A few weeks ago we had an opportunity to have some of our neighbors over for dinner and drinks. It just so happens that our awesome neighbors are medical graduate students at Drexel University. The three of them are now deemed to be my first official focus study group. Not only did I learn a ton about the medical masters route prior to medical school, but I also had the chance to ask them what their biggest concerns are financially going into their medical school years.
Student loans and debt repayment are their #1 concern and that seems to be a trend that should continue. We will continue to blog about those topics and provide plenty of details, but I also wanted to know what else was on their mind financially. Second place went to… budgeting! I must say, I was very proud of our neighbors! So it got me thinking, if I had to build a budget for them while in residency, what would it look like? Truthfully, you could probably use this same budget if you are in medical school; however, it’s difficult to estimate the varying forms of income/side hustles medical students may undertake to make ends meet. Plus, you are still building student loan debt at that time.
We provided an excel spreadsheet at the end of this post with everything we discuss built into the budget for you. This will give you the opportunity to custom-craft the budget line items to match your current situation.
Let’s start with some basics, your salary. We will use ~$61,000 as a national average – it is a little bit higher here in Philadelphia; Thomas Jefferson starts at $58,714 for PGY-1 (2020). Money-in was the good part, now comes the bad part…money-out.
Subtract your taxes: Federal, State, and Local. ADP offers a nice calculator to help with the specifics.
$1,154 per month
This would be your 403b (assumes 6%), health insurance, and other group benefits from the hospital.
$402 per month
Your monthly take-home pay should be right around $3,136 per month. This will vary state-by-state and city-by-city. For example, Philadelphia’s local tax is HIGHER than our actual state tax. For Philly residents, their take-home pay is usually a little bit lower, and we also have an 8% sales tax in the city which is 2% more than the state sales tax at 6%.
We will need to use averages here, and it will vary for each of you, but you have to start somewhere. Remember that we give you the budget template, so take some time to make it your own and enter your own figures!
In today’s world, we have not come across too many residents living on their own (rent is ridiculously high) or owning their own home (not the best idea for residents). In reality, you should be renting at this point as a resident. First, renting is far less expensive. Second, who the heck knows where you will end up after residency? It will be much easier to leave the keys and move, as opposed to selling your home.
$1,000 per month
The car situation is where you can really get ahead on your budget. For example, if you live in a city (i.e. Philadelphia), you should easily be able to make it around without a car, and that should hold true for almost any major city due to the public transportation systems. Not only does it relieve you of a car payment, but also the car insurance, gas, maintenance and parking fees. If you do have a car, make sure it is reliable and hopefully paid off. If you do need a car, now is not the time to buy a nice one. You are a resident; the eight-year-old Honda will do just fine! I promise you will have the opportunity to buy numerous dream cars down the road.
$500 per month (with car insurance)
Student Loan Payment
While in residency, you should be using an income-based repayment plan, and if we stick with your $61,000 salary, your student loan repayment should fall in right around $312 per month. I know your loan balance is overwhelming at this point; however, don’t do anything crazy here (i.e. paying 3x the monthly amount on your loans to pay them down). Stick to the plan!
$312 per month
This is one that swings all over the place, but assuming you have shared these expenses in some way, let’s average these expenses out to $300 per month. In that number, I am also including your cell phone bill.
Hint: Drop your cable bill! You are a medical resident, you barely have enough time to even open the cable bill and send a payment. Grab Netflix for $10 per month for those lucky moments you have to watch TV (or borrow your awesome friend’s username & password for FREE!).
$300 per month
Well, food is pretty important so we will include that. As a medical resident, it is not a good time to follow the Paleo diet because at this point I am convinced it is the world’s most expensive diet. Believe me, I would know based on our current monthly food budget.
Let’s use $500 per month on food, which equates to $125 per week and $18 per day. Sometimes it helps to break bigger goals into smaller ones. I think that is especially helpful with food budgeting.
Take full advantage of all FREE meals!
$500 per month
Your biggest asset? You, and the ability to wake up and go to work every day. Disability coverage is a must for any physician, no questions asked!
Your residency hospital should provide some form of group disability coverage for you; however, you will want to buy an individual disability policy to supplement the gap and also provide a guaranteed insurability rider. This will allow you to increase your coverage without proving insurability in the future. This is vital for when you leave residency and sign your first medical contract and your income skyrockets.
The monthly premium will vary based on your age, sex, state, specialty, and income. For the budget, we will use $150 per month. That should be on the high side, but it’s better to overestimate than underestimate with budgeting.
$150 per month
That’s right! You are saving even on a resident’s budget. Put $100 per month into your savings account, NOT your checking account. Make sure you keep these accounts separate. This will be your emergency fund because I promise life will happen and you will need a sum of cash at some point (most likely numerous points). If you have an emergency, and you are stuck living paycheck to paycheck, you will probably take the easy (and wrong) road…put it on a credit card. It is very DIFFICULT to live paycheck to paycheck and “hope” that you can pay off your entire credit card bill each month.
$100 per month
We know that we missed a lot of little things! Whether it is your trip to CVS, the stop at the local bakery, or a night out with your friends, life happens.
$250 per month
And there you have it, a grand total of $24.00 left over at the end of the month! This will vary for each of you; however, it gives you a great starting point.
Medical Resident Budget Template. Make sure you custom-craft it for you!
2020-1-31 Presentation Slides at Jefferson for Internal Medicine Residents (2020 Wellness Week)