If you’re heading into your last year of residency as a young doctor, congrats! Medical training is tough and you’re almost done. As you celebrate and start reserving your vacation weeks, don’t forget about some large expenses that may be coming your way. As a former senior resident who just started fellowship, there were quite a few large expenses I had that I wasn’t fully prepared for. I ended up having to make some extra money on the side in order to cover all the costs. Learn from my mistakes and plan ahead for these large expenses that may be coming your way:
1. Board Certification Exam
As you finish your residency, you will become eligible to take the board certification exam for your specialty. While some specialties like Ob/Gyn and Surgery have oral components that may take a lot longer to study or qualify for, almost all specialties require you to pass a written exam. In case you weren’t aware, that written exam isn’t cheap. I’m in family medicine and I paid around $1300. Yep, you read that right $1300. And yes, I had to pay the full cost before I was able to schedule the exam. Be sure to look up how much the board exam costs for your field. For some specialties and subspecialties it may cost over $2,000.
2. Full Physician Medical License
Residents in training usually practice medicine and see patients with a post-graduate training license. Once you finish residency, (whether you decide to do a fellowship or not) you are usually required to get a full physician license. This is not a national license. It is a state license which means you must have a full medical license in each state you practice medicine. Unfortunately, the cost of a full medical license isn’t cheap. I paid at least $500 in application fees for my initial Georgia license. Then I paid $230 a couple years later to renew it. Because I am doing a fellowship in California, I needed to pay for an initial California medical license along with the application fee which was around $1200. I also had to pay to get official fingerprints, medical transcripts, and USMLE scores sent to the state medical board. These costs were not cheap either. If you have already signed an attending contract, you may be able to get some of these expenses paid for by your new employer. Try to negotiate that into the contract or plan ahead so you have the money available for it.
3. DEA License
If you’re like me, you may be surprised to learn that getting a full physician license in each state you practice in, isn’t sufficient. You also need a license to prescribe medication, otherwise known as a Drug Enforcement Administration (DEA) license. The cost of this license isn’t cheap. I paid $888 for mine. If you’re a physician in training at a state institution or residency you may be able to get this fee waived, but there’s a caveat. Technically speaking, you need a DEA license for each state in which you practice medicine and you may have to pay for it yourself if your employer does not provide funds for this cost. I have a DEA license associated with my Georgia medical license and another DEA license associated with my California medical license. These costs can add up quickly.
4. Moving Expenses
Whether you are moving to a different state for fellowship or starting your attending job in a new area, most doctors-in-training move after they finish residency. In case it’s been a while since you moved, let me catch you up to speed: it’s expensive. I moved to California from Georgia and this cross-country move was not cheap. Simply traveling to California to look at apartments was costly. The cost of moving my clothes, transporting household goods, and shipping my car was expensive as well. Plus, there are other moving costs to consider too. You may need a new driver’s license and car registration which can lead to additional expenses and insurance fees. You may also need furniture or kitchen appliances. Once you account for these costs, you can easily spend $2,000 to $4,000 if not more.
5. Housing Costs
Many people finish residency and want to buy a home. We have so much delayed gratification in training that we finally want to accomplish the ultimate sign of adulting: homeownership. Unless you’ve been living under a rock, you know that inflation is through the roof and housing prices have increased over the last couple years. Many people are offering over the asking price and paying with cash which has made it more difficult and costly to find the home you desire. Be prepared. For those of us who plan to rent for another year, things may not be as good on our end either. Rent prices have gone up tremendously and many places still require a rather large security deposit. Whether you decide to rent or buy, beware that your housing costs may be higher than you anticipated.
6.Celebratory Vacation
Residency is hard. We were on call for over 24 hours at a time, worked nights and weekends while missing out on time with our families, and were drastically underpaid for the work we did. Finishing this training is quite an accomplishment and you deserve to celebrate. If you’re like most people, you will want to take a break before you start working as an attending. Most people take at least 6 weeks off to refresh and recharge and one of the most popular things to do during that time is travel. Go to Greece, Belize, Europe, Hawaii, or whatever bucket list location tickles your fancy. This may be one of the only times in your life where you have an extended time off without work obligations so take advantage of it. Just be aware that these vacations aren’t cheap. They can cost thousands of dollars and usually require you to save for them ahead of time.
My point? The end of residency or fellowship can be exciting, but it can also be quite costly. Expenses tend to add up quick. If you’re not careful, you can find yourself charging way more things on your credit card than you ever imagined. Be sure to plan ahead.
5 Black Friday Budget Tips
I’m not sure about you, but I love a good sale. As a young professional who hates paying more for something than I could, I marvel at the chance to buy valuable items at a discount. The only thing I don’t like are the crowds at stores or the look of my bank account the weekend after I go shopping. If you are like me and would like to enjoy the sales without spending too much money, here are some Black Friday Tips to consider.
1. Plan ahead—set aside money for holiday spending. It can be easy to overspend during the holidays. Minimize the chance it will happen this year by planning ahead. Reserve some money from your last paycheck and find ways to lower your expenses on other items this month. Consider working some overtime at your job, try to make some extra money from your side hustle, and pull in cash from other revenue streams. I plan ahead for holiday expenses throughout the year by setting aside $100-$200 each month for holiday spending. I know other people who forgo retirement contributions during the month of December and instead use that money to pay for added expenses during Christmas time. There are even folks who sell some of the investments they made throughout the year and use the profits to pay for expenses. My point? Plan ahead to make sure you have the money you need for all of your holiday expenses.
2. Make a list of your expenses and expected purchases. One of the things that can hurt your finances is buying things you don’t need or didn’t expect to purchase. Try to avoid this by making a list of your expenses ahead of time. Include flights, money for gifts, and any social outings or restaurants you may go to. If you know you are going to do some holiday shopping, write down the things you plan to buy and leave a little extra room for unexpected purchases. Making a list of your expenses gives you a glimpse of how much you will spend and can help you prepare in advance for your purchases.
3. Search for deals but avoid the temptation to buy more. It can be great to find sales on the items you already plan to purchase but be careful. In the midst of looking at deals, try not to fall into the trap of buying more than you anticipated. If you know you need to buy clothes for one of your family members, avoid looking in the electronics section. If you already plan to buy a household appliance, avoid browsing the shoe section. In fact, if you already know what you need, then you may want to consider buying the items online to avoid the temptation of buying more than you anticipated at the stores in person.
4. Set a spending limit and stick to it. Sometimes we have good intentions but still fall short. One way to avoid that is to set an overall spending limit. Make a goal not spend more than a certain amount this holiday season, and stick to it. Set a spending limit each time you decide to go shopping. For example, my gift giving limit is $500 (which includes secret santa gifts, stocking stuffers, and gifts for each of my family members). Since I usually buy clothes during the holiday season, I also set an overall limit for how much money I will spend on myself. Once I reach my spending limit, I go home and avoid looking at additional sales. You should too.
5. Avoid credit card debt. It can be so easy to swipe a card and get all the things you desire. The temptation to buy something we really want can be quite strong. In fact, many people accumulate a substantial amount of credit card debt during the holiday season as a result. Don’t let this be you. Make a goal right now to avoid credit card debt. Don’t let one month of spending during the holidays derail all the progress you made toward your money goals this year. Simply put, don’t use money you don’t have to purchase things you don’t need. Avoid debt.
6 Money Moves to Make this Fall of 2021
If you’re like most people, your expenses increased during the summer. Between vacations, birthdays, entertainment costs, and weddings, many people tend to spend a lot more in the summer than they do in almost any other season. Fall is a time to get back on track. Make a plan to balance your budget, stick to a spending plan, and make some strides forward in your finances. If you’re not sure where to start, here are 6 money moves to make this fall:
1. Set aside money from each check for entertainment expenses. As a young professional, entertainment expenses can be a challenge area for my budget. Some months these expenses are lower than expected. Other months, I’m shocked when I check my debit card balance. Perhaps you feel the same way? Instead of repeating the same patterns, make a decision to act differently. Set aside money from each check for entertainment and put a limit on how much you will spend on social outings each month. The purpose of setting aside money for entertainment is not to restrict you from living your life. The goal is to help you enjoy life in a financially responsible way. By setting aside a set amount of money for entertainment each month you can spend money in this area guilt-free with boundaries in place so that you don’t go overboard.
2. Make a travel budget for every trip. As a young professional with lots of friends and good health, I love to travel. Work can be stressful and taking the time off to explore a new area or relax with my loved ones is the refresher I need to remain productive at work. While travel clearly has its perks, as adults, we must prepare in advance for it. It’s not wise to plan a trip and charge all the expenses on a credit card. The goal of vacation is to use the time away to recalibrate not to go on an expensive trip that puts you in debt. Create a travel budget and plan ahead so you don’t overspend.
3. Plan in advance for special events. This is vital when it comes to special events. As a young professional in my early 30s with quite a few friends and associates, many of the people in my circle are undergoing life events. They are getting married, having babies, and buying houses, among other things. As one of their friends, I’m frequently invited to partake in the celebration. While I love to support others, I recognize that doing so can be expensive. Maybe you’ve noticed the same thing? One way to decrease the financial burden of special events is to plan ahead. One of my budget coaches suggested that I create a wedding/life event fund and put a couple hundred bucks from each paycheck into it. That way, when I get invited to special events, I have the financial means to participate while still maintaining my financial goals. Perhaps this is something you can try as well.
4. Have a spending limit when you eat out. I don’t know about you, but I love to eat. Good food warms my heart and is a consistent source of joy. Although it tastes good on my palate, it can sometimes be detrimental to my wallet. I cook a good deal at home but there are times when I want to eat out. Maybe I’m too tired to cook or one of my friends has invited me out to a happy hour or meet up over dinner. Although I have good intentions, sometimes I spend too much or accept these invites too frequently. As a result, I find myself spending way too much on restaurant outings. One way I’ve tried to limit this is by having a spending limit. I glance at the menu before I go and have a max amount that I plan to spend while I’m out. Having a spending limit allows me to still partake in the outing but do so in a more responsible way.
5. Establish a second source of income. One of the major things to do this fall is to try to increase your income. If you can’t get a raise at work, perhaps you can try creating a second source of income by monetizing one of your hobbies. While some folks opt to work overtime or get a second job that is similar to their main job, that may not be the right move for you. Spending too much time do any one thing can create burnout. Instead, find something you enjoy, a passion project you’d love to explore, or an area of expertise that you can provide to others. Discover ways to monetize it. The goal is to increase your income in a way that brings you more joy and allows you to use the money you make to have more of the experiences you desire.
6. Make your savings and investments automatic. This is probably one of the most important money moves I’ve ever made. Automation. Instead of having to remember to contribute to my work retirement plan, save money, or invest in my Roth IRA, I do all of these things automatically. Setting up automatic savings and investment contributions helps ensure that I meet my financial goals. It also helps ensure that my money is growing. Consider doing the same. Don’t rely on your memory. Make a decision today to save and invest a certain amount of money per month then set up automatic withdrawals and contributions from your paycheck to make it happen.
I’m a firm believer that we can enjoy the money we’ve earned while also investing it in a way that allows it grow. This fall, let’s make a commitment to do both. Plan ahead for expenses and experiences with others. Automate savings and investment contributions. Be a young professional who does both.
5 Money Mistakes To Avoid This Summer
Summer is here. Covid cases have declined. Outside is officially open. As you enjoy being able to leave your home and live life as you did before the pandemic, be mindful of your spending. Despite the delayed gratification we all had in 2020, the urge to make up for lost times might be good for our psyche but bad for our wallet. If you aren’t careful, you could find yourself spending way more than you anticipated. In order to continue to progress in your financial goals, avoid these 5 money mistakes this summer:
1. Going out to eat too often. Whether it’s brunch, happy hour, or a birthday dinner many people tend to eat out a lot more frequently in the summer. I know I do. With the increased prevalence of food delivery apps like Doordash and Uber Eats, I order takeout meals more often as well. If I’m not careful, I can easily spend $100-200 a week eating out. Although the food may taste amazing and the time with friends can bring happiness, these endeavors, when done on a frequent basis, can be quite expensive. In order to be a money savvy young professional, we must be mindful of this added cost. It’s not that we can’t eat out at all, it’s that we must resist the urge to do so too frequently.
2. Not having a budget when you travel. Now that things are opening back up, one of the things many of us cannot wait to do is travel! We long to get out of our homes and away from our cities to visit someplace else. Although traveling can be fun and provide a much-needed break from our current lives, don’t forget to budget! Many of us factor in the cost of a flight and hotel, but we underestimate how much we will spend on food, uber rides, drinks and entertainment after we arrive. If we aren’t careful, those expenses can add up quickly and before you know it, you’ve spent way more than you planned and re-accumulated the credit card debt you worked so hard to pay back. Avoid this by budgeting appropriately. Before you go, estimate how much you will spend on incidentals like snacks, drinks, and transport. Find ways to cover those expenses without putting it all on a credit card. Don’t let improper planning turn your vacation into a financial catastrophe.
3. Overspending at bars/lounges and happy hours. If there’s one thing friends love to do in the summertime, it’s go out. Although many of us may no longer be in clubs until 2am, we likely still enjoy a good happy hour after work or a nice lounge on the weekends. Although there is nothing inherently wrong with these activities, they can serve as unexpected money pits that take away all of our disposable income. If you aren’t careful, you can easily drop $20-30 on drinks, another $20 on an appetizer and tip. Before you know it, you’ve spent almost $50 and still need to get dinner. While this may not break the bank if done every once in a while, hitting a happy hour every week can start to add up. Nightclubs and lounges can be even more expensive, especially if you try to get a section to sit down and split a couple bottles or drinks with friends. You can easily send $200-300 if not more, on a night out. While this can lead to great times with friends, don’t let it shatter your financial goals. Try to set a spending limit when you’re out and don’t go over that amount, That way you can enjoy the evening without overspending and regretting it in the morning.
4. Buying new clothes for every occasion. Whether it’s the desire to post photos in new outfits or the unexplainable feeling of excitement I get whenever I purchase a new dress, one of the financial mistakes I used to make a lot is shopping. Specifically speaking, I loved to buy new clothes for special occasions and in the summertime, there was ALWAYS a special occasion like a friend’s birthday party, entertainment event, or upcoming vacation for me to shop for. Although shopping and wearing new clothes brought me joy, seeing my bank account diminish soon after I got paid was definitely NOT a good feeling. If you’re like me, and can get a little carried away when it comes to shopping, try to put barriers in place and approach things differently this summer. Delete text messages from stores about sales, unsubscribe from store emails, make a concerted effort to re-wear things you haven’t worn in awhile, and resist the urge to buy something new when you have other outfits in your closet that could work just fine.
5. Underestimating the costs of weddings/special events. Another thing we need to be careful not to do this summer is underestimate the costs of special events like weddings. As we enter our late 20s and early 30s many of our friends and co-workers may start getting married and having children. This means there will be lots of engagement parties, weddings, gender reveals, and baby showers to attend. Although these events may create memories that last a lifetime, make sure you plan ahead. This means setting aside money each month for these costs and understanding that you may not be able to make ALL of the events. Set a budget and plan ahead.
5 Ways to enjoy the holidays without destroying your budget
The holiday season usually comes with dedicated time off to spend with the ones we love. Instead of going into debt doing expensive activities or forgoing any festivities altogether, how about finding a middle ground? Here are some affordable ways to enjoy the holidays without destroying your budget.
1. Explore low-cost activities in the city. Whether you live in a big city or a small town, there are usually several low-cost activities in the area to explore during the holidays. Check out winter decorations in the city and Christmas lights as you walk around your local area. Spend the weekend going ice skating at a park or visit an indoor rink. If you work for a corporation or are in involved in various community organizations, you can also check out company Christmas party or some holiday soirée filled with young professionals in the community. Search the internet, ask your friends, and skim your local newspaper to find out about various affordable activities in the city around the holidays.
2. Buy inexpensive, meaningful gifts for friends and family members. Gift giving is a great way to show our gratitude for others. Many times it can be quite rewarding. Instead of lamenting over the realization that we cannot purchase new Iphones, designer clothes, or hefty gift cards, why not purchase inexpensive meaningful gifts for the ones we love instead? If you need some ideas, try giving a Christmas basket filled with the person’s favorite desserts, a holiday stocking filled with pajamas, hot chocolate, and other trinkets they can use to relax and watch a holiday movie, or even gifting them framed photos of a happy memory, wine they’d enjoy, or a book they’d find intriguing.
3. Search for discounts on holiday travel. With the holidays usually comes lots of travel. Oftentimes, it’s the travel expenses that end up being putting a serious dent our budget. In order to prevent this from happening search for discounts. Look to see if you have earned any rewards points from credit cards or if you qualify for any discounts on transportation services like Uber or Lyft. You could also search Groupon for affordable travel packages and skim AirBnb for reasonably priced lodging options. Regardless of which route you take, spending a little time searching for travel discounts may be worth your while.
4. Enjoy holiday festivities on existing subscription services. In this current digital world, many of us have a variety of different ways we entertain ourselves. Whether it is listening to Apple Podcasts on the way to work, dancing to our favorite playlist on Spotify, laughing at the newest comedy on Hulu, or watching a popular movie on Netflix, we have a variety of subscription services we use for entertainment. The majority of them are either free or some inexpensive bill we pay each month. As we look for ways to enjoy the winter season in an affordable manner, why not make use of the things we already have? Whether it’s a Christmas playlist, holiday episodes of our favorite shows, or adorable Christmas movies from our childhood, we could all find ways to enjoy holiday festivities on the subscription services we already have.
5. Participate in fun activities at home. If you’re looking for ways to enjoy the holidays without leaving the comfort of your home, there are several things you could try as well. You could decorate your home and Christmas tree as a family. If you’re like me and crave a good amount of social interaction, you could invite some of your close friends over to watch holidays movies and drink hot chocolate. You could even adopt the mindset of some of my coworkers by hosting a holiday potluck for some of your associates. Lastly, you could play fun holiday games, do puzzles, or bake cookies with your loved ones as well. Either way you spin it, there are fun and affordable things to do during the holidays at home.
Tell me, what are some ways you plan to enjoy the holidays that don’t require you to spend a lot of money?
Quick Guide For Managing Loans, Insurances, and Budgets
Of note, this article was originally published on Doximity’s Op-Med for resident physicians.
As resident physicians who work crazy hours, we have a lot on our plate. With so many competing responsibilities, it can be difficult to balance our personal lives with our careers and some things may inevitably fall by the wayside. While there are many things we can put off for another month or even another year, our finances shouldn’t be one of them. Here’s a financial check list of three things you must do to make sure you’re on the right track:
Have a concrete plan for your student loans
Figuring out what to do with your student loans can seem a bit overwhelming. Here are a few steps to help you navigate through the madness.
Decide whether or not to consolidate or refinance your loans. Consolidation is when you combine all your loans into one giant loan and this can usually be done through the federal government. Refinancing is when you combine your loans with a private company outside of the federal government. Refinancing your loans usually allows you to get a lower interest rate on which can save you money over time but it makes you ineligible for several government loan forgiveness programs like public service loan forgiveness (PSLF). Since I’m enrolled in PSLF, I chose to consolidate my loans through the government instead of refinancing them with a private company.
Pick a repayment plan that you can afford. If you have federal student loans, you will be automatically enrolled into the standard repayment plan. This plan may require a higher monthly payment than you can afford. If this is the case for you, as it was for me, switch into one of the income driven repayment plans that cap your student loan payment at 10-15% of your discretionary income.
Sign up for public service loan forgiveness if your residency qualifies. Enrolling into the program isn’t binding and may give you the chance to get tens of thousands of dollars in student loans forgiven, tax free. Take five minutes out of your day and submit the form to officially enroll, if your resident program meets the qualifications.
Make sure you have insurance
Many of us didn’t think much about insurance in medical school. We probably had health insurance from our parents or our schools and didn’t worry about anything else. Now that we’re out in the “real world,” here are three things to do to make sure we are thoroughly protected in residency:
Verify that you have medical insurance. Even though most of us are young and healthy, we still need health insurance. Whether it’s for yearly checkups, acute illnesses, the birth of a baby, prescriptions, or unforeseen injuries, we have to make sure we’re protected and have an affordable way to cover these costs. As residents, most of us should get free or low-cost coverage through our programs. Just make sure you’re enrolled.
Get disability insurance. After taking out loans and spending most of our 20s in school, let’s make sure that our income is protected. If we get in an accident, are diagnosed with an illness, or simply have an injury that prevents us from working to our full capacity, disability insurance will kick in and give us money to replace the income we may have lost. Group disability insurance policies through our residencies usually don’t have enough coverage or adequate protection. I purchased an individual specialty-specific disability insurance policy that will pay out $4,000 a month if I am unable to work at 100% capacity as a resident. The policy will increase and pay out $12,000 a month when I become an attending.
Decide if you need life insurance. Life insurance pays money to our families if we were to pass away. While many of us have a life expectancy well into the 80s, life can be unpredictable. If something were to happen to us, we’d want to make sure our family was taken care of. As a resident, many of us have a small life insurance policy from our employers, but if you have a spouse or kids who depend on your income, that group policy may not be enough. You may need to purchase additional term life insurance.
Create a monthly spending plan
As resident physicians, life is much different now than it was when we were medical students. Instead of getting one lump sum of money each semester, we now get paid on a consistent basis. In order to make sure we’re not spending too much money and are actually saving a decent amount for emergencies, paying down debt, retirement, and vacations, it’s imperative that we implement a spending plan. I categorize my spending into 3 buckets:
Things I need to buy, which are necessities like rent, bills, and food.
Things I want to buy, which are discretionary entertainment expenses like concert tickets, movies, books, meals at restaurants, or clothes.
Things I should buy, which are investments I make to increase my net worth whether that’s by paying down debt, saving money into a separate account, or investing toward retirement.
Simply allot a percentage of your check to each of these three buckets to make sure you’re living within your means and making responsible spending choices.
To summarize, getting your finances in order doesn’t have to be difficult. Have a concrete plan for your student loans by deciding whether or not to consolidate or refinance your loans, enrolling into an affordable repayment plan, and signing up for PSLF. Next, make sure you have all the insurance you need like medical insurance, disability insurance, and life insurance. Lastly, create a spending plan to ensure that you’re paying your bills, increasing your net worth, and investing in your own self-care.
My residency spending plan: a new way to think about budgeting
As a young professional with many competing expenses, it is paramount for me to prioritize my spending. However, adhering to a strict budget can seem a bit daunting and restrictive. To get over this anxiety, I started out with a spending plan that mirrors the “50-30-20 rule” by allocating money into 3 different buckets: things I have to buy, things I want to buy, and things I should buy. Let me explain.
Category #1: Things I Have to Buy
This category is for my fixed expenses. It includes the bills and necessary purchases I must make to survive. This includes my monthly rent and other bills (like electricity, internet, water, and sewage). I also use this category to pay for groceries, gas, and different types of medical insurance (i.e. vision, dental, and disability). For young adults just starting out in their careers, this category of fixed, necessary expenses can take up about 50% of your take-home pay. For young professionals established in their career, it may be a much lower percentage. For me, this amounts to about 45% of my take-home pay.
Pro Tip: If your fixed expenses add up to over 50% of your income, consider ways you can cut costs or increase your income. I tried to do both. In order to decrease costs, I decided to live with a roommate. This not only lowered my monthly rent payment, but it also allowed me to split many other bills, which substantially lowered my living expenses. Along with decreasing costs, I also created a second source of income. As a resident physician with limited free time, I couldn’t get a second job, nor did I want to. Instead, I decided to turn something I love (blogging) into a second source of income by monetizing my blog and accepting paying offers to write for other platforms. Whether you enjoy writing or have another area of interest, think about what you love to do and consider different ways you can turn your hobby into a second source of income.
Category #2: Things I Want to Buy
This category is for my discretionary spending “aka” non-necessities that increase my quality of life. These expenses can differ for each person but for me they include: entertainment (like weekend outings to the movies, sporting events, and restaurants), self-care (like personal grooming, hair appointments, and gym memberships), and incidentals (such car maintenance, birthday gifts, and other unexpected expenses). This is also the area I dedicate to giving. As a Christian I try my best to give to the less fortunate and donate to organizations that do the same.
Pro Tip: Everyone’s list of discretionary spending may vary. I choose to drive an older car and spend extra money on entertainment and self-care. You may, instead, choose to drive a much nicer car and opt for a car payment. The items you choose to purchase can differ from mine. The goal is to keep your discretionary spending to about 20-30% of your take-home pay. Mine is 25%.
Category #3: Things I Should Buy
This category is for monetary growth. It is the part of my take-home pay I use to increase my net worth and build financial security. This can be done in a variety of ways, but I use this section of my budget to save, invest, and pay down debt. For example, I put a certain percentage of money into an emergency fund and secondary savings account (which I will use for unexpected expenses, a future vacation, a house down payment, etc). I also allot a portion of money from this category to invest in my employer-sponsored retirement account (which is a 403b retirement savings plan through which I invest in a combination of stocks and bonds). Lastly, I use this category of money to pay down student loans and credit card debt.
Pro Tip: You can increase your net worth by either paying down debt or increasing your investments. I do both. The goal is to reserve at least 20% of your take-home pay to this category to ensure you have an adequate emergency fund and are saving enough money for retirement. Since I was unable to work during my time in medical school and incurred some credit card debt when I moved to another state, I am allotting about 30% of my budget to this category to “catch up.” However, your exact percentage may differ from mine. You may need to start off by allocating a much smaller amount to this category and increasing the percentage over time.
Generally speaking: the amount you allot to these 3 categories may vary. The important thing is to make sure you have a portion of your budget reserved for all 3 areas.
Tell me, was this helpful? What percentage of your check do you have allocated to these 3 areas?
6 surprising benefits of having a spending plan
In order to practice good money management, we must put a valiant effort into getting our spending habits under control. Although challenging, creating a monthly budget or at least having a “spending plan,” can really help us get on the right track. When I finally started following a budget not only did my finances improve, but I also noticed these 6 surprising benefits:
I am better organized. Before I created a budget, I used to “guesstimate” how much money I spent each month. After a few weeks, I’d realize that my bank account was lower than I anticipated and would just tell myself to “try harder” next time. As you can imagine, that didn’t work. I was still spending too much money and barely making ends meet. When I finally sat down and made a monthly budget things changed for the better. With a budget, I actually know how much I can afford to spend on certain items and can plan better strategies on how to meet my financial goals.
I know what is happening to my money. Now that I have a realistic budget, my spending habits have changed. I am more aware of fixed vs variable expenses and have a rough idea of how much money is in my bank account at all times. Because of this awareness, I no longer have anxiety opening my mobile banking app or logging into mint.com. I know how much I can afford to spend on food and which times I can splurge on other items. Instead of getting to the end of the month and wondering where my money went, I am now the one telling it where to go.
I feel less guilty when I spend money on myself. Before I created a budget, I felt guilty spending money on myself. Even though I worked hard, I always felt like I should be using the “extra” money I had to pay off credit card bills or save for retirement. At one point, my guilt was so bad that I could barely walk into the nail salon without feeling financially irresponsible. All of that changed when I actually created a budget. Each month I allocate a certain amount to “personal grooming and self-care.” I now have a small portion of my budget set aside for a monthly pedicure and trip to the hair salon. This minor change adds so much to my quality of life. It makes me happy knowing that I can enjoy myself from time-to-time and remain on track to meet my financial goals.
I worry less about my bills. Before I had a spending plan, paying bills near the end of the month gave me anxiety. Even though I knew the bill was coming, I had usually spent too much money earlier in the month so paying that bill would lower the balance in my checking account to a level that I was not comfortable with. Facing that reality caused me great angst on a regular basis. When I created a budget, things changed. Fixed expenses that come out of my check are no longer a surprise to me, regardless of when the money is deducted. I am more aware of my spending throughout the month which makes me better prepared to pay those mid-month bills when they come.
I actually save money each month. Before I had a budget, saving money was something I didn’t think I could afford to do. I swiped my card whenever I deemed it necessary and was genuinely surprised that I didn’t have much left over at the end of the month. When I created a budget, this changed. I became much more aware of how my unhealthy spending habits precluded by ability to save. Nowadays, I solve this problem by actually “paying myself first.” I have a portion of my check directly deposited into a totally different bank account. Since I hardly ever use this secondary account, I don’t really “see” the money I am missing. As result, the money in this account has continued to build over time. As I continue to work in residency, I’ll have this separate bank account serve as an emergency fund, new car fund, and vacation savings account.
I finally started giving. As a well-intentioned Christian, I try to give to others. Generosity not only blesses the other person, but it does something internally to the giver as well. Every time I give, I get this wave of gratitude knowing that I helped make someone else’s life better. Creating a budget has allowed me to continue these good deeds on a regular basis. Instead of feeling like I can’t afford to share with others, having a spending plan helped me see where I could make room in my budget to tithe and make small charitable donations. It might take me a little longer to become financially independent, but to me, this sacrifice is worth it. Giving to others brings me so much joy and helps me maintain perspective. It also allows me to enjoy the work I’m doing so much more. Without a budget, I wouldn’t be able to continue this practice.
For these 6 ways and more, creating a spending plan has really enhanced my life. If you haven’t already, sit down and make a budget and see if you experience some of these same benefits. As the old saying goes “Do something today that your future self will thank you for.” Believe me, creating a budget (and sticking to it) is something you won’t regret.
Tell me, was this helpful? What other benefits have you gotten from creating a budget?