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Medical Student Perspectives: Money Management: A Medical Student Financial Guide

Whether you are deep in six-figure debt or obliviously swiping your parents’ credit card with every purchase, all of us are concerned about money at some point. The financial burdens placed on medical students, the budding physicians of the future, are at levels previous medical graduates did not endure. Many medical students are not sure how to tackle a budget or a HUGE loan lump sum at the beginning of the semester. Not everyone can watch CNBC or Fox Business for the latest financial news and “wealth management” advice. So here are some tips that I have used and gathered from my other medical school friends. Why should you listen to me, though? While I am admittedly not a financial analyst, I did get my undergraduate degree in business management and I have sat through many seminars on financial planning. So listen up, this might just change your life!

Starting out, one of the worst mistakes students make financially is also the most popular crime committed. At the beginning of the year or semester, most students get a loan or large sum of money and place it all in their checking account. They then proceed to just spend as needed until the next large sum will be available. Meanwhile, at the end of the semester their account balance gets smaller and smaller until it reaches zilch, or worse, the feared overdraft. This is a terrible plan for several reasons. You have no way to track how much money you are spending each month. You may spend all of it upfront getting ready for school and housing, but as the semester goes on you have less and less to pay off your commitments. Many students find themselves at the holidays with little money for that plane ticket home or presents for family and friends. This is bad fiscal policy and frequently causes you to make tough financial decisions when you absolutely need the money. Not to mention this is also the time when you are taking the hardest finals of your lives. Even if you know ahead of time that you will need to save some money for the end of this period, it is hard to be certain you will have enough when you are not even sure how much you spend each month. When you see that large amount just hanging out in your checking account, it is really easy to be loose with your money and spend without consideration.

How can you tackle the relentless draining of your checking account? The following is what I do and it has been working great for three years now. First, I take the lump sum that I get at the beginning of each semester and divide it by the number of months it will be until the next precious check arrives. So to make it easy, let us say that you get $12,000 in loans and funds from your parents for a six-month time period. That means you have $2,000 a month to survive on. I recommend placing the entire $12,000 in a savings account. Then at the beginning of each month you give yourself an allowance of $2,000 that you transfer into your checking account. This is really easy and ensures that you will have enough for each month. Using this method teaches you to budget as well. It will force you to look at whether you are over or under spending each month. If you under spend, that money just gets added to your next allowance at the beginning of the month. You might have $2,234 to start out the next month. Residency programs and businesses do not give you half your salary at the beginning of the year. So training yourself to be disciplined now can only help you when you actually get a salary in a few years.

For some people, this method is too overwhelming and does not fit their personality. That is fine as long as you are trying to balance the same amount of expenditures each month so you do not blow it all before the end. Another method I have heard my friends use is to pay off all the expenses they know they are committed to at the beginning when they get their lump sum. That includes rent, car payments, insurance, and fixed bills like cable/internet or Netflix. This way they know that all of the required bills are taken care of and the remaining balance is free to spend on whatever they like. I think this is a good plan for those who easily forget that the rent is due until it seems to sneak up on them. Whatever plan works for you, being organized with your money is extremely important. We will be making financial decisions for the rest of our lives and now is the best time to start being responsible for your spending.

An equally important part of being responsible with your money is saving for splurging and having fun. Make sure you plan for shopping, dining, and bar tabs that always seem higher than expected. We all need vacations throughout medical school to unwind on the beach or see our family and friends. Do not let your financial burdens detract from living a full life. While having fun and going on vacation is not in the “official medical school loan budget,” the right amount of planning and saving will allow you to have extra money to use at your leisure. You never know when your car will break down or your computer will crash, so be ready for the fun surprises in life.

A quote that I have read is, “The worst financial decision you will ever make is the daily decision to spend money on things you don’t need.” Be smart with your money and enjoy spending it. How you spend your money says a lot about your values and priorities in life, and people take notice.

Gates Colbert, MSIII
Southwestern Representative, Council of Student Members
University of Texas Medical School at Houston, 2010
University of Oklahoma, 2006, BBA
Email: Gates.B.Colbert@uth.tmc.edu

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Back to April 2009 Issue of IMpact

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