Budgeting in Residency: Tips for Recent Medical School Graduates

My husband and I moved 1,000 miles from home for my residency and when we arrived, we had about $3,000 left between the two of us. He finished graduate school around the time I graduated from medical school, and we drain our savings while getting our degrees and moving to our new home. We didn’t know how to manage our finances and didn’t have much time to learn as we adapted to our new life. We fumbled through our finances devastating for the first three years of my residency and, thankfully, didn’t make any mistakes — but we lost the opportunity to save meaningfully and we were unnecessarily restrictive in some areas because we didn’t know how far our income could go.

I’m not alone in this experience. US schools medical are required to give a cursory introduction to financial planning by the end of training, but students are otherwise left with large amounts of debt and few personal-finance skills to overcome it. Finances are a significant stressor for physicians-in-training, and this stress has been shown to impact specialty physician choice and contribute to physician burnout.

Looking back, I wish I had a strong financial foundation early in my residency to eliminate stress and optimize my and my husband’s saving sooner. Here, I will share the four financial steps I wish we had taken early in my residency along with a sample budget as an example. Please keep in mind we are a dual income household with no children and live in a state without state income tax — both of which influence our budget heavily. I am not a licensed financial professional. The steps listed are personal opinions and not formal financial advice.

Four Steps for Creating a Budget as a New Resident

Gather data from current residents

Residencies post salary information on their websites publicly, but it can still be difficult to estimate what your monthly take-home pay will be. Take-home pay takes into account deductions like federal and state taxes, healthcare premiums, retirement, and even parking fees. After you have an idea of ​​what your take-home pay will look like, try to get an estimate of what current residents pay in living expenses such as rent and utilities. This will help you find housing and other essentials at a fair price for your local market. Most finance books include guidance on what proportion of your income should be dedicated to housing. I believe this approach is too rigid for most resident physicians. A large portion of residency programs are concentrated in high cost of living areas, and many medical trainees see an advantage in paying more for housing in exchange for better quality of life. When you’re working long hours, it may be worth it to live close to the hospital in a building with ample parking and an easily accessible gym — and it’s okay if you want to put a larger-than-average portion of your budget towards that.

Establish your fixed monthly expenses

After getting an idea of ​​your housing and utility costs, you need to consider the fixed and essential expenses in your monthly budget. This often includes student loan payments — the average graduate medical student has over $240,000 in student loan debt. You should try to have a preliminary plan for paying off that debt prior to receiving your first paycheck. Most residents are employed by non-profit organizations, so payments towards federal loans made on income-based repayment plans during residency count towards public service loan forgiveness. You can use this calculator to determine which payment plan will work best for you. This is a fixed portion of your budget, so it is important to know this amount early. Other fixed, essential expenses include insurance, transportation costs (including car payments), groceries, dependent care, and any other debt payoff you may have.

Pay yourself first, indulge then

After accounting for the essential expenses in your budget, think about saving next monthly. First, create an emergency fund totaling three to six months of your essential expenses. I recommend putting this money in a high yield savings account so it is easily accessible in an emergency. After you have an emergency fund, you can consider other savings goals. My favorite personal finance blogger and social media influencer, Money With Katie, has a great downloadable wealth planning tool to help you calculate what portion of your income you should try to save or invest, and what portion you can comfortably spend on yourself. An easy first step is to save for retirement in a Roth IRA — this will be especially important if your residency program doesn’t offer a good pre-tax retirement option. As you become more advanced in your financial literacy, you can also consider investing in taxable brokerage accounts and other, more creative, investment vehicles. Finally, consider “saving” money in sinking funds — a finance-world term for accounts we use to save for large future expenses — but keep in mind this is deferred spending and not true saving. After following the “pay yourself first” rule, you can use your remaining income for other expenses. For me, these categories include restaurants, gyms, streaming services, personal care, shopping, gifts, and travel.

Track and perfect

Now that you’ve done the hard work of identifying your monthly expenses, it is time to put your budget to work. Everyone needs a good way to track their spending, and there are a lot of great apps out there. My favorite is Copilot, an app that automatically categorizes spending and graphically represents budget categories so users can easily track where they have extra room to spend and where they should be restrictive. Other great budgeting apps include You Need a Budget and Mint.

Extra Credit

This wouldn’t be academia without an opportunity for extra credit. Once you have a solid monthly budget and saving plan, several other steps can help support a secure financial future. It is important to secure long-term disability insurance during residency, as trainees can often lock in great rates without a required medical exam. Training programs often have access to special rates for physicians in training, so watch for information about this from your program. Also consider buying umbrella insurance and life insurance, both of which are fairly inexpensive and add an extra layer of financial protection.

The beauty of your personal budget is that it is all yours, and you can use this monthly spending data to reallocate your income to best fit your lifestyle and improve your quality of life. By canceling a few recurring subscriptions that aren’t bringing you any joy, you make space in your budget for goods or services you didn’t know you could afford. For me, it was a cleaning service to offset some stress during busy months in the hospital. There is also freedom in knowing that you have money set aside for unexpected expenses. This fall, I unexpectedly had to spend $5,000 in car repairs (yes, more money than we had to our names four short years ago), but I was able to confidently pay the bill and move on with only a few distressed calls to my husband for moral support. Taking control of your finances is a way to reduce stress and maximize your well-being during medical training.

Sample budget

Averi Wilson-Raya, MD, is a resident physician in Texas with an interest in hospital medicine and clinical informatics. In her free time, she enjoys spending time with her family and reading about personal finance.

Disclosures

Wilson-Raya has an affiliate agreement with and receives royalties from the Copilot app.

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