7 Step Guide to Budgeting for Early Career Doctors

As a doctor-in-training or doctor early in your career, you already have enough on your plate — the absolute last thing you want to worry about is your finances. Unfortunately, a lack of financial education, huge debt, and poor basic financial habits can create a lot of money anxiety. I know because I experienced this! However, budgeting can help doctors to plan, track, guide, and prioritize how you manage your money.

Despite having a bad rap, budgets are valuable tools that:

Give you control over your money. Budgeting saves you the financial stress of suddenly having to pivot if there is a lack of funds. A budget is not limiting – it gives you freedom to spend based on your priorities.
Make you aware of your spending. Budgeting saves you from wondering at the end of every month where your money went.
Keep you focused on your goals. Whatever your short- or long-term financial goals (such as paying off your student loans or saving for a new house), a budget is a plan that helps you achieve them.

Moreover, starting this habit early in your career and even as a trainee will help develop this healthy habit to have maximum impact. Here are some other simple financial habits with maximum return.

My goal with this article is to provide a step-by-step guide to help doctors create their own personal budget!

Here is our 7 step guide to budgeting for doctors!

I’ve enlisted the help of Michael Jerkins, MD for this budgeting guide for doctors. Aside from practicing, he is also founder of Panacea Financial, one of our key resources with a goal of helping doctors with their finances.

1. Pick a budgeting tool

The easiest way to create a budget is by using a tool like Mint, You Need a Budget, Tiller Money, or Money Patrol.

You can also just use my free budgeting Excel template that you can download here!

These apps easily sync to your bank and other financial accounts — plus they’ll import information about all of your transactions.

And the best part? Many of them are free.

Each tool navigates differently. Regardless, each of them including my template will need to be populated with information about your income and expenses. That’s where the next few steps come in.

2. Start gathering information

Start by going in reverse: take a historical look at your income and expenses over the last three to six months (or preferably, the last 12).

Be sure to gather all of your online banking records, receipts, credit card and other financial statements—anything that demonstrates your income and spending.

3. Review and understand your income

Based on the last few months, how much money do you estimate you will have coming in each month moving forward? And from where?

4. Identify and categorize your expenses

Review your expenses, and identify whether they are fixed or variable. This may be the most daunting step of this budgeting guide for doctors. But it is important and necessary. Despite being intimidated, taking this step gave me so much clarity and, unexpectedly, relief.

Fixed expenses are those that do not vary from month-to-month, while variable expenses may change depending on the season. Identifying which category each expense falls into can help determine which expenses you can trim to reduce spending each month.

Fixed:

Housing: rent or mortgage payments (this is a helpful post on this topic: Rent or Mortgage Your First Home? [Why I Didn’t Follow My Own Advice])
Insurance: renters or home insurance, health insurance, car insurance (What Types of Insurance Do Doctors Actually Need)
Transportation: car payments (Debunking the Myth of the Doctor Car!)
Utilities: water, electricity, heat, internet
Debt: student loan and credit card payments (Revealing My Secret Strategy to Pay My Student Debt)

Variable:

Sustenance: groceries, eating out, coffee
Entertainment: streaming services, nights out with friends
Transportation: ride-share services, taxis, gas

To estimate your expenses, identify everything you spend your money on and how much you’re spending in each category.

5. Balance your budget

You have your income and expenses figured out. Now it’s time to balance your budget. To do so, simply subtract your expenses from your income.

If you have a positive balance, congratulations: you’ve got more money coming in than you’re spending!

Even though you have a positive balance, you want to make sure that you have the right mindset about it. Make sure you are “paying yourself first” and not just hoping each month for this positive ending balance.

Your goal excess or savings rate will be 20% of your gross income. So, see where you are now and try to increase slowly to this goal.

You can then use your savings rate to pay down debt, save for an emergency fund in a high-yield savings account (at least three to six months worth of expenses), support future goals like retirement or a vacation, and invest wisely based on a written financial plan.

Don’t forget to occasionally treat yourself—you deserve it!

What should you do if you are spending more money than you are bringing in?

In this case, start working to pay yourself first. Use your fixed and variable expense assessment to determine which variable areas of spending could be reduced.

Here are just a few common areas we’ve found doctors can cut back on spending (we get, however, some of these are necessary for your mental health and are fine in moderation!):

Grabbing food on the go (fast food, gas stations, convenience stores etc.). Instead, lower your expenses by always carrying snacks with you, and bringing meals to work.
Entertainment. We understand the need for a night out on your non-call weekends is important for your mental health, but try to set a budget for the night and stick within it.
Subscriptions. Are you still paying for apps, games or streaming services you no longer use? Go through your financial records and ensure you cancel the ones you no longer want.

As harmless as those $5 and $10 expenses may seem, they can add up to a lot over a year.

If you can save a small amount of money each month by adapting new behaviors, your budget (and your future self) will thank you.

6. Automate your payments

If you’re in the middle of treating a patient, you don’t want to be distracted wondering if you paid your water bill.

The good news is you can automate payments on the majority of your ongoing monthly bills.

Take advantage of automated payment features to stay organized, ensure prompt and on-time payment, and avoid penalties like late fees, increased interest rates, and more. Plus, once payments are set up, you can go about your busy life with one less thing to worry about.

7. Automate your savings

Open a high-yield savings account and start automatically putting aside some of your monthly salary into it. Use your available retirement accounts to start investing these savings automatically. Start small — $10, $25, $100.

We all realize that automatically setting aside $25 a month isn’t going to make or break your retirement. But it’s important to start the habit early and begin saving today.

If you aren’t sure what accounts may be available to you, Panacea Financial offers savings and investments accounts and will work with residents and trainees at little or no cost (read here how you can get connected if interested).

In the end, stick to your plan. You can do it!

Start your budget now!

We get it. Taking the time to develop a budget and plan for the future as a medical student, resident, fellow, or even practicing physician is tough. And sticking to that budget is even tougher.

But if you establish a plan today and then review and update that plan regularly, you will be better prepared as your career progresses. We really hope this budgeting guide for doctors helps!

Having these habits in place will also give you peace of mind—plus decrease the possibility of being blindsided by something unexpected in the future. Reducing this stress will make it much easier to focus on what really matters: your patients and your professional growth.

You’ve got this!