Blog Post Focus — Budgeting as a Resident Adds Value
This blog post will discuss budgeting in residency. It is not fun for everyone, but it is valuable. It is a way to apportion your money to things of value and to avoid waste. This helps one to avoid wasting money on what is not considered to add value, while being able to spend more money on things that do add value. Regarding this idea of “adding value,” I found Killing Sacred Cows: Overcoming the Financial Myths That Are Destroying Your Prosperity by Garrett Gunderson to be a thoughtful read.
Budgeting as a Resident
Budgeting as a resident is no different from budgeting for anyone else. You track what you have available and what you have to spend and what you have leftover should you want to spend more or need to spend more. When used, it empowers you to spend more on items or services of value. It may not be a task anyone wants to do, but it should be done. There are tons of ways to budget and some that are very easy.
Personal Experiences With Budgeting
Spending Averse
I have always been spending averse. Deciding to take on debt for medical school was very difficult, but it was necessary to finance my education. As an intern I lived frugally and was able to save half my take home pay. Then, for residency I relocated to a program in a big city and I had to be much more frugal to save what seemed like a little bit of money. Certainly, location can make things difficult [check out the post on Geoarbitrage for Residents to get a little more information].
I never spent beyond my means. There were months where I had negative cash flow, such as when I had a car accident and had to buy a new car, but with my emergency fund I was able to cover these unexpected expenses. Even living in an expensive city, I was able to generally have a positive cash flow.
I Knew Residents Responsible With Money and Irresponsible With Money
I knew residents in the city making roughly 100k annual pre-tax salaries who lived paycheck to paycheck and had bad credit card debt who would have family constantly gifting them money. I knew residents living in upscale areas with help from their parents. I knew residents with more modest incomes living in lower cost of living areas and being cost-conscious who were able to save money every year.
Budgets vary for people, but not having one can lead to reckless spending habits, where even relatively high incomes cannot make up for it.
Some Budgeting Thoughts
Realize a Budget Is Important
First, realize why a budget is important. It can guide you in how much money you have available for each expense and helps you know where you are spending your money. It can help you identify and eliminate expenses that aren’t adding value to your life. It can help you plan for certain goals.
Determining a Budget and Resources to Help
Two, determine your budget.
You can download apps to help you with this, such as Buddy (what I use) and Rocket Money (also what I use).
Or, you can do it yourself with a pen and paper, a spreadsheet, or however you choose. Regardless of app or doing it yourself, the same principles apply.
Budgeting Without Apps
Simply determine how much you make after tax (take home money). This can be estimated by taking your paycheck (if this is your only income) and multiplying it by the total number of paychecks you receive in a time period. Then determine any recurring expenses you have. Recurring expenses can include rent, car payments, phone payments, insurance, streaming services, fuel, student loan repayments, etc.
Take your after-tax money and subtract you recurring expenses. If you have included all your recurring expenses then you have a good estimate of what you have leftover for covering any extraneous expenses.
Persistent Negative Cash Flow?
Three, if your expenses are greater than your take home pay then you need to address this immediately. Perhaps this can be addressed by eliminating recurring expenses or moving to a lower cost of living area. Or, maybe you can make some behavioral changes. With a budget, you can see what is possible.
If your rent is a large part of your expenses, then moving can lower your expenses. If you spend lots of money eating out and drinking each month then maybe you can save a significant amount by making your own meals. Are you paying for multiple streaming services, but only using one? Maybe you should get rid of the other streaming services.
Think of Value When You Spend
Four, spend if it increases your value. If it does not add value to your life, then why pay for the product or service?
Budgeting Apps I Use
I like the budgeting apps Buddy and Rocket Money.
Buddy
Buddy is largely manual. I am not linking my accounts to this app. I am able to set up recurring income and recurring expenses. I can set any payment to me or from me for any date. The app has a concise and clear layout. I am able to look back each month and see my cashflow. The accuracy of the app is dependent on me making sure I add each income and expense. It is something that keeps me honest.
Also, being spending averse it actually helps me to realize I can invest some extra money on a product or service or treat myself from time to time. However, some months have had unexpected expenses and even though I am spending averse I realized I needed to cut down on expenses for a while.
Rocket Money
Rocket Money is the app advertised for identifying recurring expenses (subscriptions) and helping consumers make the choice of deleting them or not. However, it can also be used as a budgeting tool and can link to accounts, which can track spending whenever these accounts are used.
These accounts can be any income source or expense source, including student loans. You can adjust how much you pay for the app each month, which is a nice feature. It has lots of features, but one nice feature is its monthly credit score update. This can help the user determine positive and negative spending habits—or simply be aware of one’s credit score.
Concluding Thoughts
Having a budget is important. It can prevent you from spending money you don’t have. It can help you plan for your future. It can help you modify spending as needed.
Budgeting may not be fun, but it is not particularly difficult. You can do it yourself or utilize apps to help you.
The way you spend money becomes a habit. If you are reckless and clueless with your spending then you are likely to continue these habits as an attending. If you are conscious of your cashflow as a resident, you will likely continue such habits as an attending.
Don’t be the resident building ever greater debt. Don’t be the new attending physician making tons of money per paycheck who gets into trouble by increasing your rate of spending even more than your income has increased. Don’t be the established doctor who never got their spending under control and is broke.
Budget and live well. Add value to your life by avoiding spending on frivolous things and being able to allocate funds toward things that do add value to your life.
Links
I do not have affiliate links at this time. I simply am sharing the apps that i have used for budgeting that have added value to my life.
NOTE: These are my thoughts and should not be considered financial advice.