear. Unlike most other forms of debt, medical school loans generally cannot be discharged even through bankruptcy. [5] Without income, that debt becomes an enormous problem.
Disability insurance provides income replacement if you are unable to work due to illness or injury. Getting a policy during residency has a specific advantage: premiums are based on age and health, which means younger, healthier residents can lock in lower rates that stay with the policy long term. [6] It is one of those things that feels unnecessary until it suddenly is not, and by then it is too late to change the calculus.
Start a Roth IRA If You Can
Residency is actually a good time to open a Roth IRA, even if contributions are small.
The reason is tax brackets. Residents are typically in a lower tax bracket than they will be as attendings, which makes Roth contributions particularly attractive — you pay tax now at a lower rate, and the money grows completely tax-free for the rest of your career. [7] Every year that passes where you could have contributed to a Roth IRA but did not is a contribution year you can never get back.
Even contributing a modest amount each year during residency — whatever you can manage without straining your budget — takes advantage of years of compounding and the lower tax environment that will not last. The contribution limit for 2026 is $7,000 per year. Not everyone will be able to hit that during residency, and that is fine. Something is better than nothing.
The Goal Is to Avoid Catastrophic Mistakes, Not to Optimise Everything
This is something we came across in our reading that genuinely stuck with us.
Residency is not the time to be maximising every financial opportunity, exploring complex investment strategies, or stressing about every dollar. The hours are too long and the mental load is already too high. [4]
The goal during residency is simpler than that: understand your loans and have a plan for them, keep your fixed costs reasonable, avoid high-interest debt, build a small emergency fund, and start a Roth IRA if you can. That is it. Everything else — real estate, taxable brokerage accounts, complex tax strategies — is an attending problem. Getting the basics right during residency means arriving at the attending years without having made any decisions that are hard to undo.
The Bottom Line
Residency is financially hard. The salary is modest relative to the debt load, the hours leave little time for anything else, and the financial decisions made during this period have long-lasting consequences. Understanding that going in makes it easier to handle.
We are writing this as students who are still a few years from residency ourselves. But these are the lessons we are trying to absorb now, so that when we get there we are not starting from scratch. The residents who arrive with a financial foundation already in place are in a meaningfully better position than those who have to figure it all out under pressure.
References
- American Medical Association. (2026). You made it — will your wallet? How to budget in physician residency. https://www.ama-assn.org/medical-residents/medical-residency-personal-finance/you-made-it-will-your-wallet-how-budget
- PhysEmp. (2026). Financial planning 101: What every new resident should know about loans, budgeting, and investing. https://www.physemp.com/blog/financial-planning-101-what-every-new-resident-should-know-about-loans-budgeting-and-investing
- KeyBank. (2026). A financial planning guide for residency. https://doctors.key.com/healthcare-banking/financial-guide-for-surviving-residency/
- White Coat Investor. (2026). Medical residency personal finance. https://www.whitecoatinvestor.com/the-five-big-money-items-you-should-do-as-a-resident/
- Financial Residency. (2024). Disability insurance for residents: Finding the best policy. https://financialresidency.com/disability-insurance-for-residents/
- Doctor Disability. (2025). Resident physician disability insurance: Essential income protection for medical residents. https://doctordisability.com/resident-physician-disability-insurance-essential-income-protection-for-medical-residents/
- Physician Side Gigs. (2025). Guide to retirement accounts for physicians. https://www.physiciansidegigs.com/retirement-accounts-for-physicians