Medical school is a time to form good habits that will serve future physicians in good stead over a long and rewarding career in medicine. Some of these habits relate to personal matters that can have an outsized impact on your well-being. Budgeting is one of these.
Establishing a simple budgeting strategy during training will help you make the right financial decisions now—and in the future. How should you go about budgeting? One of these three methods might be a useful blueprint.
The 50-30-20 method
One of the easiest budgeting methods to follow is the “50-30-20” budget.
Financial experts tout the 50-30-20 for its simplicity. In this system, you divide your expenses into three buckets: 50% for your essential needs, such as housing and groceries, and car payments, then 30% for your wants, or nonessential costs such entertainment; and the final 20% would ideally go to your savings, which might be a difficult bucket for medical students.
“If you’re able to examine your spending with this essential versus nonessential lens during medical school, you’ll be prepared for your next step when you need to budget and ‘live like a resident,’” said Diana Welch, head of hospitals at Laurel Road, a financial services company that specializes in working with physicians.
For those interested in working on their 50-30-20 budget, this calculator tool can offer a helpful starting point.
Dive deeper:
- Medical student financial FAQ: Insight on budgeting, loan repayment
- Budgeting 101: Money management tips for medical students
Other budgeting methods
Experts tend to tout the 50-30-20 method as the most effective budgeting technique. A few others medical student might to consider include:
The envelope system. This budgeting method involves setting aside cash for specific expenses like housing, transportation, and groceries. Once the cash for that category is gone, you cannot spend any more in that area. This can help you stick to your budget by prioritizing essentials expenses. The cons of this approach are that for many, in an electronic world, it is somewhat impractical.
The zero-sum budget. To create a zero-sum budget, simply allocate every dollar of income towards a specific expense. This can help ensure that you do not overspend in any one area. Budgeting apps that can track your spending by connecting with your bank account can help students follow this method.
More than how students go about the budgeting process, the most important part isn’t about the methodology.
“Whichever method you decide to use, setting up a budget early can help you stay on track toward your goals—even during training,” Welch said.
For those going into the medical field, budgeting will be critical component during medical school, and subsequently during residency and fellowship. Student loans will likely be a necessary part of your financial plan. In a survey of graduating 2024 medical students conducted by the Association of American Medical Colleges, 67% of respondents reported having medical school debt, with most of the group reporting their medical school related debt load to be more than $150,000.
“With a bright medical career ahead of you, it’s never too early to create a plan to manage your student loans, especially if you’re an M4 preparing for residency,” Welch said. “Talking to a student-loan specialist early can help you manage your medical school debt with confidence during residency and beyond. Create a plan now so you can set up your future-self for success.”
Dive deeper:
- AMA member exclusive: Medical student loan repayment options and forgiveness consultation
- What I wish I knew in medical school about student-loan repayment
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