Financial Literacy

If there is any question, now is the time to get your financial life in order.  When managing personal finances, one must understand that a few missteps can add up quickly – as can a few steps in the right direction.  With financial well being, as with life, the old adage holds true: it is a marathon, not a sprint.  Below are some tips and links to informative outside sources that will help you get on the right track now:

• Budget
• Save
• Know what’s on your credit report
• Borrow wisely – only the amount you truly need to cover educational expenses
• Cut unnecessary expenses
• Have an emergency fund
• Live a student’s lifestyle
• Sales, coupons, discounts
• Know your goals…and what you must do to meet them

Budgeting

Knowing where your income goes and allocating for fixed expenses (car payments, rent / mortgage,  student  loan payments, etc.), variable expenses (other living expenses, entertainment, etc.), and savings provides the framework for financial wellness.  Budgeting and being wise about money management does not begin when you land your first ‘job’, but right now. 

Save

It’s never too early to start to save and no amount is too little.  Similar to budgeting, establishing good saving habits at a young age will carry forward with you through life.  If you do not have one, open a savings account that does not require a minimum balance an make small contributions whenever you can. 

Know What’s on Your Credit Report

Lenders will rely on your credit report to determine if you are creditworthy from now until the day you stop borrowing money.  Your credit report contains:

• identifiers (name, date of birth, social security number, etc.)
• what you owe (installment balances, revolving balances, etc.)
• monthly payments and past due amounts
• old balances that you have paid off along with payment history
• any recent inquiries along with any collection attempts that have been made
• dates that accounts were opened and closed
• additional information related to what you have borrowed

You should be aware of what is on your credit report and check it somewhat frequently to be sure there it is free of errors.  If errors are found, take the necessary steps to address them immediately.  To access your free credit report, visit the FDIC website:

http://www.fdic.gov/consumers/consumer/alerts/facta.html. 

You are entitled to review your credit report annually.

Borrow Wisely

It may be tempting to borrow more money than truly necessary to cover your educational expenses.  You may think that the extra money will come in handy; but, remember that you are required to pay this money back.  Also, do not underestimate the total amount due at repayment (the principle amount and the interest accrued on that principle). 

The money that you borrow / have borrowed (student loans, mortgages, car loans, credit cards, etc.) travels with you.  Until debt is paid off, it will be used to calculate your debt-to-income ratiowhich is a factor lenders use to make determinations on how and how much you can borrow.  Although this may not be a concern while borrowing to fund your education, it will be later in life when you are making larger purchases (home, car, etc.).

For more information on borrowing please click here.

Cut Unnecessary Expenses

It has long been referred to as the “latte factor” – the amount of money that you can save if you discontinue buying exotic $5 coffees every day and brew your coffee at home.  The reason this example is so widely and frequently used is that it is true!  Take a look:

Days / year	365
Business days / year (avg.)	253
Class days / year (avg. med student)	225
Cost for coffee	$4.50
Total cost for coffee (business days @ 1 a day)	$1,140
Total cost for coffee (class days @ 1 a day)	$1,010
Cost for brewing at home
Coffee pot (one-time expense)	$50
Coffee	$240
Travel mug	$5
Total cost	$295
Savings (business days)	$845
Savings (class days)	$715

That amounts to your annual interest payment on a $20,000 loan at 6.5% over 10 years (and over the life of the loan, that is roughly $7150 to $8450).  It adds up.

While this example is the most common, it is not limited to your coffee.  Small savings, compounded daily, really add up quick.  Start cutting unnecessary expenses now to ensure you are able to manage your debt tomorrow. 

Have an Emergency Fund

It is wise to have a little bit of money set aside for an emergency.  This may be more difficult to do when a student, but important nonetheless.  Even something as small as $500 not to be withdrawn under any circumstances (unless, of course, those circumstances are emergent) will allow for peace of mind in the event that something unfortunate takes place (medical, auto, etc.).

Live a Student’s Lifestyle

In order to put yourself in the best possible financial position when you graduate from medical school, live like a student now.  What makes this most difficult is the fact that you will find yourself surrounded by your peers (who have not chosen to pursue medicine) who are bringing home a paycheck – in most cases for the first time – and are eager to spend.  Resist the urge to run with the pack (in most cases you will not always have the time to do so) and live beneath your means.  Doing so while you are in residency training will also help in the prevention of accumulating non-educational related debt.   

Sales, Coupons, Discounts

To expand upon the “student’s lifestyle” idea from above, take advantage of sales, coupons, and discounts.  The internet is an excellent resource when it comes to discovering deals and discounts.  The effort and time required to find the deals will surely pay off over the long haul.  Some places you may want to start your search:

www.froogle.com

Froogle is Google’s comparison shopping search engine.  This is a good place to start as it offers competitor price comparisons on almost any item you can think of.  If for nothing else, you can use this site to gauge product costs or to determine if you should be getting a better deal on a laptop computer, a pair of running sneakers, or a kitchen appliance, for example.    

http://www.retailmenot.com/
http://www.couponcabin.com/

These sites offer coupons for some popular nationwide retailers.  Discounts vary among retailers but 15% savings is more money in your pocket.

http://www.longislandcoupon.com/

Here you can find discounts on local retailers, services, and eateries.

A few additional valuable coupon/discount websites.

http://www.groupon.com/learn

http://livingsocial.com/deals/how_it_works

http://www.restaurant.com/about_gcp.asp

Know Your Goals

Where do you want to be in 5 years?  And in 10?  This question often refers to “where” in your professional life, but it is wise to know where you want to be financially as well.  Some may think the two go hand-in-hand; however, entering a profession that historically has paid better that average salaries alone will not guarantee financial freedom.  

Personal finance calculators:
http://www.walletpop.com/calculators

Personal finance savings, budgeting, investing tips (somewhat humorous, very practical):
http://www.fool.com/how-to-invest/personal-finance/index.aspx?source=ifltnvsnv0000001

A website dedicated to managing money, investing, spending, and debt, targeted specifically towards individuals in their 20s and 30s:

http://www.youngmoney.com/credit_debt/