Last week many residents throughout the country had the foresight and were lucky enough to get involved with the Doximity initial public offering for stock. It was a rarity because, unlike most IPOs, only doctors could get in on the initial public offering (IPO) action instead of the finance guys. Physicians were able to purchase up to 250 shares. In a few short hours, what was initially an investment of up to 26 dollars a share (6500 dollars), climbed to 55.98 dollars. On that one day alone, you could have made ((55.98-26)*250 or 7495 dollars. That would represent a 115% profit in one day. Not all bought the maximum number. Regardless, although not life-altering, for a resident, that means a significant sum of money compared to a typical resident salary. You could call it a sort of windfall.
Sure, there is lots of information out there about windfalls for physicians. Check out some of the articles on the white coat investor- My Experience With A Windfall. Or, you can read about What To Do With A Windfall.
But, most are not specific to your situation. Some may tell you might plunge that money back into the market. Others say take it and pay off your credit card debt. (Those folks should probably not have done the Doximity IPO in the first place!) And, others may decide to repay some more interest on your student loans. But what is the right place for you to plug that money in as a radiology resident? Are the considerations different for a radiology resident than other types of physicians?
Personal Finance Is Personal- What Is Right For You Might Not Be Right For Everyone (Except For Credit Card Debt!)
First of all, anyone with credit card debt should probably remove that debt immediately from your life. That is a no-brainer. Of course, that simple tenet is not just for the radiology resident. But, it is indeed a personal situation. Anyone paying interest over 10-15 percent is slowly getting their financial life sucked away like a Hoover.
But let’s assume that you are without credit card debt and have a decent amount of student loans. Currently, most of you have loans that are accruing very little interest because of the low-interest-rate environment and all the deferments from the pandemic. So, it is reasonable not to plug all the money back into the student loans. On the other hand, debt can be burdensome and a proverbial noose around the neck for others. What to do next depends on your tolerance for debt and your financial situation.
Where Should The Windfall Go If Not Student Loans (Think Roth!)
If some of the windfall is not going back into student loan debt, where should it go?. To answer this question, if you haven’t done so already, it is time to get a head-start on investing. You are already behind the eight-ball as a physician. So, filling a Roth IRA with an index fund would probably not be a bad start for most of you. One of the best financial decisions I made many years ago was to start a Roth IRA when I was in residency. A small amount has significantly increased in value over time. So, with this small windfall, consider taking some of the money and adding it to a Roth IRA.
Reasons For Radiology Residents In Particular To Choose The Roth IRA
How does being a radiology resident change the equation about where to put the money? Well, because you are more likely to make a higher salary than your pediatrician and internal medicine colleagues, you may want to consider putting more into investments than loans.
In particular, for two reasons, the Roth IRA even makes more sense for the radiology resident. First of all, your salary will be higher as a radiologist, so you will have to pay more taxes on the amount of post-tax money you put in than your lower-salaried colleagues. So, now is even a better time to take advantage of your low tax situation.
Second, you can afford to be a little bit more aggressive than other specialties. More future dollars allow you to put more into stocks because you can afford more risk. So, putting more away into investments can make more sense.
A Small Windfall And Investing For The Radiology Resident
Opportunities arise from time to time, and you may find new money, such as the Doximity IPO. As a radiology resident, your situation may differ slightly from other physicians. So, based on your risk profile, consider taking a bit more of your windfall and investing in a Roth IRA. That’s what I would do if I had a few extra dollars and were still a radiology resident!