The “PERK”s of Building a Better Budget

For young doctors recently emerged from medical school, the road from cash-strapped resident to well-heeled physician may seem interminable. Modest initial income (an average $40,000-$45,000 starting salary) combines with crushing student loan debt (an average $158,000), leaving little disposable income for young physicians. Making sure they have more money than month, rather than the other way around, means that young physicians need to adopt a spending plan—in other words, a budget—stat.

The first step is to make a list of all expenses. Large, recurring expenses such as rent, utilities, and transportation costs are easy to quantify, but the incidentals that frequently go untracked can derail a budget in no time. To better identify them, it’s helpful to use a small notebook (or your smartphone) to jot down every dime that is spent for an entire week (then multiply by four for a monthly total); from stray bagels to afternoon Starbucks lattes, parking meters, cigarettes (or Nicorette gum, hopefully), small items can add up to a significant percentage of one’s budget and tracking them can in and of itself help reduce spending.

Subtract expenses from income to determine the net monthly cash flow. Next, apply the “PERK” strategy to maximize the amount of available funds throughout the month:

Postpone major expenses. The temptation to reward oneself for surviving med school is understandable. However, buying a new car, taking an expensive vacation, or purchasing elaborate items for a hobby (think skis, scuba, racing bike, photography equipment and the like) is not a wise move on a minimal budget.

Eliminate cash drains. Pay off credit cards systematically, focusing on first eliminating the cards with the highest interest. Transfer credit card debt onto a zero-interest card via a balance transfer and pay off the balance by the end of the promotional period if possible, so all of the payment will go toward paying off the balance.

Reduce expenditures. Why spend $150 a month on dry cleaning when it’s possible to hand wash half of those items and save $75 in the process? Rethink nice-to-have services such as cable and premium subscriptions, resist the urge to acquire the latest electronic device or upgrade, and brown-bag it to the office or hospital most days.

Keep what’s necessary. Rent or mortgage amounts, basic utilities, food, transportation costs, insurance premiums, and so on are necessary, but even necessities can be trimmed. Consider getting a roommate to instantly halve or substantially reduce what is typically the largest item on the budget—rent (or mortgage).

By budgeting with a PERK approach, it is possible for even the leanest spending plans to end up in the green each month. To keep the cash flowing, make sure to include physicians disability insurance in the budget. Such coverage is key to protecting a young physician’s greatest asset—the ability to earn an income—and fortunately, premium amounts can be tailored in keeping with a young physician’s limited income during his or her early years in practice. Contact a professional insurance agent to learn more about physicians disability coverage.