Independent Financial Planning Resources?

[ralk]

I've started pouring my way through the various options for financing med school (and planning of finances beyond that), and I've been a bit disappointed to find that virtually every resource is provided by a bank or other financial institution. This isn't to say that the information I've received has been bad, but I'd like to find an independent source, if possible, for two reasons:

 

1) Institutions are pretty tight-lipped about the details of their products, especially ones that I wouldn't be immediately able to access (i.e. financial matters beyond the LOC, such as mortages, business planning, etc.)

 

2) I don't entirely trust the advice of a person/institution that's trying to sell me the thing they're giving advice on

 

Opinions from current/former students have been helpful (particularly on this forum, of course!) but even then it tends to be anecdotal, and the average student/physician tends to be a bit looser with money than I would like to be. I realize alternative sources for financial planning advice may not be available, especially from a Canadian perspective, but I figured I'd ask anyway!

[future_doc]

There are 5 potential sources of fuinding for med school:

1. Some parents

2. Savings if any

3. Work

4. Provincial goverment loans and bursaries

5. LOC from a bank

 

Parents are not needed, work is counterproductive at this stage for many reasons, savings if any go quickly. And the more the savings, 4 is reduced accordingly.

 

4 & 5 are the simplest and best sources of funding.

 

My advice is do not try to reinvent the wheel. The normal method has been tried and tested, works well, don't fight success.

[ralk]

There are 5 potential sources of fuinding for med school:

1. Some parents

2. Savings if any

3. Work

4. Provincial goverment loans and bursaries

5. LOC from a bank

 

Parents are not needed, work is counterproductive at this stage for many reasons, savings if any go quickly. And the more the savings, 4 is reduced accordingly.

 

4 & 5 are the simplest and best sources of funding.

 

My advice is do not try to reinvent the wheel. The normal method has been tried and tested, works well, don't fight success.

 

Oh, I'm definitely going to fund my education through provincial loans and an LOC - those basics I understand and fully accept. It's more the "around and after" financial issues that matter to me. Namely, paying off the LOC once school is done, while potential setting up a business, buying a house, etc.

 

I know it seems early to be thinking about these things, but this is a very large financial commitment. I realize that with a typical physician's salary, it's a manageable commitment, but I get the sense from a lot of students that money gets spent on things because they know they'll be able to pay it off later, not because it's necessarily a good expense.

 

Basically, I don't want to reinvent the wheel, but I want a better understanding of where it's taking me, and how steering it one way or another will affect me down the line.

[rmorelan]

Oh, I'm definitely going to fund my education through provincial loans and an LOC - those basics I understand and fully accept. It's more the "around and after" financial issues that matter to me. Namely, paying off the LOC once school is done, while potential setting up a business, buying a house, etc.

 

I know it seems early to be thinking about these things, but this is a very large financial commitment. I realize that with a typical physician's salary, it's a manageable commitment, but I get the sense from a lot of students that money gets spent on things because they know they'll be able to pay it off later, not because it's necessarily a good expense.

 

Basically, I don't want to reinvent the wheel, but I want a better understanding of where it's taking me, and how steering it one way or another will affect me down the line.

 

sure I can understand that - I will say first off we get a lot of talks about all of this in medical school. You may not trust one bank or agency but when you see 10 of them all in competition all with their messages and residents and staff explaining their experiences things begin to get a lot clearer.

 

By now I know some of it (I have an economics degree and took an interesting in learning about all of these) so might be able to answer some of them. What would you like to know? Maybe we can pull together people to answer the questions internally

[ralk]

sure I can understand that - I will say first off we get a lot of talks about all of this in medical school. You may not trust one bank or agency but when you see 10 of them all in competition all with their messages and residents and staff explaining their experiences things begin to get a lot clearer.

 

By now I know some of it (I have an economics degree and took an interesting in learning about all of these) so might be able to answer some of them. What would you like to know? Maybe we can pull together people to answer the questions internally

 

Ok, so I may be jumping the gun by even more than I thought - it's good to know this topic will be broached in the early stages!

 

I really have one immediate question and one longer-term concern.

 

For the short-term, I'm trying to get a real sense of how punitive it is to increase the LOC-financed debt when it comes to paying it off later, particularly after a longer-duration residency (+/- fellowships). If I avoid spending $1000 in first year, for example, how much pain will I save myself later? Is it at all feasible to pay off some of the debt during a residency? Furthermore, is earning money really that pointless? I know it reduces the OSAP grant amount, but say I was able to earn $15k+ through a summer (or found a summer job that I would want to do even if it didn't pay, but happened to have a salary), would that at least put me ahead?

 

For the longer term, I want to understand how the debt from the LOC might interfere or interact with major life events. If I was to get married during school or residency, would my partner's salary reduce OSAP funding? How would the LOC debt impact our ability to buy a house? Assuming spending is kept in check, how long could I reasonably expect to pay off the LOC? I've seen some banks offer 10-to-15 year amortization, but I'd prefer to get it settled (much) faster.

 

I know that's a lot to throw out there, and I apologize if this info comes later as part of the natural process - I just like to be prepared for what's coming! Thanks for any information anyone can provide, it's all very much appreciated!

[schmitty]

Ok, so I may be jumping the gun by even more than I thought - it's good to know this topic will be broached in the early stages!

 

I really have one immediate question and one longer-term concern.

 

For the short-term, I'm trying to get a real sense of how punitive it is to increase the LOC-financed debt when it comes to paying it off later, particularly after a longer-duration residency (+/- fellowships). If I avoid spending $1000 in first year, for example, how much pain will I save myself later? Is it at all feasible to pay off some of the debt during a residency? Furthermore, is earning money really that pointless? I know it reduces the OSAP grant amount, but say I was able to earn $15k+ through a summer (or found a summer job that I would want to do even if it didn't pay, but happened to have a salary), would that at least put me ahead?

 

For the longer term, I want to understand how the debt from the LOC might interfere or interact with major life events. If I was to get married during school or residency, would my partner's salary reduce OSAP funding? How would the LOC debt impact our ability to buy a house? Assuming spending is kept in check, how long could I reasonably expect to pay off the LOC? I've seen some banks offer 10-to-15 year amortization, but I'd prefer to get it settled (much) faster.

 

I know that's a lot to throw out there, and I apologize if this info comes later as part of the natural process - I just like to be prepared for what's coming! Thanks for any information anyone can provide, it's all very much appreciated!

 

 

I can help answer some of these.

 

As for work, it depends. If you are like most students, little parental help, no spouse, little/no income then working WILL cut into your allowance for OSAP, grants and bursaries. However, if your eligibility for these things is already low, working will help you. E.G. I have a wife that works full-time and thus get almost no OSAP and definitely no grants/bursaries, thus, I plan on working at much as possible. I will likely TA during medical school and work (probably research as I have a lot of experience) during the summers. In my case, this will help reduce our overall debt.

 

As for a house, it shouldn't affect it much/at all. Your LOC is an unsecured loan, meaning you have no collateral for it. When you buy a home with a mortgage, on the other hand, that loan is tied to that asset so that if you ever don't pay the bank, they just take the house, sell it and get their money that way. The hard part about getting a mortgage during med school is that for this you will need to prove some income. Thus having a sig. other will help tremendously in this regard.

 

You can pay back your loan as quick as you want. If you can manage it, you can start paying principle payments in PGY1. If you live relatively frugal for you first couple years (even one year!) as an attending, you could pay it all off in year 1. It's up to you.

 

As for impact of +/- $1000 here and there down the road, you can just use any investment/debt compound interest calculator online for that. Hell, you can even use the old grade 11 formula: A(n) = P(1+i)^n , where A is the future value, P is principle (or amount you want to compound), i is the interest rate per compound period (i.e. 3% annual interest compounded monthly, i = 0.0025 (0.03/12)), and n is the number of compound periods (years x 12 for monthly compounding). Or you can just use something like this: http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

[osteon]

I can help answer some of these.

 

As for work, it depends. If you are like most students, little parental help, no spouse, little/no income then working WILL cut into your allowance for OSAP, grants and bursaries. However, if your eligibility for these things is already low, working will help you. E.G. I have a wife that works full-time and thus get almost no OSAP and definitely no grants/bursaries, thus, I plan on working at much as possible. I will likely TA during medical school and work (probably research as I have a lot of experience) during the summers. In my case, this will help reduce our overall debt.

 

As for a house, it shouldn't affect it much/at all. Your LOC is an unsecured loan, meaning you have no collateral for it. When you buy a home with a mortgage, on the other hand, that loan is tied to that asset so that if you ever don't pay the bank, they just take the house, sell it and get their money that way. The hard part about getting a mortgage during med school is that for this you will need to prove some income. Thus having a sig. other will help tremendously in this regard.

 

You can pay back your loan as quick as you want. If you can manage it, you can start paying principle payments in PGY1. If you live relatively frugal for you first couple years (even one year!) as an attending, you could pay it all off in year 1. It's up to you.

 

As for impact of +/- $1000 here and there down the road, you can just use any investment/debt compound interest calculator online for that. Hell, you can even use the old grade 11 formula: A(n) = P(1+i)^n , where A is the future value, P is principle (or amount you want to compound), i is the interest rate per compound period (i.e. 3% annual interest compounded monthly, i = 0.0025 (0.03/12)), and n is the number of compound periods (years x 12 for monthly compounding). Or you can just use something like this: http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

 

No, it will absolutely affect getting a house. If you owe $150,000 after med school, then apply for a mortgage, that $150,000 will be factored in as debt during the pre-approval process. Thus, until you pay it off, it will always have some influence over whether you get approved for a mortgage or not (in the banks eyes, why would they lend money for a house to someone with 150K in debt? Note that future income is not considered for mortgage amounts - it may be a factor if your application is borderline for approval/rejection). During residency, the influence will be greater since your salary is lower. As a full time doc, you will likely get approval regardless, but a debt of $150,000 will absolutely decrease the house price you get approved to buy. Not to mention, to buy a house in the first place you need cash for the down payment, which has to be at least 5% of the house price (pretty sure you can't use LOC for this). And saving $20K-$35K in cash when you are $150K in the hole won't be easy.

[rmorelan]

Ok, so I may be jumping the gun by even more than I thought - it's good to know this topic will be broached in the early stages!

 

I really have one immediate question and one longer-term concern.

 

For the short-term, I'm trying to get a real sense of how punitive it is to increase the LOC-financed debt when it comes to paying it off later, particularly after a longer-duration residency (+/- fellowships). If I avoid spending $1000 in first year, for example, how much pain will I save myself later? Is it at all feasible to pay off some of the debt during a residency? Furthermore, is earning money really that pointless? I know it reduces the OSAP grant amount, but say I was able to earn $15k+ through a summer (or found a summer job that I would want to do even if it didn't pay, but happened to have a salary), would that at least put me ahead?

 

For the longer term, I want to understand how the debt from the LOC might interfere or interact with major life events. If I was to get married during school or residency, would my partner's salary reduce OSAP funding? How would the LOC debt impact our ability to buy a house? Assuming spending is kept in check, how long could I reasonably expect to pay off the LOC? I've seen some banks offer 10-to-15 year amortization, but I'd prefer to get it settled (much) faster.

 

I know that's a lot to throw out there, and I apologize if this info comes later as part of the natural process - I just like to be prepared for what's coming! Thanks for any information anyone can provide, it's all very much appreciated!

 

Let's all add to the pile First off of course I am just a starting resident so it isn't like have gone through the entire process and paid things off

 

You can pay off some during residency, particularly if you are not doing that residency is a very expensive place, say downtown TO for instance. The thing is the salary is fixed regardless of location. My rent in Ottawa will not be the same as my TO friends and mine will be a bit higher than my Hamilton friends and so on.

 

Still from what I have learned and what I have budgeted I will be able to take a swing at things. First off you pay basically no tax for the first two years or so. So my 51K + call shift bonus is pretty close to my take home pay. That is because we have tuition tax credits of around 80K to use up, plus any left over from your UG and maybe grad work etc.

 

51K tax free is like earning about 70K of typical salary. If you cannot put some money off the loan of say at most 200K on that then there is a bit of a problem. Some do simply chose not to and know they will earn more later so they want to live better now. Dealer's choice.

 

If you got married during med school then yes your spouse's income would then impact your max OSAP amount. In residency it wouldn't matter at all - you are post the OSAP phase of things.

 

Banks are quite willing to give mortgages to residents at rock bottom rates actually. You can even use the LOC to generate the down payment. You will be pay extra fees/interest for having a no money down effectively mortgage but you can do it. If you happen to have the downpayment more power to you. Bottom line is just like your LOC interest rate is low and the amount is high - which makes no sense for a LOC in any other situation - your status as a resident gives you special powers for good mortgage rates. Many people in my class are in the process of buying homes or condos all over the place.

 

to be continued

[rmorelan]

How quickly you pay things off is up to you - you can go fast or slow really, and of course it depends on your income as well, i.e. what type of doctor are you. The big thing you will start to learn about though is the impact of taxes and your corporation. When most docs earn money it is paid to their corporation, which then pays dividends or a salary to the doc.

 

For dividends it is initially earned is taxed in the corporation and what ever amount you take out, which will NOT be the full amount likely, is taxed as income in your hands after at the dividend rate (which is lower than the usual marginal income tax rate). Any money left in can be invested for later use.

 

Salary is a business expense so it is taxed only as personal income when taken out. The effect of either approach is similar but the idea that is important is money left in the corporation can continue to grow quasi sheltered from personal tax. Most docs end up with most of their wealth in the corporation. They need to do this - it is how they save for retirement.

 

Now for the loan payment - this is where it gets interesting. Let's say you take 100K to live on as a round number but you earn more that and rest is in the corporation. Let's also say you need that 100K, which you pay tax on, to cover your living expenses and it is completely used up that way, i.e. there is no money to pay the loan. Now you want to take money out of the corporation further to pay the loan, and let's say the loan is 200K. Again round numbers. Lastly lets say you have been working for a couple of years, earned 300K a year so the corporation has (300-100) = 200K x 2 years = 400K in it. Again I took the 100K out as you are living on that.

 

gah - TBC

[rmorelan]

gah long post, sorry. but I find this stuff interesting

 

ok so at this point your loan is 200K, you have 400K in the corp and you say hey, let's pay off that loan! You might think you just take 200K out of the corp and throw it at the loan and bam, done.

 

Trouble is you cannot. As soon as you take that 200K out it then is taxable. Worse you earned already 100K so you are in the highest tax bracket, with a marginal rate now of around 50% (if you take it out as dividend it isn't quite that much but point is expect big chunk to be removed that tax year. BIG MONEY to the government). At that marginal rate to get 200K to pay off the loan you have to withdraw around 400K. You give about 200K to the government (we all thank you for that) and you give 200K to the bank (they thank you for that). All done, congrats, you are loan free.

 

Now the big question was that smart? The answer is probably not.

 

Instead some docs rationally chose to delay things. The reason is that 400K in the corporation could simply continue to be invested and grow. Probably grow faster even than the rate of the student loan. Maybe say in ten years you could double it (that is an average of 7ish percent a year, which is below stock market averages). Now you have 800K and your student loan has grown a low interest rate per year so would be say 300K. Point is you could repeat this now - take out 600K, 1/2 to the government, 1/2 to the bank EXCEPT you still have 200K left in the corporation.

 

In fact ideally you would really never pay off the loan if you could. Just let your investments grow faster than the interest on the loan for pretty much forever. However banks are not that kind - they force you into a payment plan, where you have to pay it back in 10-15 years. Throughout that time you may curse the loan, be annoyed by the loan, just want to reach out and smash the loan BUT in reality that probably just isn't logical. It would cost you money do to so.

 

Point is don't look at someone paying off the loan in 10 years as being foolish. They may actually be doing exactly the right thing.

[rmorelan]

side note to the ramblings of someone suddenly with a lot of free time - all that doesn't apply in residency. You are in a lower tax bracket and cannot horde income in a corporation. From that point of view paying the loan off, if you can, is potentially a smarter move. Most planners seem to think you are doing ok if at least old the interest at bay.

[schmitty]

No, it will absolutely affect getting a house. If you owe $150,000 after med school, then apply for a mortgage, that $150,000 will be factored in as debt during the pre-approval process. Thus, until you pay it off, it will always have some influence over whether you get approved for a mortgage or not (in the banks eyes, why would they lend money for a house to someone with 150K in debt? Note that future income is not considered for mortgage amounts - it may be a factor if your application is borderline for approval/rejection). During residency, the influence will be greater since your salary is lower. As a full time doc, you will likely get approval regardless, but a debt of $150,000 will absolutely decrease the house price you get approved to buy. Not to mention, to buy a house in the first place you need cash for the down payment, which has to be at least 5% of the house price (pretty sure you can't use LOC for this). And saving $20K-$35K in cash when you are $150K in the hole won't be easy.

 

It won't affect it as much as you think! My spouse and I both owed a lot of money (OSAP AND student LOCs) and only one of us was working (I was still a student) making not THAT much money (like PGY1 salary) and they pre-approved us for almost 300K mortgage. They will want your business even more if you are in med school w/ the threat of taking your LOC and future business elsewhere.

 

As for the down payment, you can absolutely take it from your LOC- in fact, many of the big banks even have a process to allow 5-10% down payment direclty from your LOC!

 

P.S. Good stuff as usual rmorelan!

[rmorelan]

It won't affect it as much as you think! My spouse and I both owed a lot of money (OSAP AND student LOCs) and only one of us was working (I was still a student) making not THAT much money (like PGY1 salary) and they pre-approved us for almost 300K mortgage. They will want your business even more if you are in med school w/ the threat of taking your LOC and future business elsewhere.

 

As for the down payment, you can absolutely take it from your LOC- in fact, many of the big banks even have a process to allow 5-10% down payment direclty from your LOC!

 

P.S. Good stuff as usual rmorelan!

 

The price arrange most of my class has gotten in mortgage is enough to get a downtown TO condo - 350K+ range.

 

Again it may seem weird but the usual LOC and mortgage rules are just not applied. Us med students and residents live in a fantasy land of access to credit that make no sense outside of similar professional groups. Banks make virtually no money or with mortgages comparatively little money on us - all an effort to attract us and keep us in a bank. Their hopes are that in the long run we will be valuable customers - not even with loans and wealth management but simply with the business accounts we have to have and banking fees we will generate. They are playing the long game here.

[schmitty]

The price arrange most of my class has gotten in mortgage is enough to get a downtown TO condo - 350K+ range.

 

Again it may seem weird but the usual LOC and mortgage rules are just not applied. Us med students and residents live in a fantasy land of access to credit that make no sense outside of similar professional groups. Banks make virtually no money or with mortgages comparatively little money on us - all an effort to attract us and keep us in a bank. Their hopes are that in the long run we will be valuable customers - not even with loans and wealth management but simply with the business accounts we have to have and banking fees we will generate. They are playing the long game here.

 

Exactly! People often forget how banks will often compete for our business like any other business, not the other way around as many people usually assume with credit.

[NutritionRunner]

In terms of OSAP, if you get married during medical school, and your spouse is making a "decent" amount of money, you will have a significant reduction in your OSAP amount and you may not receive any OSAP at all. You may also not be eligible for any bursaries or other forms of financial assistance.

 

I've looked into this quite extensively, because my husband makes a decent salary (enough for both of us to live on while I go through university). I'm not eligible for any OSAP at all (because he makes "too much" money) and I'm also not eligible for any bursaries or need-based aid. It sucks, because while he makes enough for us to live on, we also have a considerable amount of debt (the mortgage on our house).

[ralk]

Wow, this is exactly what I was looking for - thank you all for the input!

 

So it seems as though, even with the very LOC favourable rates, early expenditures will really add up over time. Since much of the money won't be paid until after residency, and since it becomes punitive to pay it off quickly at that point, it has a long time to grow.

 

Working does seem to have some value then, though it does appear to get worse the more I earn. Earning, say $5000 in a summer appears to be an unqualified positive. Earning the $15000 I'll likely be making this summer, however, is going to really cut into my OSAP - it seems to be the absolute worst amount to earn, actually. Still, that lost OSAP money is countered by reduced interest payments of about $3000 over the course of a typical residency (and more interest past residency). If the prime rate increases from its current historic lows, those reduced interest payments become even greater.

 

I suppose it's good that even with those potential costs, future income and investments will be so high that it largely won't matter in the long run, but in the medium-term there are some bumps and pitfalls. Timing of those major life events may be even trickier than I had thought!

 

Again, thank you all for the information provided (and thank you in advance to those who may have more to add), this has been very helpful and given me quite a bit to think about.

 

Edit - Just for relevant information, I won't likely be getting married until 3rd or 4th year, if even then, I'm just on that rough path at the moment and like to know (for my sake and my girlfriend's), what such an event would mean for us financially.

[rmorelan]

Wow, this is exactly what I was looking for - thank you all for the input!

 

So it seems as though, even with the very LOC favourable rates, early expenditures will really add up over time. Since much of the money won't be paid until after residency, and since it becomes punitive to pay it off quickly at that point, it has a long time to grow.

 

Working does seem to have some value then, though it does appear to get worse the more I earn. Earning, say $5000 in a summer appears to be an unqualified positive. Earning the $15000 I'll likely be making this summer, however, is going to really cut into my OSAP - it seems to be the absolute worst amount to earn, actually. Still, that lost OSAP money is countered by reduced interest payments of about $3000 over the course of a typical residency (and more interest past residency). If the prime rate increases from its current historic lows, those reduced interest payments become even greater.

 

I suppose it's good that even with those potential costs, future income and investments will be so high that it largely won't matter in the long run, but in the medium-term there are some bumps and pitfalls. Timing of those major life events may be even trickier than I had thought!

 

Again, thank you all for the information provided (and thank you in advance to those who may have more to add), this has been very helpful and given me quite a bit to think about.

 

well remember the money of 7300 a year for OSAP does not get paid back.You will be earning money at job a) and seeing a corresponding reduction in grants - from purely a financial point of view you are working for nothing. Except really when you think about it you are not working for nothing, it is worse than that - you effectively are losing resources (time) for no gain (or maybe a very small gain).

 

I was given about 8-10K a year in "free money from OSAP". That is the same as about 10-11K in income as you have to pay tax on that (as you would with your 15K example as you are over the cut off of personal exception tax wise). Yes you pay interest of prime on that during residency - assuming you don't want to stay in ontario for 5 years after residency in which case there is a program so you continue to not pay interest through residency as well. Remember though inflation right now is actually around 1.5-2 percent - so the EFFECTIVE interest rate is around 1% (that is what we call the real interest rate in economics).

 

and that is actually part of my point with respect to this. In your summers in medical school for instance your priorities should not be to earn money at all, but rather make sure you are actually getting into the specialty or choice and/or figuring out what that specialty actually is. If you fail at that objective everything else you have done will not really matter (or at least not matter as much).

 

In economic terms the opportunity cost of doing something solely for the money makes no sense. You will win a small battle to reduce you debit and lose potentially the war later on by not getting the ideal location or field you want. Now if a job happens to come a long that gives you both (I was lucky that way) then of course take the money but that is just not the best way I think to look at it. You are paying 40K a year to obtain the career of of choice - worrying about maybe saving 3K in a summer and losing that end objective makes little sense to me.

 

I could not have matched to a competitive specialty by applying such an approach. My competition would have completed more research, more ECs, more clinical exposure, more networking while I would be worrying about a few thousand dollars. Ha - actually because I didn't in the end I actually won awards that had effectively cash prizes that exceeded the income difference anyway. My competition may have squeezed me out and I would be out in the cold if I focused on debt. I was lucky enough and backed up with the work I did to match to what I wanted and where I wanted (thankfully!).

 

It was hard for me to think that way initially - my family grew up poor, and the instinct is to take money when you can. I really, really do not like debit but it is just another tool to use. I was lucky enough I think to have the economics training to retool how I approached things. Look at this from the long view. These process will cover a time frame of usually 20 years.

 

Start with your end goal firmly in mind. Derive an approach with that primary target in mind. Avoid distractions but take up secondary objectives when they are available and they don't impact the primary negatively. Work hard, achieve success.

[rmorelan]

 

Edit - Just for relevant information, I won't likely be getting married until 3rd or 4th year, if even then, I'm just on that rough path at the moment and like to know (for my sake and my girlfriend's), what such an event would mean for us financially.

 

side note many in the class get married in the 4th year post CARMS match. The reason for this many fold but one is simple logistics - after your end of all things exam you have 6-8 weeks off. It is the spring/early summer and a good time to plan, and execute a wedding and honeymoon period. It also allows for the purchase of a suitable home for residency or other housing plans in the end city you match in.

[WtsupDoc?]

In terms of OSAP, if you get married during medical school, and your spouse is making a "decent" amount of money, you will have a significant reduction in your OSAP amount and you may not receive any OSAP at all. You may also not be eligible for any bursaries or other forms of financial assistance.

 

I've looked into this quite extensively, because my husband makes a decent salary (enough for both of us to live on while I go through university). I'm not eligible for any OSAP at all (because he makes "too much" money) and I'm also not eligible for any bursaries or need-based aid. It sucks, because while he makes enough for us to live on, we also have a considerable amount of debt (the mortgage on our house).

 

Same thing here! I just completed my OSAP quote with my SO's income (not married, may or may not be relocating with me). My OSAP estimate dropped to $440 with their income added.

[schmitty]

Same thing here! I just completed my OSAP quote with my SO's income (not married, may or may not be relocating with me). My OSAP estimate dropped to $440 with their income added.

 

Yeah, this is why it makes sense to work for people like us. Though it is best to try and get both as rmorelan suggests. This was my approach throughout my UG and grad degrees - I managed to get a tons of various positions that gave me great experiences in clinical settings, research/pubs, breadth of knowledge while also paying quite well for student jobs.

[Lactic Folly]

Start with your end goal firmly in mind. Derive an approach with that primary target in mind. Avoid distractions but take up secondary objectives when they are available and they don't impact the primary negatively. Work hard, achieve success.

This is a great post.

[WtsupDoc?]

Yeah, this is why it makes sense to work for people like us. Though it is best to try and get both as rmorelan suggests. This was my approach throughout my UG and grad degrees - I managed to get a tons of various positions that gave me great experiences in clinical settings, research/pubs, breadth of knowledge while also paying quite well for student jobs.

 

Exactly! That's what I'm hoping for. Experience AND a paycheck ... fingers crossed!

[ralk]

well remember the money of 7300 a year for OSAP does not get paid back.You will be earning money at job a) and seeing a corresponding reduction in grants - from purely a financial point of view you are working for nothing. Except really when you think about it you are not working for nothing, it is worse than that - you effectively are losing resources (time) for no gain (or maybe a very small gain).

 

I was given about 8-10K a year in "free money from OSAP". That is the same as about 10-11K in income as you have to pay tax on that (as you would with your 15K example as you are over the cut off of personal exception tax wise). Yes you pay interest of prime on that during residency - assuming you don't want to stay in ontario for 5 years after residency in which case there is a program so you continue to not pay interest through residency as well. Remember though inflation right now is actually around 1.5-2 percent - so the EFFECTIVE interest rate is around 1% (that is what we call the real interest rate in economics).

 

and that is actually part of my point with respect to this. In your summers in medical school for instance your priorities should not be to earn money at all, but rather make sure you are actually getting into the specialty or choice and/or figuring out what that specialty actually is. If you fail at that objective everything else you have done will not really matter (or at least not matter as much).

 

In economic terms the opportunity cost of doing something solely for the money makes no sense. You will win a small battle to reduce you debit and lose potentially the war later on by not getting the ideal location or field you want. Now if a job happens to come a long that gives you both (I was lucky that way) then of course take the money but that is just not the best way I think to look at it. You are paying 40K a year to obtain the career of of choice - worrying about maybe saving 3K in a summer and losing that end objective makes little sense to me.

 

I could not have matched to a competitive specialty by applying such an approach. My competition would have completed more research, more ECs, more clinical exposure, more networking while I would be worrying about a few thousand dollars. Ha - actually because I didn't in the end I actually won awards that had effectively cash prizes that exceeded the income difference anyway. My competition may have squeezed me out and I would be out in the cold if I focused on debt. I was lucky enough and backed up with the work I did to match to what I wanted and where I wanted (thankfully!).

 

It was hard for me to think that way initially - my family grew up poor, and the instinct is to take money when you can. I really, really do not like debit but it is just another tool to use. I was lucky enough I think to have the economics training to retool how I approached things. Look at this from the long view. These process will cover a time frame of usually 20 years.

 

Start with your end goal firmly in mind. Derive an approach with that primary target in mind. Avoid distractions but take up secondary objectives when they are available and they don't impact the primary negatively. Work hard, achieve success.

 

Very good points, thank you!

 

I'm lucky in that the field I'm working in has quite a bit of value to my medical career, even without the money. Furthermore, I should have enough tax credits to remove any income tax, despite the higher earnings. It definitely makes sense to me to not work just to get money, but I also have a bit of a debt-aversion instinct and am very wary of actively avoiding work, just because the benefits of working are not as great as they were during undergrad.

 

Saving $3k doesn't seem like much, but if it doesn't detract from career goals later on, it still seems like a worthwhile endeavor. If it costs double the dollar amount to pay off a debt after residency because of marginal tax rates, than that $3k is really $6k. Inflation reduces that real cost, yes, but interest increases it as well, and over the next decade interest rates seem far more likely than inflation to increase.

 

But yes, it definitely appears as though the most important resource is time, not money. I'll be sure to keep that in mind!

[rmorelan]

Very good points, thank you!

 

I'm lucky in that the field I'm working in has quite a bit of value to my medical career, even without the money. Furthermore, I should have enough tax credits to remove any income tax, despite the higher earnings. It definitely makes sense to me to not work just to get money, but I also have a bit of a debt-aversion instinct and am very wary of actively avoiding work, just because the benefits of working are not as great as they were during undergrad.

 

Saving $3k doesn't seem like much, but if it doesn't detract from career goals later on, it still seems like a worthwhile endeavor. If it costs double the dollar amount to pay off a debt after residency because of marginal tax rates, than that $3k is really $6k. Inflation reduces that real cost, yes, but interest increases it as well, and over the next decade interest rates seem far more likely than inflation to increase.

 

But yes, it definitely appears as though the most important resource is time, not money. I'll be sure to keep that in mind!

 

If it doesn't detract then there is not question as to what to do (that is would be the optimal solution actually). I hope you can find such a scenario!

 

I think you have much more information at your disposal to work with - I suggest you further expand that when you get into the school. Learn what it takes to get the specialty you are interested in year one so you can decide how to allocate your time (which I think you are quite correct about - time is the most important resource). Some time with the OSAP calculator will be of use for you as well - to determine the exact point that the free grants vs income earn tips in your favour with work etc. I too am debit adverse (never even got a car in med school as I didn't want to have to pay for it) - but of course that is an emotional response to a financial problem. I can be overly frugal at times

 

Oh and anything you pay back in residency is of course outside of the max marginal rate. If that works for me I will let the forum know of course - I suspect I can significantly impact my loans during residency.

[osteon]

It won't affect it as much as you think! My spouse and I both owed a lot of money (OSAP AND student LOCs) and only one of us was working (I was still a student) making not THAT much money (like PGY1 salary) and they pre-approved us for almost 300K mortgage. They will want your business even more if you are in med school w/ the threat of taking your LOC and future business elsewhere.

 

As for the down payment, you can absolutely take it from your LOC- in fact, many of the big banks even have a process to allow 5-10% down payment direclty from your LOC!

 

P.S. Good stuff as usual rmorelan!

 

If you didn't have the OSAP loans and LOC, you would have been approved for a more expensive house. If it were not for your spouse working, you would have been approved for much less than 300K or maybe not even approved at all. So, like I said, it may not make the difference between approval or not (this is more dependent on employment), but it will absolutely affect the price of house you can afford which is a huge issue for expensive cities like Toronto, Vancouver and Calgary. Use the RBC "how much house can I afford calculator." Try it once with debt, try it again without. You will see that the difference can be quite large. Cool about the LOC for downpayment thing. Maybe it is bank/branch dependent though? When I spoke to TD and RBC, they said no way.