Doctors are human, and humans need budgets. However, budgets are not one-size-fits-all. Physicians have a specific set of financial circumstances that make their budgeting more nuanced. They’re high-earners, but doctors also tend to have larger expenses, service more student loan debt, and pay higher taxes, for example. Moreover, each physician’s financial circumstances are different. For example, housing costs for a Montana-based doctor are going to be lower than those for a doctor in New Jersey. If crafting or improving your budget is a priority, we recommend using this principle-based approach, then customizing to your needs. We’ve also included links to real physician budgets, if you’d like to see the gritty-gritty percentages of how doctors have budgeted their money. Here are 6 steps to creating a better physician budget. Step 1: Determine your priority Merriam Webster defines priority as “something given or meriting attention before competing alternatives.” Something, not things. Singular. Before you begin crafting a budget, we recommend that you (and your significant other, if applicable) determine a singular financial priority. Possibilities may include early retirement, financial independence, both (in the form of FIRE), eliminating student loan debt, or saving for college, for example. By determining a priority, you’re determining where you’ll put the bulk of your savings. If you decide it’s early retirement, that doesn’t mean you ignore the rest. You are simply deciding what is most important to you. Step 2: Determine what you’re spending What gets measured gets managed. This includes your money. For 2-3 months, log every dollar that comes in and every dollar that goes out. We don’t care how you do it, just do it. Build your own high-powered Excel spreadsheet, download a Microsoft budget template, use a free service like Mint (just keep in mind they’ll use your data), or use a paid service like QuickBooks. There are 2 categories of expenses, fixed and variable. Your leading fixed expenses are likely to be the Big 3: housing, food, and transportation. Physicians are also likely to have these standouts: disability, malpractice, and personal liability insurance, as well as student loans. Variable expenses may include things such as dining out, discretionary shopping, and entertainment. These are harder to pin down, but easier to control. You can scale back on restaurants, but not on your mortgage payment. The idea here is to get as good of an estimate as you can. Mint excels at bucketing and tracking variable expenses. When tracking, try to avoid outlier months that are going to jack up your spending. These typically include months containing major holidays or vacations. Step 3: Identify savings opportunities Surgeons, fetch your scalpels. It’s time to start slashing. While you need housing, food, and transportation, there are ways to save money on all three. On the housing front, you might be able to save by renting in a less-swanky location. If you’re a homeowner, you might be able to free up some monthly funds in the near future by making some extra mortgage payments to eliminate PMI. Saving on food costs may be a matter of paying closer attention to sales and coupon offers, as well as shopping at more affordable grocery stores. On the transportation front, city-based physicians may want to rely on mass transit. Those who need cars can opt for used, instead of financing a vehicle’s depreciation with a lease, or monthly financing payments. Savings are easier to identify in your variable spending. After tracking your income and expenditures for 3 months, you’ll begin to see where you can scale back. These are some money-wasters you can eliminate right away. Lowering your variable spending might mean washing your own car, having fewer restaurant meals, or eliminating an unused streaming service, for example. It could also mean sticking with an older smartphone that’s paid off rather than opting for the latest model. Controlling your variable spending is more often a matter of creating better financial habits. Step 4: Determine your monthly spending limit This is where the rubber meets the road for budgeting. Naturally, your spending limits for variable and fixed expenditures should be lower than your monthly income. In your spreadsheet or budgeting software, add up your fixed and variable spending. Greater than your total income? Revise and repeat. As we mentioned earlier, every physician is going to have unique financial circumstances and, therefore, spending limits. Your career stage will also play into this. For example, a more established physician likely doesn’t have to sweat trips to the car wash or a morning Starbucks run. An up-and-comer might have to restrict both. So, how much money should you allocate for each expenditure? White Coat Investor created some great examples using hypothetical physicians at different career stages. The key to budgeting success is finding a balance between frugality and frivolity. Too frugal, and you’re setting yourself up to fail. You’re more likely to blow your budget month after month, then give up on it altogether. Too frivolous, and you’ll end up a broke doctor. Step 5: Determine your monthly savings goal So by now, you’ve tracked your expenditures for 2-3 months, set spending limits, and added them up, resulting in a figure that is less than your monthly income. The difference between your expenditures and your income is your monthly savings goal. You’ve also established what your savings priority is.The next step is to identify your other mandatory savings buckets. These may include areas such as eliminating student loan debt, college savings, or paying off your mortgage. Once you’ve identified each of your savings buckets, assign a percentage to each. Your priority bucket gets the highest percentage. We find that people save better when they automate it. For example, if your priority savings goal is to eliminate your student loan debts, automate your loan payments. You can even take it a step further by creating a separate checking account for paying your loans and automating direct deposits to that account every time you get paid. Is retirement the priority? Then automate contributions to your retirement account. Step 6: Monitor and adjust Budgeting isn’t a one-and-done activity. You need to track your progress over time to see if your plans match reality. Furthermore, your financial picture will change over time. As you become more established, you’re likely to achieve your savings priority, requiring you to create a new one. You might also find that you can give yourself more of a spending cushion each month as your income increases. Finally, getting married and starting a family are 2 guaranteed changes that will require you to revisit your budget. Think of these monthly reviews of your budget as personal finance physicals. TL;DR How to create a physician-friendly budget: Determine your priority. What is your most important financial goal? Determine your spending. What are your fixed and variable monthly expenditures? Identify savings opportunities. How can you reduce your fixed and variable monthly expenditures? Determine your monthly spending limits. Set caps on what you can spend each month. This should be less than your income, otherwise you have a problem. Determine your monthly savings goal. This is your income minus your fixed and variable expenditures. Split this amount between your various savings goals, with your priority getting the highest percentage. Monitor and adjust. Check your budget monthly to make sure you’re sticking to it. Adjust as your income and life changes. Source
Doctors are high earners u said ...it is interesting ,,here in ethiopia it is much lower earners are doctors relative to some our country 's profession and other country's doctor salary
