Doctors: 4 Steps to Building Your Finances

Karen Riccio

Disclosures

December 21, 2018

In This Article

2. Give Every Dollar a Specific Purpose

White added that doctors should calculate their anticipated net income and then design a plan that gives every dollar a specific purpose.

"Giving every dollar a purpose creates boundaries and good habits. It also creates a mental map that allows a person to feel more organized, which has positive implications for mental health and reduces physician burnout. If a dollar does not have a designated purpose, its capacity to create value (travel, investment growth, debt reduction, tax benefits) is underutilized or even worse, wasted," he said.

Once established, tracking your spending takes only a matter of minutes. Which option you choose depends on what's easiest and makes most sense for you.

You can do it the old-fashioned way, by using a shoebox to store every receipt. At the end of the month, separate the receipts into expense categories (eg, entertainment, gas, automotive, household). Total up the receipts to see how much was spent in each expense category. Saving monthly receipts and totaling them up at the end of the month may seem simplistic, but it is a precise way for a physician to create a budget.

Using the shoebox budgeting method can work for doctors who don't want to calculate a budget using spreadsheets or budgeting software.

3. Use Programs to Help Budget and Plan

Many young doctors will instead use a spreadsheet program on their computer, such as Excel or Google Sheets, and create columns for the upcoming 3 or 4 months with expense categories above each. At the end of the month, total all expenses for each category and enter them into the relevant cell in the spreadsheet. Using the sum function, total that month's column to get the total monthly expenses. Repeat for a minimum of 3 months, and then average the monthly totals to get the monthly expense amount. There may be a small learning curve for doctors who do not regularly use spreadsheets, but physicians who are already comfortable with spreadsheets will be able to easily create a budget.

Finally, software programs such as Quicken can automate much of your tracking by linking with your bank and credit card accounts. They can also automatically categorize your spending and project future cash flow from the practice, leaving other long-term goals, such as retirement, on the back burner.

Intuit's Mint online software is a free, web-based personal finance program. It keeps track of your bank account transactions, credit card balances, investment balances, and all other financial information under one umbrella.

Another budgeting tool, Tiller, pulls your financial information from your banks and other financial institutions and organizes it into one easy-to-use space. Tiller costs $59 a year; however, you can try it for free for 30 days.

Personal Capital offers free personal finance software to help you manage and track financial goals, create a budget, track your net worth, and more. The company is affiliated with an investment advisory firm, and offers advisory advice and funds to invest in.

You Need a Budget is a user-friendly online budgeting tool that helps you gain control of your money. It costs $85 annually (with a free 34-day trial). Their system's goal is to plan where you want your money to go before you spend it, so you can avoid the wasteful spending that puts so many budgets in the red.

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