Once you have decided to enroll in medical school, be sure to consider:
- How you will finance your medical education,
- The amount of indebtedness you are willing to incur, and
- How to live on a fixed allowance.
Good money management is a learned skill. Remember that the goal of budgeting is to live within your means and avoid unnecessary debt.
Key Financial Strategies
- Have a spending plan
- This does not mean you have to keep track of every penny, but you should have a plan for how you want to allocate your resources. If you know where your money goes, you are less likely to spend more than you have. A spending plan can also help you identify future expenses so that you can put money aside to pay for them.
- Keep a cash reserve for emergencies
- Unexpected expenses, such as car repairs or medical bills, are unavoidable. Having an emergency fund means you will be less likely to be forced to charge these bills on a credit card.
- Avoid overuse of credit
- Credit is convenient, but it is not free. You are responsible for repaying everything you borrow, including interest and finance charges. Choose a credit card with the lowest fees and interest rate possible. Pay off your balance in full every month. If you do not trust yourself, do not carry your card in your wallet. Take it with you only when you plan to use it.
- Use windfalls constructively
- Use the rule of thirds: one-third to your savings account, one-third to pay down debt, one-third to spend.
- Make provisions for larger expenses
- Plan for expenses that come up only once or twice per year, like auto insurance, by factoring the monthly amount into your budget and setting that amount aside.
- Don't underestimate the cost of ownership
- This is particularly important when purchasing a car or a home. You may be able to afford the payment, but also consider the cost of insurance and maintenance when making your purchase.
- Plug up your spending leaks
- Pay attention to all of those seemingly minor expenditures, like your morning cup of coffee from Starbucks or the afternoon candy bar from the vending machine. You may be surprised to find that you're spending as much as $150-$300 per year on these items.
- Shop carefully
- Many of our spending leaks are a result of impulse buys. Limit your grocery shopping trips to every two weeks. Bring a list to the grocery store and stick to it! Stay out of the mall unless you have a specific item you need to purchase.
- Save small amounts
- The idea is to get in the habit of saving, no matter how little the amount. Saving even $5 per week will eventually add up.
- Practice delayed gratification
- Ask yourself these questions when considering a purchase:
- Is this a "want" or a "need"?
- Do I have to have it right now?
- Can I get it cheaper somewhere else?
- Can I borrow or rent it instead of buying it?