The first thing every physician should do before getting out of training is prepare a financial plan.. A well-designed system doesn't just track progress—it also prevents missteps before they happen.
Medical students and residents can live a version of this plan, which we will break down for each step. Please see a sample medical school and resident budget at the end that can be downloaded and used as a guide.
Step 1: Pay Yourself First
Medical students: For medical students, this is not a real possibility. Not only are you not able to pay yourself first, you are spending your future self’s money via student loans if you have to take them out. The best way for medical students to pay yourself first is to mitigate how much debt you take out by adopting our cash flow management system.
Residents: Once you are in training, I challenge you to save 10% of your gross pay into your work retirement plan or a Roth IRA. If you have significant student loan debt, you might consider part of your 10% to be making the required payments on your loan toward Public Service Loan Forgiveness or at least staying ahead of interest accumulating.
Attendings: Most of you will need to save 25% to set yourself up for the option to retire by the time you are 65. For those of you wanting the option to retire earlier, that number should be between 30%-50% of your gross pay.
Step 2: Build Savings for Predictable and Unpredictable Needs
Create separate savings buckets for recurring or large, irregular expenses to avoid future financial stress. Medical students and residents can use this system to set money aside in an emergency fund, to save ahead for annual recurring bills, or even travel.
Attendings will want to build as many as 7-10 separate savings goals.
Emergency Fund: Save enough to cover several months of living expenses. This protects you from unexpected life events.
Future Goals: Save monthly for large purchases like vacations, car replacements, or home repairs.
Recurring Bills: Set aside funds for annual insurance premiums, tax payments, or tuition bills.
Health Expenses: If on a high-deductible plan, save monthly toward meeting your annual deductible.
Home Maintenance: Budget a percentage of your home’s value each year for repairs and upkeep.
Remodeling & Upgrades: Treat cosmetic home improvements as separate from home repair. This can be an expensive hobby. Be clear-eyed when you go about it.
Other: Clothing, gifts, and tech upgrades can also be saved for intentionally through additional savings accounts.
This approach minimizes financial shocks by spreading out costs over time and reducing reliance on credit. Automate monthly contributions into each of these savings accounts.
Step 3: Cover Fixed Bills
These include housing, utilities, insurance, subscriptions, and other recurring monthly obligations.
The goal is to live well within your means, ensuring that your housing costs in particular do not crowd out other priorities.
Consider a modest home relative to your income, especially early in your career, to allow room for other savings goals.
Examine your fixed bills periodically to eliminated unused subscriptions or to lower payments where possible.
Step 4: Spend What’s Left
After savings and bills are handled, the remaining amount is available for discretionary spending.
Use this for food, entertainment, transportation, and day-to-day purchases.
Keep this in a separate “spending” account to avoid confusion and overspending.
Consider using a debit card tied to this account to naturally cap spending.
Conclusion
With this system:
You prioritize your future while maintaining a good quality of life now.
You avoid the stress of surprise expenses and the trap of higher-than-necessary student loans and consumer debt.
You gain freedom—the power to work less, retire early, or simply enjoy financial security.
At Aptus Financial, we believe every resident deserves a financial plan before they get out of training. Aptus is an advice-only financial planning company dedicated to financial planning for residents and early-career physicians. Our delayed payment option makes comprehensive planning accessible for residents. Learn more here: https://www.aptusfinancial.com/resident-financial-planning