Fellowship plan: why you need one

Have a fellowship plan ready to take the pressure off

After four to five years of medical school and three to seven years of training, for a lot of registrars and senior doctors in training, undertaking a medical fellowship is the final step before establishing yourself as a specialist in your field. Having a fellowship plan will help you survive and ensure you can live comfortably during your medical fellowship.

A fellowship provides a challenging platform to fine tune your expertise while potentially opening up greater career opportunities. However, for a lot of those who embark on a medical fellowship, there is a lot to know and consider prior to jumping head first into such a project.

The greatest challenge is being able to continue providing for you (and your family if you have one) when faced with a significant reduction in income. While on a medical fellowship in Australia or the UK, your income may reduce to anywhere from $50K to $100K (AUD) per annum, which in some cases, may represent a reduction of over 50% from your senior registrar year income. If you choose to complete an overseas fellowship in Europe, Canada or somewhere in the US, you may not receive any salary at all! To make matters worse, all expenses are typically out-of-pocket, meaning you will need to fund your own flights, accommodation and living costs.

This article will outline what you need to consider when creating a fellowship plan by highlighting some of the key decisions you may be faced with in the lead up to commencing your medical fellowship.

Budget for your medical fellowship now

If you are completing your registrar years or undertaking some locum work prior to your fellowship, you are more than likely in a cash flow positive position, where you are saving funds without too much thought, which is a useful position to be in. This is unlikely to be the case once your medical fellowship commences so it becomes increasingly important to establish a budget and start a savings fund for your fellowship years.

In order to do so, you will require a solid understanding of all your expenses, both now and throughout your medical fellowship. You may choose to itemise these in an excel spreadsheet, otherwise Money Smart is a government website that provides an easy to use budgeting tool that you can access here.

Build your fellowship to plan ahead

If you are planning on completing a medical fellowship which you know is going to put some strain on cash flow for a period of time, your only solution is to plan ahead. 

Investing could be an option to help build a wealth buffer in the years leading up to your fellowship. One option you may want to look into is the establishment of an investment portfolio, which could be either direct equities or managed funds. The portfolio could then be sold down in small tranches, if and when required or alternatively, the income generated from the investments could be used to supplement your cash flow, rather than being reinvested. It is important to ensure you have the right composition of asset allocation that’s appropriate to your own circumstances and goals as well as appropriate diversification aligned to your personal situation and risk appetite. 

The medical financial advisers at DPM can assist you with this.

Other considerations to include in your fellowship plan

Lending options to manage financially while on fellowship

As a doctor, there may be generous short-term finance options available to consider that may help provide a cash buffer during your period of negative cash flow. 

For instance, depending on your financial situation, you may be able to access an everyday account with an optional overdraft and/or credit card with a limit of up to $75,000 (AUD) on an unsecured basis. 

This could assist you with cash flow while on tour medical fellowship, however managing repayments within your budget as well as your post fellowship plans would need to be factored into the decision when weighing up this option.

What to do with mortgage repayments during your medical fellowship

If you own real estate and have determined that your cash flow will be negative throughout your medical fellowship, you will need to make some decisions about how you will manage your ongoing repayments. 

A discussion with a medical lending specialist and/or bank should be your first port of call here. They can review your situation and discuss the options that are available to you, depending on your personal circumstances. Options that you may also envisage in your fellowship plan:

• Renegotiating your repayment terms with the lender to convert the loan to interest only repayments during your medical fellowship. This is assuming you will be able to comfortably meet the repayments. 

• Converting your loan to a line of credit where interest is capitalised (added to the loan balance) rather than having to be paid on a monthly basis. In this case, the maximum limit would be 80-90% of the property value depending on the lender.
• Renting your property out may help you meet your repayments, but there are also tax implications you’ll need to be aware of. A discussion with your tax expert or accountant is highly recommended here.

• For some people, selling their home or investment property may be the only option, depending on how long you expect to be in a negative cash flow position. Before making this decision, we recommend speaking to your medical tax accountant and/or financial planner to ensure you have considered everything in your fellowship plan down to the broader impact on your overall financial plan.

If you are unsure about how to go about developing a fellowship plan or require some help navigating this financially challenging period in your life, book an initial consultation with our team of medical financial experts who are here to help ensure you are able to advance your career, without your finances taking too much of a detour.