Budgeting Basics and Tips

August 14, 2023

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Money will probably be tight during medical school and residency. That’s why a realistic spending plan (budget) – one you can stick to – will be critical to your financial well-being.

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Benefits of Budgeting

The word “budget” may have negative connotations for some people; however, setting, reviewing, and maintaining a budget can offer many benefits. For example, you might be able to better control your spending by having a set budget. You might be able to reach your financial goals faster because budgeting can give you the opportunity to set financial priorities. Budgeting can also help you be prepared for unexpected expenses and allow you to set up an emergency fund within your monthly plan. 

How to set up a Budget

The first step to budgeting requires that you know what your income (for a student, likely a student loan refund) and expenses are each month. Once you know this information, you will need to add up your income, determine your expenses, and calculate the difference to see if you have a surplus or deficit before you can create a budget. If you have a hard time accurately determining what your expenses are, you may need to track your expenses before formulating your working budget. You can track your expenses and create a budget directly from your phone by using the AAMC Financial Wellness program.

It may help to categorize your expenses as either “fixed” (stays the same every month) or “variable” (fluctuates from month to month).

After you total your monthly expenses, and subtract that total from your income, you will then know what your “bottom line” is.  If you find that you don’t have enough money to cover your expenses, consider adjusting your variable expenses; this may be an area in which you can make up for some of your shortfalls. You can use the AAMC Financial Wellness program, the Budget Worksheet for Students or the Budget Worksheet for Residents to help you create your budget.

Cost-Saving Measures

If you find that you have “too much month at the end of the money,” there are things that you can do to reduce your spending. Some possibilities include:

  • Share housing costs with a roommate.
  • Clip coupons to save money on groceries.
  • Carpool or use public transportation.
  • Buy clothes at end-of-season sales.
  • Buy generic brands rather than name-brand products.
  • Buy non-perishable items in bulk.
  • Take advantage of coupons you receive from department stores.
  • Cut down on frequent dining out – pack your meals and make coffee at home.

Special Considerations for Medical Students and Residents

Every medical school determines a total cost of attendance (COA) for their school. This is a figure that usually reflects most expenses as well as the maximum financial aid you can receive. The COA will be very helpful to you in formulating a budget. Request this information from your medical school’s student financial aid office if it is not reflected on your aid offer. 

If you are currently in residency and having difficulty managing your budget, you can postpone payments on your student loans through a mandatory forbearance. You are eligible for this forbearance on your Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans during residency. After residency, you will need to incorporate your student loan payments into your budget. See FIRST’s Postponing Loan Repayment During Residency and the Loan Repayment Options fact sheets for more information.

More Savings Information

Review “Time is On Your Side, a publication from the U.S. Department of Labor, Employee Benefits Security Administration that provides some tips on basic retirement information.

Small Changes can Make a big Difference

Decide what makes sense for you. If you live more responsibly and make smart choices about how you spend your money now, chances are, you’ll be paying a lot less when you enter repayment on your student loans.

Budgeting Tips

Living on a budget as a medical student or resident is an essential step for minimizing debt. Try to think of a budget the same way you’d think about maintaining a healthy diet: make sensible, responsible choices and you’ll reap the benefits. Here are some tips and ideas to save money and/or time:

Join a cooking co-op or cook several portions at once to freeze for a later date. A cooking co-op is not only a more social way to spend your meal, but it saves time cooking. You may even get a few new recipes or meal ideas.

Make your own coffee or tea and buy a thermos. You’ve probably heard this before; endless cups of coffee from a coffee shop can really increase expenses. If you choose to purchase coffee, consider opting for a smaller size or limiting yourself to plain drip-coffee instead of fancier drinks, and be sure to include this expense in your monthly budget.

Try not to buy bottled water. Not only are all those bottles terrible for the environment, but they’re also expensive.

Bag your lunch. Being short on time and having irregular hours will be less stressful if you have easy, healthy, homemade food with you. Not only will you save time and money, but you may also eat better.

Shop smart.  Buying groceries online may save you time. If you go to the store, bring a list to minimize impulse buying and browsing time. Join your market’s “shopper’s club” to take advantage of weekly specials. Design menus based on weekly sales and take advantage of manufacturer’s coupons. Whenever possible, buy generic brands.

Take control of your credit cards. Avoid carrying a balance on your cards; this will save you money, as you won’t be charged interest. Additionally, use credit cards that don’t charge an annual fee.

Avoid late fees. Pay your bills on time and online. Late fees add up and they may have a negative effect on your credit rating. If you do miss a payment, call the creditor, and ask to have the late fee waived.

Avoid ATM fees. If you can, bank locally and use your financial institution’s ATM for cash withdrawals so that you won’t be charged a fee. Some financial institutions have ATM agreements that allow you to use specific machines without a charge – learn what’s available to you to save money.

Buy used books. There are numerous websites where you can buy, sell, or even swap books. If you and your friends need the same books or several titles, try buying your purchases together to save on shipping or even qualify for free shipping.

Bike to school/work. If your climate, schedule, and location are suitable, bike to school/work. This may also help you stay in shape, and it will be less costly than the upkeep, maintenance, and gasoline for a car. To save even more money, buy a used bike.

Take public trans­portation. It may be more cost effective not to rely on a car at all. Public trans­portation will alleviate the expenses of buying gas, maintenance, and parking. It might be less stressful too!

Join a carpool. If you drive— form or join a carpool. This will help you save money on gas, parking, “wear and tear” on your vehicle, and you can share the driving responsibilities with others.

Buy big items from online classifieds. Try websites like “Facebook Marketplace”, “Letgo”, or other local classified ads or apps. You may be able to obtain merchandise at reduced prices. You may even want to try “Freecycle” to find deals on free items. Just be cautious and careful when using these types of services.

The 30-Minute Rule

If you see something you “have to have”, wait 30 minutes, then if you still can’t live without it—make the purchase.

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