Whether you're a new resident physician or have been in practice for years, you can benefit from the budgeting process. Your budget will be personal to you (and your spouse or significant other, if you choose to create a household budget); there's not a one-size-fits-all solution that works for every doctor. If you're ready to create a budget but aren't sure where to begin or what to include, follow these tips: 1. Start by cataloguing your expenses. Each of us has certain fixed expenses every month. Things like mortgage payments, car payments, student loan payments, insurance premiums, cable, cell phones and day care expenses generally don't vary much (if at all) from month-to-month. Everyone also has discretionary expenses. Take a good look at how much money you spend every month on things like entertainment, dining out and even impulse purchases. Chances are, there are opportunities to cut back on those types of expenses without feeling deprived. When you're looking for ways to trim your budget, you may be also be able to lower some of your fixed expenses. For example, it may make sense to explore options to lower debt payments (but not at the expense of long-term interest.) When you are able to lower expenditures, you'll have more money to set aside for future goals. Your financial planner can help you evaluate where you're spending, and where there may be opportunities to increase savings. 2. Pay yourself first. Many successful doctors live by one simple rule: set aside your retirement savings and other investments first. When you include retirement savings as a fixed expense that isn't optional, and you're consistently saving money month after month for your future goals, you're much more likely to actually reach those goals. Set up your retirement deductions to come directly from your paycheck. If you've maxed out your retirement plan contributions and you still have discretionary dollars left over with, talk to your financial professional about automatic investing to help you reach your other goals. Saving for children's educations or for future purchases can be painless when you treat those deductions as required expenses every month. 3. Compare your expenses to your income. Ideally, you'll have more leftover expendable income at the end of the month that you can put toward savings. Your budget can help you identify how much you should be able to save, as well as tweaks you can make to save even more. 4. Don't let the budgeting process overwhelm you. Starting with even a basic financial budget is better than not budgeting at all. If you're overwhelmed by the idea of even starting, start small. Save all of your receipts for one month, separating them into categories (i.e. gas receipts, restaurant meals, groceries, etc..) This should give you a true picture of what your monthly expenditures are for each of the various categories. There are also templates, software packages and financial planning tools available to help physicians create and manage their budgets. Medical Practice Budgeting While the above tips make sense for both physicians and non-physicians alike, there are special considerations for physicians' medical practices. A budget for a medical practice is just as important as your personal budget. Your practice's budget is a tool that not only tracks your revenue and expenditures, but helps you plan for them. When it comes time to make decisions about adding or reducing staff, moving to new space or purchasing/leasing new equipment, your budget will be invaluable in helping identify options. When planning the revenue side of your medical practice budget, evaluate the services you currently offer as well as those you could offer to patients. Look at the expenses associated with those services when determining whether changes are merited. Changes in your revenue will affect your expenses, and vice versa, so you can't just look at one side of the equation. Most planners agree that medical practice budgets should use separate revenue lines for each physician in your practice. Some practices break it down even further, using separate revenue lines for different types of services provided. This can help clearly identify if too much, or too little, of the budget is allocated to a certain service or area. However you choose to organize your medical practice budget, revisit it and adjust periodically as needed. And, make sure it makes sense for your practice. Creating a pie-in-the-sky budget you're unable to stick to won't add value to your practice. Your Financial Professional Can Help When you approach your finances deliberately, make a plan and stick to that plan, you can make the most of that income. Physician budgeting isn't always easy, but it doesn't have to be difficult either. Contact your financial plannerfor more information, and to get started creating and managing your budget - your finances will thank you later. Source
