Many physicians are no strangers to the necessity of scrimping and saving—after all, during the residency process, there are not many future doctors who have funds to spare. However, once physicians graduate, start reaping the benefits of a six-figure salary, and begin paying off debt from medical school loans, the necessity of budgeting may seem like a thing of the past...and for those who are smart with their money, it can be!
No matter how much money you’re bringing in each month, whether it equates to a smaller residency stipend or a six-figure salary, it is vital to know where your money is coming from and where it is going. By making sure you know exactly what your money is doing from the moment it hits your bank account, you can ditch the spreadsheets and percentages and start making the most of your money both now and in the future.
Why Most People Think Budgeting is a Must
While many people hope to find a rule-based, percentage program when they seek out budgeting advice, we don’t believe in a one-size-fits-all approach for anyone (including physicians). However, with these personalized guidelines, you can be certain your money is doing exactly what you want it to from the moment it hits your bank account, leaving you with more funds left over for living the life you want.
For most physicians, when payday rolls around, their insurance and taxes are taken care of as it is already deducted automatically. From there, most go on to take care of their grocery, leisure, and other lifestyle expenses with a regimented budget while paying the minimum on their debts. However, by reallocating the order of operations that occurs on payday, you can let your money do the work so you can do the living—no budget tracking needed.
How Physicians Can Avoid Budgeting
- Protect Your Income First
There are many valuable assets in life, but for physicians, their most valuable asset by far is the ability to get up and go to work in the morning. That is why protecting your income and minimizing risks is the first step in taking care of your cash flow. Starting off by paying insurance ensures that your income, health, and life is fully protected so you and your family will still be able to maintain your quality of life in case the worst occurs.
- Pay Yourself Second
In most traditional budget structures, savings comes last—but when you plan to save from the beginning, you can be sure you are prioritizing your future without taking away from your current lifestyle. Saving 15-20% of your income automatically will ensure that your savings and retirement funds are already squared away to build the future you are dreaming of.
- Pay Down on Debts Third
One of the most detrimental things about being a physician is the burden of student loans that many face for the majority of their lives. However, by prioritizing paying down your debts—and paying as much as possible towards them—you can get yourself on track to quickly pay down your school loans, mortgage, car payment, and any other recurring expenses you may be faced with. Just ensure your income is protected and your monthly savings goal has been met first.
- Live Your Life
Now, the fun part! Once your necessities are taken care of, everything you have left over is yours for spending. By making sure your insurance and debts are paid and your money is saved first, you can then utilize the rest however you choose. There’s no need to worry about budgeting or the allocations of funds, as everything important has been handled and what you have leftover is there to enjoy. Guilt-free spending can be accomplished!
Above is an example of finances for an average married couple earning $340,000/year. By working from left to right across the “Cash Flow” section, you can see that by prioritizing protection, asset building, and debts and taxes first, they’re left with over $160,000 remaining for lifestyle expenses.
Are you ready to stop budgeting and start living your life? We can help. Contact us to learn more about our financial planning and wealth management services for physicians and medical professionals today.
Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. Links to external sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services and make no representation as to the completeness, suitability, or quality thereof.
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 6115 Park South Drive Suite 200, Charlotte, NC 28210; 704.552.8507. Securities products offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Consolidated Planning is not an affiliate or subsidiary of PAS or Guardian. 2020-108468 Exp 12/22