Over half of all residents say they aren’t paid enough, and that’s a fair point, given that we basically live at the hospital.
On the other hand, though, the salary you make as a medical resident is a solid middle-class income. That means you can — and should — be saving some money in addition to making a budget and sticking to it.
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Budgeting 101 for Residency
So the trick here is to actually write out your residency budget. Make a list of your monthly expenses by category (e.g., food, transportation, etc.), and then track your spending for a month or so. It doesn’t have to be fancy; Excel works great for this. You could also try budgeting systems like You Need a Budget (YNAB) for better organization.
Once you have a good idea about how much you’re spending, you can compare it to your net income and then set goals for your budget. Continuing to monitor your spending will help you evaluate whether you’re on track or need to make some adjustments.
Here’s a breakdown of some of the major categories of expenses and how you should be thinking about each.
Housing
The general rule here is to spend no more than 30 percent of your income on housing.
I recommend bumping down that percentage as much as possible during residency. Yes, you want to be comfortable where you’re living, but you also won’t be spending much time there, so it doesn’t need to be super nice.
And if you’ll only have your resident salary to work with, renting might be the safest option since a landlord would generally be responsible for any repairs, which can add up quickly.
Finally, it’s a good idea to find a place close to the hospital so that you can save time and money on your commute.
Transportation
Now is not the time to buy or lease a new car. Instead, think about taking the bus or train or riding a bike (it might be your only time for exercise, anyway).
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Lots of employers will let you pay for a public transit card pre-tax, allowing you to save even more. If you absolutely must have a car, get a used one. Maybe grandma’s ready to let go of that Pontiac with the miraculously low mileage?
Student loans
Loan repayments can eat up a large chunk of your budget. You should also be aware that income-based repayment plans occasionally create problems.
For example, your minimum payment could be so low that you end up with something called negative amortization. That means that, even if you make all your payments on time, the total amount you owe will actually go up because the payments aren’t even touching the principal.
Hiring a student loan expert can help you avoid this type of situation.
Food
Depending on where you live, you’ll probably want to budget about $300-500 a month on food.
The cost of food can add up quickly, so breaking this figure down into a weekly or even daily goal can help you stay on target. Other than that, my advice is to take advantage of free meals at the hospital, plus any discounts you get at the cafeteria.
It’s really hard to do as a resident, but try to avoid eating out, and that includes your daily latte habit.
Utilities
Having a roommate is a great way to save on utilities since you’ll only be responsible for half the bill. Other than that, look for things to cut out. We’re looking at you, cable. Get a shared Hulu or Netflix account instead.
Of course, the above list doesn’t cover everything you’ll need to account for in your budget. You should also budget for disability insurance, an emergency fund, and some fun things every month.
How Much Can You Save During Residency?
Once you’ve figured out a realistic residency budget, you can figure out how much you can afford to save. Your first goal should be building up an emergency fund sufficient to float your non-negotiable expenses for about six months.
Even if you’re in one of the most competitive residencies in a major city, you should be able to stash away about $100 a month for this in your savings account.
Your next goal should be putting money away for retirement. Maxing out your 401(k) is a great way to save money on taxes while preparing for your financial future.
So, there you have it — the basics for going beyond mere financial survival during residency.
If you’re really looking to maximize your residency budget and savings, consider hiring a medical financial advisor to fine-tune your plan.
Upcoming Webinars
Market Outlook and Real Estate Investing
Hosted by Sovereign Properties
Gain insights from Sovereign Properties’ CEO Russ Krivor on capitalizing in today’s market. Discover our fund’s strategy for investing in discounted land near thriving Sunbelt cities and the latest trends in multifamily and active adult living. What You’ll Learn: • Market insights for multifamily and senior living • Strategic land acquisition in growth areas • Sovereign’s innovative active adult community model
When: November 13 | 8 am PT | 11 am ET