My husband and I moved 1,000 miles from home for my residence and when we got there 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 depleted our savings while graduating and moving into our new home. We didn’t know how to manage our finances and didn’t have much time to learn as we adjusted to our new life. We dug into our finances for the first three years of my residency and luckily made no devastating mistakes – but we lost the opportunity to save significantly and were unnecessarily restrictive in some areas because that we didn’t know how far our income could go.
I am not alone in this experience. US medical schools are required to give a quick introduction to financial planning at the end of training, but students otherwise end up with big debts and little personal finance skills to overcome it. Finance is a major stressor for physicians-in-training, and this stress has been shown to impact choice of physician specialty and contributing to physician burnout.
Looking back, I wish I had a solid financial foundation at the start of my residency to eliminate stress and maximize my savings and those of my husband sooner. Here I will share the four financial steps I wish we had taken at the start of my residency with a sample budget as an example. Please keep in mind that we are a two-income household with no children and live in a state with no state income tax, which heavily influences our budget. I am not a licensed financial professional. The steps listed are personal opinions and not formal financial advice.
Four steps to creating a budget as a new resident
Collect data from current residents
Residences publicly post salary information on their websites, but it can still be difficult to estimate what your monthly net salary will be. Take home pay takes into account deductions such as federal and state taxes, health care premiums, retirement, and even parking fees. Once 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 advice on how much of your income should be spent on housing. I believe this approach is too rigid for most medical residents. Much of the residency programs are concentrated in areas where the cost of living is high, and many medical trainees see a benefit in paying more for housing in exchange for a better quality of life. When you’re working long hours, it can be worth living close to the hospital in a building with ample parking and an easily accessible gym – and it’s okay if you want to dedicate more to average your budget towards that.
Establish your fixed monthly expenses
After getting an idea of your housing and utility costs, you need to factor fixed and essential expenses into your monthly budget. This often includes student loan repayments – the average graduate medical student has over $240,000 in student loan debt. You should try to have a preliminary plan to pay off this debt before you receive your first paycheck. Most residents are employed by nonprofit organizations, so payments for federal loans made on income-based repayment plans during residency count toward civil service loan forgiveness. You can use this calculator to determine which payment plan is right for you. This is a fixed part of your budget, so it’s important to know this amount early. Other fixed and essential expenses include insurance, transportation costs (including car payments), groceries, dependent care, and any other debt repayments you may have.
Pay yourself first, then treat yourself
After accounting for essential expenses in your monthly budget, then think about saving. First, create a emergency fund totaling three to six months of your essential expenses. I recommend putting this money in a high-yield savings account so it’s easily accessible in an emergency. Once you have an emergency fund, you can consider other savings goals. My favorite personal finance blogger and social media influencer, Money with Katie, has an excellent downloadable wealth planning tool to help you calculate how much of your income you should try to save or invest, and how much 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 progress in your financial literacy, you may also want to consider investing in taxable brokerage accounts and other more creative investment vehicles. Finally, consider “saving” money in sinking funds – a term from the financial world for accounts we use to save for large future expenses – but keep in mind that This is deferred spending, not real savings. 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.
Follow and improve
Now that you’ve done the hard work of identifying your monthly expenses, it’s time to put your budget to work. Everyone needs a good way to track their spending, and there are plenty of great apps out there. My favorite is Copilot, an app that automatically categorizes spending and graphs budget categories so users can easily see where they have extra slack to spend and where they should be restrictive. Other great budgeting apps include You need a budget and mint.
It wouldn’t be academia without the possibility of additional credit. Once you have a solid monthly budget and a savings plan, several other steps can help ensure a secure financial future. It is important to secure long term disability insurance during residency, as interns can often get great rates with no medical exam required. Training programs often have access to special rates for physicians-in-training, so watch for information about this with 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’s entirely up to you, and you can use this monthly spending data to reallocate your income to best suit your lifestyle and improve your quality of life. By canceling a few recurring subscriptions that bring you no joy, you’re making room 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 the busy months in the hospital. There’s also the freedom of knowing you have money set aside for unexpected expenses. This fall I unexpectedly had to spend $5,000 on car repairs (yes, more money than we had four years ago), but I was able to pay the bill with confidence and move on with just a few distress calls to my husband. for moral support. Taking control of your finances is one way to reduce stress and maximize your well-being during medical training.
Averi Wilson-Raya, MD, is a resident physician in Texas with interests in hospital medicine and clinical informatics. In her spare time, she enjoys spending time with her family and reading about personal finance.
Wilson-Raya has an affiliate agreement with the Copilot app and receives royalties from it.