There’s no getting around it — you do need a budget. Whether you’re in medical school or residency, whether you have outstanding student loans, are debt free, or even have a bit of savings, you’re going to have to pay special attention to where, when and how you’re spending your money over the longer term.
Getting started is the hardest part
Often, the thing that prevents people from developing a budget is the very first step: figuring out your overall spending. It can be a painful process to look honestly at where your money is going (especially when you know that you’re going to have to cut back in some areas). But there are a few ways you can make the process of building a budget — and, more importantly, sticking to it — a little less stressful.
One way to get over that first hump is to skip the step of assigning a specific dollar amount to your discretionary spending. Trying to spend a certain amount each month in a category can be complicated. Instead, you can pay for everything you buy — food, entertainment, clothing, etc. — with your credit card, and then look at your balance regularly. If you’re halfway through the month and you’re at or under the total you wanted to spend, that’s great. If you’re over, then you’re going to have to make some adjustments for the next two weeks.
Sometimes a simple little trick like that can make all the difference. It’s all about finding a new perspective on your finances.
Your medical training should be your priority, and every moment that is taken up with worrying about where your money is going works against it. Life can be stressful enough — your budget should be easing your stress, not contributing to it.
The burrito exchange rate
We heard about one client who had a unique way of forcing himself to see his finances in a new light. When he thought about the thing in his life that he couldn’t live without — the thing that really made him happy — he discovered it was … burritos. After a long night, he energized himself with a burrito. The promise of a nice hot burrito also got him through the day.
So, to better understand his spending habits and make harder choices about where his money should go, he started calculating the value of things he wanted in burritos. Think of it as a burrito exchange rate. Would he be willing to trade 10 burritos for a new pair of shoes? Was that weekend ski trip worth 40 future burritos? Could he bear to give up five burritos for a night out on the town? It might seem silly, but this new context for understanding the “happiness cost” of what he spent his money on helped him to be more disciplined with his budget.
Consider what your own unit of measurement for happiness is. You don’t have to be happy about having a budget — but you can find what makes you happy within it. You’re going to have to spend money; there’s no getting around that. You just have to find out what those expenses are really worth to you.
There are things in your life that you love (that may or may not be tasty Mexican dishes), and, because you love them, they probably bring some small sense of peace and consistency to your life. So it’s not wrong to spend money on them. But, in order to control your spending through a personalized budget, you have to free up money from somewhere else to accommodate those purchases.
Day to day, your spending habits might seem inconsequential, but there are long-term consequences. Over time, the cost of having a couple of lattes every day could be equivalent to a down payment on your first home.
There’s no point in sugar-coating it
The reality is, you won’t be able to do everything you want. Budgeting is about making hard decisions; knowing what’s most important to you, and how to say no to things that aren’t, helps to make those decisions much easier.
A budget is just one part of your financial plan — to get a big picture view of your finances, and to develop a smart strategy for managing it all, connect with an MD Advisor*. They’ll be happy to chat with you.
*MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.
The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.