A budget is a guide that helps you increase your awareness of where your money is going and how much you are saving. It’s important to develop a budget early on as part of a strong financial foundation. It’s a common misconception that budgeting gets easier when you have more money. As the rapper Notorious B.I.G. famously said, “Mo’ money, mo’ problems.” Why is it important to develop a budget while you’re in training?

A budget will help you develop habits of saving, even if just $20 a month at the beginning. It is important to know your cash flow. No matter where you are in your career your cash flow is key. Though your finances can be time-consuming and stressful to think about, ignoring them won’t make your financial situation any better.  Developing a habit of reviewing and updating your finances on a yearly basis can allow you to keep your cash flow in check.

A budget will also help you answer these three questions: Where is your money going?  Is it going where you want it to go? What changes need to be made?

Even though you will make more money when you’re finished with your medical training, your budget items will stay the same. Your budget items may increase in size, but whether you take $200 vacations or $20,000 vacations, you still need to be able to account for that money.

4 budget tips

1. Keep it realistic. You probably spend more than $100 a month on food. Be honest. We all wish our eating habits fit in the McDonald’s dollar menu price, but let’s face it. Dollar menu prices are not realistic.

2. Budgets are not meant to be exact to the penny. Be as thorough as you can, but no need to stiff your waiter because you’ll go $1.13 over your dining out budget. A budget is a close estimate of your expenses. Utility costs such as water, electricity, and gas, tend to fluctuate depending on the temperature and need for heat or air conditioning; therefore an estimate or average of those costs would suffice.

3. Pay yourself first. If you have $100 left over every month, put that money in your emergency fund first. Splurging on a fancy dinner or shopping spree with the leftover $100 will not allow you to save for emergencies.

4. Minor tweaks will get you there. It’s not big adjustments to your budget, but minor tweaks, that account for getting your spending back on track. Smaller tweaks are easier to maintain and add up quickly. Adding half to one more percent of your salary to your 401k every month would be a minor tweak, and you would barely notice it was missing from your paycheck.

Budgeting is easier than you think. 80 percent of your budget consists of fixed expenses. It’s the other 20 percent that makes budgeting seem difficult. To start on your budget, begin by writing down your fixed expenses since these are the easiest to identify. Some examples of fixed expenses are car payments, mortgage/rent, cell phone, savings, and security system. After you write down your fixed expenses, work on your variable expenses. Groceries, for example, are a variable expense.

Starting and maintaining a budget is the key to good financial habits. Physicians should start one early on in their training.

John Dameron is a financial planner and partner, Spaugh Dameron Tenny. He is the author of the Residents and Fellows Financial Survival Guide. He is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC (www.sipc.org). 4350 Congress St., Suite 300, Charlotte, NC 28209. Spaugh Dameron Tenny is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. CRN202005-231302

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