The Golden Ticket 🎫

In the world of cryptocurrency, DOGE coin started as a joke, but somehow it became a serious conversation about investing. It’s a bit like the chatter you hear in medical school: some folks are all in, convinced they’ve cracked the code to financial freedom, while others are skeptically watching from the sidelines. Just like betting your savings on DOGE during a meme-fueled frenzy, investing while still in school can feel equal parts risky and exciting—but let’s not forget, we’re playing a long game here. So, before you start chasing the next financial trend, let’s take a step back, grab our stethoscopes, and diagnose whether jumping into the investment pool is the right call for your current stage in life. Spoiler alert: this isn’t about moonshots—it’s about making the right moves for your future.

In today’s email:

• We talkin’ bout Investing? 💰️ Is now the time…

• What does that even mean. 🤔 What is a TFSA/RRSP.

• Can debt be a good thing? 😅 Diving into student loans & LOCs

👇 COMING SOON: Master your money with our Ultimate Guide to Canadian medical student finances—your one-stop resource for budgeting, insurance and investing tips tailored to future physicians.

THE BIG IDEA

We talkin’ bout investing? 💰️ 

General Overview

In the words of the legendary 76ers point guard Allen Iverson, “Practice? We talkin’ bout practice?” That’s exactly how I feel sometimes when I hear fellow students debating investments during medical school. Everyone’s heard the story of a friend’s friend who invested their LOC into Bitcoin and struck gold. But no one ever talks about the countless others who lost money chasing the same dream. That’s how the investing world works—you hear from the winners, but the losers? They stay quiet.

There are a few key points I want to highlight as we dive into this discussion about investing as a medical student.

Don’t Mess with the Future ⏳️

Before diving into investments, it’s essential to weigh the pros and cons. As medical students, we’re in a unique position—barring something catastrophic, we’re almost guaranteed to become high-income earners. That’s our golden ticket. If you’re thinking about investing, you need to understand the risk: things might not go as planned. A failed investment could dig you into a deeper debt hole, forcing you to start your career climbing out instead of building wealth.

Understand the Break-Even Point ✂️

Take a look at the S&P 500’s stock chart over the last decade—it shows an average annual return of 11%. Sounds great, right? Now, let’s factor in reality. The average interest on your debt (like your LOC or student loans) is around 5-6%. Add inflation into the mix—about 2.2% annually over the last decade—and your true return on investment shrinks to closer to 3-4%. To really profit from the market, your break-even point is a return of 7-8%. Anything less, and you’re treading water.

Let’s Think About It Another Way 💡

So, is a 3-4% return better than 0%? Sure. But consider this: paying off debt or spending less money, which reduces your debt, has a guaranteed payoff. Every dollar you don’t borrow or pay interest on effectively “returns” 5-6%. That’s a better deal with none of the market uncertainty—and it’s a win you can count on.

What’s Your Risk Tolerance? 🫢

If you’re still eager to invest—or maybe you’re lucky enough not to have loans—let’s talk about risk tolerance. Everyone falls somewhere on the spectrum, from high-risk to risk-averse. Here’s the key takeaway: we’ve already won the lottery of a stable and secure income. The last thing you want is to jeopardize that flexibility by making poor investment choices early in your career. Imagine digging yourself into a financial hole before you’ve even picked up a shovel to start building.

By thinking critically about your financial decisions now, you can set yourself up for a stable and successful future. Remember: you’re already on the path to long-term success—don’t let unnecessary risks throw you off course!

What does that even mean? 🛍️ 

As Canadian medical students and residents, understanding the difference between a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP) is essential for building a strong financial foundation. Both accounts are powerful tools to grow your money tax-efficiently, but they work in different ways and can serve distinct purposes depending on your stage in life.

1️⃣ The TFSA: Flexibility for Short- and Long-Term Goals

The TFSA is a superstar of flexibility. Contributions to a TFSA are made with after-tax dollars, meaning you don’t get a tax deduction upfront, but all growth—whether from investments or interest—is tax-free. Plus, you can withdraw money at any time without penalties or taxes, making it an excellent choice for short- and medium-term goals like a down payment on a home, an emergency fund, or even future tuition costs. Best of all, withdrawals don’t reduce your contribution room, which resets each year.

2️⃣ The RRSP: A Long-Term Retirement Powerhouse

The RRSP is all about retirement. Contributions reduce your taxable income in the year you contribute, providing a valuable tax break, especially for higher earners. The trade-off? Withdrawals are taxed as income, which is fine if you’re in a lower tax bracket during retirement. While RRSPs are ideal for long-term savings, early withdrawals can be penalized—unless they’re for specific programs like the Home Buyers’ Plan (HBP) or Lifelong Learning Plan (LLP).

💡 How to Choose: TFSA or RRSP?

As a student or resident with a lower income, the TFSA is often the better starting point. Since you’re not earning enough to benefit significantly from RRSP tax deductions, it makes sense to grow your money in a TFSA where it stays completely tax-free. Once your income increases, the RRSP becomes more attractive for tax-deferral benefits, especially when you move into higher tax brackets.

Ultimately, both accounts will play a role in your financial plan. Starting with a TFSA allows you to prioritize flexibility and growth now while keeping your RRSP contribution room available for later when the tax savings will be most impactful. The key is to consider your current needs, future goals, and how these accounts can complement each other in building a financially secure future.

Let’s invest in your future—one smart decision at a time!

Did you know?

Can debt be a good thing? 😅 

Debt... It’s one of the scariest words in the realm of medical education (even worse than neuroanatomy lab). We all know it firsthand, yet sometimes it feels easier to just avoid talking about it altogether. In the limited conversations I’ve had, I’ve noticed people tend to fall into two distinct camps:

1. Overly Worried, Totally Fine:
   These are the students who stress endlessly about their debt, convinced they’ll never be able to pay it off. The reality? Their future earning potential as physicians will take care of that debt sooner than they think. A little reassurance usually goes a long way to ease their fears.

2. Happily Spending, No Concerns:
   These students, on the other hand, are the ones who keep me up at night. I’ve heard stories of classmates buying brand-new luxury cars, splurging on high-end items, and casually saying, “We’re all going to be doctors—it’ll all work out.” Spoiler alert: it won’t. When I break out the Debt Projection Tool to show how challenging it is to pay off high debt levels, it usually sparks a much-needed reality check.

Now, the big question: “Is all debt bad?” The answer might surprise you, not necessarily.

Here’s why: as many of us know, the federal portion of our student loans is currently interest-free. Pending the outcome of the next election, this could remain the case. If it does, our federal student loans actually qualify as “good debt.” I know it feels strange putting “good” and “debt” in the same sentence, but hear me out.

We all accumulate debt at some point in life, most commonly a mortgage. Unlike student loans, mortgages come with interest, which is essentially a penalty for borrowing money. Now imagine if you could get a mortgage with zero interest. Sound too good to be true? It is. But as student debt holders, that’s exactly what we have: a rare, penalty-free loan.

What does this mean for you? Pay off your federal loans at the slowest rate possible and redirect that extra money to your line of credit (LOC), which does charge interest. That’s a winning strategy and one that keeps more of your hard-earned money in your pocket.

Debt doesn’t have to be scary when you understand how to work with it. Use it wisely, and it can be a powerful tool to secure your financial future.

Until next Saturday…

Christian, Founder of Budget Your MD

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