Life has a funny way of testing our resilience, especially when we least expect it.

Picture this: you're sprinting down the hospital hallway to see your next patient, stethoscope swinging like a cowboy's lasso, when suddenly, your cell phone starts buzzing. Its your car mechanic... and he has bad news. You know that wretched grinding sound that was coming from your car's under-carriage? Its your transmission. It is on life support.

But there's hope. Your mechanic can get Ol' Reliable back on the road.. But it's going to cost you... 3,500 buckeroos, to be exact.

Ouch! 

Unfortunately, unanticipated financial setbacks of this sort aren't uncommon. You're in the midst of a grueling residency, earning a paltry resident's salary, when an unexpected financial blow blindsides you. Your car breaks down, your landlord hikes up the rent, or worse, a costly medical emergency strikes. Indeed, life happens—and it unfortunately doesn't spare cash-strapped residents and fellows.

While you're busy saving the world one patient at a time, who's got your back when unexpected expenses strike like rapid onset influenza?

It is never too early to begin to forge a shield of financial resilience—an emergency fund that stands boldly between you and the precarious precipice of financial disaster. Ready to secure your financial future like a medical-grade adhesive? Here's how: 

Why you need an emergency fund

In case the transmission drama above didn't hit close enough to home, lets start with the fundamentals: why do you need an emergency fund anyways? Here's why: 

#1. Life throws curveballs, and you need to be prepared to swing. As a medical professional, you're no stranger to unexpected situations. Patients come in with symptoms you've never seen before, and you have to to respond. The Department Chair asks you an important question about a tough case, and you have to respond. Same goes for your finances. If there's one certainty in life, it is that unexpected things will happen... and you have to be prepared to respond.

#2. Rainy days are inevitable. We're not talking about a drizzle here, we're talking about a full-on thunderstorm. Whether it's medical bills, home repairs, car issues, or even a global pandemic (yeah, COVID-19, I'm looking at you), having a stash of cash set aside gives you the power to weather any storm that comes your way.

#3. The peace of mind is priceless. When your car breaks down, tou don't want to be scrambling for cash, calling your uncle twice removed, or worse, relying on a shady payday loan. An emergency fund brings peace of mind, knowing you have a financial safety net to handle unexpected expenses without breaking a sweat.

How much you should save

So... how much moolah should a resident stash away in their emergency fund? When it comes to determining the right target for your situation, several factors come into play: your comfort level, risk aversion, your lifestyle (eg. competitive mountain-bikers might want to have a touch more saved in anticipation of that unexpected face plant and the ensuing dental bills), and existing assets elsewhere. These all factor into the equation.

But those variables aside, let's not overcook the core point here: the rule of thumb is typically three to six months' worth of living expenses. This is a great target to shoot for—especially for doctors. For all you physicians in-training, in dollar terms, we normally recommend having between $2k and $8k set aside in your emergency fund.

Where to keep it

We strongly recommend keeping your emergency funds separate from your everyday expense funds. If you pay for everyday expenses out of a checking account, set up a separate savings account to stash your rainy-day funds.

Why?

By keeping it in a separate bank account, you create a clear boundary—a firewall safeguarding your precious emergency fund from impulsive spending.

If you have a Roth IRA already set up, consider

One trick-of-the-trade: if you have a Roth IRA already set up, it can double as an emergency fund. By keeping emergency funds in more conservative investments in a Roth, it will still be accessible to you, and will be able to grow tax free. There are pros and cons to using your Roth as a place to park your emergency funds, but it is another option.

But wherever you keep it, the key here is: your emergency fund needs to be readily available, not tied up in some illiquid investment like a CD from your bank, or your cousin's new nightclub. When financial emergencies strike, you need your emergency funds at-the-ready to bail you out.

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Important Note: This blog post is intended to provide general information and should not be considered as professional advice nor investment advice. Please consult with a qualified financial or insurance professional for personalized guidance based on your specific circumstances.