Budgeting

Having a spending plan is the cornerstone of a solid financial foundation. All other efforts for borrowing wisely or strategic repayment will be undermined if you don’t have a plan of action for managing your finances. Living on a budget is possible, and by doing so, you will realize your financial goals sooner.

Benefits of Budgeting

Let’s face it; money will probably be tight during school. That does why having a realistic spending plan is essential for you to most efficiently accomplish the following:

• Prioritize Spending

• Reach financial goals

• Worry less about money and be in control of your money

• Understand your spending patterns

• Identify leaks in your cash flow

• Avoid credit card debt

• Reduce your medical education debt

Creating a Budget

The most difficult part of developing a spending plan is taking the time to create it. This task may seem overwhelming at first, but it can be accomplished by using templates, guides, and other budgeting tools and websites.

TIP: Budgeting is not one size fits all. What works for someone else, may not work for you.

Basics of Budgeting

Income

The first step in creating a budget is to document all your incoming funds. If you are married, include your spouse’s income as well. If you consistently receive gifts from family members, add these to your income. A refund check from the financial aid office also counts. Any incoming funds should be included in your income calculations.

Expenses

Next, identify all your monthly expenses, or monies, that are outgoing. There are two types of expenses, with the most obvious being routine, fixed amounts—including rent, car payments, insurance, and loans. Then, there are the expenses that fluctuate—such as clothing, gas, cell phone, groceries, and utilities. Total your monthly expenses, then subtract that amount from your income. What’s left is the total of your discretionary funds.

Discretionary Funds

Once all income has been determined and expenses have been honestly accounted for and properly subtracted, the remaining number is your bottom line (discretionary funds), the amount of leftover monies that may be used on the “extra” things in life such as entertainment, travel, and eating out. If you’re being completely honest in your planning, you may find that your discretionary funds are a negative number. If so, go back and adjust until you break even.

On the other hand, if you have a positive bottom line that is significant (meaning there is a sizable amount of money left over), you should perhaps run your numbers again. Have you accurately documented all your expenses? Typically, during school, there won’t be much extra money left over after your necessary expenses have been accounted for.

TIP: Choose to live like a student while you are a student so that you don’t have to live like a student when you are a doctor/medical professional, and likewise, live like a resident while you are a resident so you don’t have to live like a resident after training is over. 

Types of Budgets

There are so many different types of budgets. Below, you will find a list of four types of budgeting techniques. Remember, budgeting is not a one size fits all type of thing. You are always welcome to use one of the below budgeting techniques and tweak it to fit your style of budgeting. 

Finding Alternatives

Having a budget doesn’t mean eliminating all the joy from your life; rather, it means keeping many of those “good” things and finding alternatives when necessary. Once your cash flow is visible in black and white, it will be easier to consciously reduce your cost of living. By periodically reviewing your budget for any imbalances, you’ll realize that small adjustments can make a big difference.

Common alternatives for students living on a budget include:

• Buying groceries instead of eating out

• Brewing your own coffee instead of going to a gourmet coffee shop

• Choosing generic products instead of name brand

• Opting for basic cable instead of a premium package or Netflix instead of the latest movies at a theater

• Getting a roommate ... or two instead of living alone