Budgeting As A Resident (Intern Financial Survival Guide)

Budgeting is an important aspect of any resident’s finances. You’re making your first paycheck, and now you have to put that money to work to pay your expenses. As medical students, there was never any hope of breaking even with a monthly budget. Now that you’re making what most would consider a middle-class income, you should be forming a budget and tracking your spending.

If you’re a single taxpayer and making $50,000 a year as an intern, you will probably keep approximately $42,000 per year after taxes, or $3,500 per month. Let’s look at the major budget items and form a sample budget. With each item, I’ll highlight some quick tips to help save you some money.

Housing

This is the largest single line item on your budget. Choose your home or apartment wisely, as an extra $100 / month in rent would cost you $3,600 during a 3-year residency, even before interest.

Location, location, location

Keep in mind the location of your housing, as a place closer to the hospital will reduce the length of your commute and save you some money in transportation. More importantly, living close to the hospital will reduce your stress levels. No one wants to have a 30-45 minute commute in traffic ahead of them after an overnight call.

Buy vs. Rent

I’ll have a more extensive discussion of the buy vs. rent decision later in the Intern Financial Survival Guide. The general consensus in the physician personal finance community is that it’s better to rent during residency. This is especially true if you have a shorter, 3-4 year residency.

Sure, you can make money if the housing market rises during your residency, as it has for the past 5 years. But if you graduated from residency 5-7 years ago, you would have faced huge losses (possibly even foreclosure) because of the financial crisis.

It’s also a lot of work to maintain a house, especially if you’ve only rented previously. You don’t want to be teaching yourself how to fix a leak in your bathroom after a long day of work.

Utilities

Whether you buy or rent, there will be associated costs for utilities, such as electric, heat, and water. Negotiate with your landlord as some will pay for water or even heat.

Internet

Unless you’re a serious gamer (and you might have to set aside that hobby for a few years during residency anyway), go for the cheapest internet you can find. Take advantage of promotional deals, and then when the promotional period is about to expire, threaten to leave to a competitor. You might be able to get the company to extend their promotional rate if you negotiate.

Transportation

Get a used car or use public transportation

If you’re in a big city like New York or Boston, you probably will take public transportation everywhere. For most residents, however, you’ll have to get a car. Hopefully, you already have one from medical school, but if you don’t, now is not the time to buy/lease a new car.

Certified pre-owned is a safe option. Some people recommend buying from car rental companies. I bought my first car for medical school off of Craigslist. Fortunately, my good buddy’s dad was a mechanic who gave me some good advice about the best cars to buy used. These days, there is so much excellent advice on Internet forums. You should be able to know generally whether there were quality issues with certain car manufacturers or model years. The rest is luck and common sense.

Don’t bother driving around for the cheapest gas.

Gas is moderately priced compared to what it’s been in the past 10-15 years. I’d take the closest gas station on your direct path from home to the hospital. Simplicity is best, and you simply don’t have the time in residency to be wasting your free time looking for cheaper gas.

Don’t forget car insurance

I would get car insurance quotes from multiple companies to get the lowest price. Each time your car insurance is up for renewal, I would take the effort to get additional car insurance quotes to see if you can get a better price.

Food / Groceries

Eating out

We all have to eat, and food can become a significant part of your budget if you eat out a lot.

Of course, to save money, you should eat out sparingly, and cook as much as you are able. Learn how to cook and be creative with leftover ingredients. You can often cook a steak dinner for the same price as eating out at a cheap fast food restaurant.

Free food

Take advantage of free food offerings available to you at the hospital. I know many of you enjoyed a lot of free food as medical students (although the free pizza wasn’t worth sitting through yet another interest group meeting at my school). My medical school offered free breakfast and lunch to residents and medical students. See whether your residency program offers free or discounted food.

Shop at discount grocers

When shopping, take advantage of discount grocers like Aldi if they are available in your area. You can get organic food offerings there and at places like Target and Walmart as well. Whole Foods = Whole Paycheck, especially for residents. You’ll have plenty of money for Whole Foods and other premium grocers once you’re an attending.

Travel

You probably only have a few weeks of vacation a year, and you won’t have much money to go on lavish vacations.

Medical conferences as free travel

Take advantage of medical conferences to do your traveling. Do some research and present at conferences for which your residency program will pay. It will help with the job search, allow you to network with other residents and attendings, and give you an opportunity to explore new cities. If you’re lucky, your specialty will have its annual conference in a sunny locale during a favorable time of the year. Sorry, radiologist residents, your annual conference is the week after Thanksgiving in frigid Chicago.

Use your points and miles wisely

If appropriate, maximize your points and miles through the use of credit cards and redeem them for travel. I’ve written about credit card rewards strategies for a new resident, and you can get some great travel deals with this method.

Other Expenses

Phone

With the end of 2-year contracts, you don’t have an incentive to buy a new phone every 2 years. Phones are way better than necessary for the needs of most residents. Your smartphone could last 3-4 years or longer.

Healthcare

I’ve discussed selecting health insurance previously in the Intern Financial Survival Guide series. If you’re healthy, you should consider a high-deductible health plan, not only because it is typically cheaper than regular insurance plans, but also because you have access to a valuable health savings account.

Student Loan Payments

Unfortunately, you’ll have to fork out some of your salary for student loans. Consider Public Loan Service Forgiveness if you are working at a non-profit hospital. Consider refinancing your student loans if it is appropriate for your situation.

Shopping/Miscellaneous

There are many one-off purchases that don’t happen on a monthly basis, so they are hard to fit in a budget. You want to have some wiggle room in your budget to account for these one-time purchases.

Mint vs. You Need A Budget (YNAB)

Some people track their spending using a spreadsheet or even with pen and paper. But that’s not really necessary with Mint. With Mint, you can link your bank accounts, investments, and credit cards, and Mint will automatically categorize your purchases. You can create monthly budgets and track your spending each month.

I know many people use You Need A Budget (YNAB) to track their spending. It’s free for the first month, but then costs $50/year after that. I prefer Mint because it’s free.

Sample Budget

Here’s a sample budget for a single resident making $50,000 a year, or $3,500 a month after taxes. This budget is a good starting point, and you can adjust the numbers to fit your individual circumstances.

Should you aim to save as a resident?

A common question among residents is whether they should aim to save any money during residency. I remember that the financial advisor who came to speak to our 4th-year medical class recommended against us saving money during residency, because it would be so hard to break even in a high cost-of-living area with student loans. If you have a 401(k) match, you should aim to save up to the match. As you see in the budget above, there is a few hundred dollars of wiggle room every month. Hopefully you won’t attend 10 weddings a year or develop an expensive hobby.

What do you think? Did you have a budget as a resident? Were you able to save money as a resident? Do you use Mint or YNAB?