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Avoiding Financial Pitfalls (Part 1): Budgeting


There is more than one road to financial success, but the key is spending less than you earn. Outgrow your new paycheck too quickly and you may find that you are struggling to meet your financial goals. Here are a few basic principles to put you on the right track. By Lindsey Rutland, MD

If you’re like me, once you graduate, someone is going to start putting more money into your bank account than you’ve ever seen. If you’re not careful, all of that delayed gratification can turn a high-earning anesthesiologist into someone who lives paycheck to paycheck. It seems unfathomable that someone earning a six-figure salary could have a low or even negative net worth, but it can become reality if you don’t use your money to build wealth. 

It’s important that your spending is less than your income in order to build wealth. A newly minted anesthesiologist with six figures in student loans is likely to start with a very negative net worth. In order to be financially successful, you must use your income to reduce your debts and increase your assets. To start, a set of clear financial goals will help you direct your dollars. For example, you may want to save for retirement, buy a house, or pay for a child’s college. Next, you’ll need an active plan to help you achieve those goals.

One key strategy is continuing to use those frugality skills you learned in residency. If you maintain a similar or slight increase in your spending from training, you will have plenty left over to put toward your goals. It’s certainly reasonable to increase your standard of living, but take care not to spend every cent in your bank account. Living a modest lifestyle will allow you to faster meet your financial goals and pay off your debts. This may mean renting or buying a starter home while you save up the 20% down payment for your dream house and paying cash for a used Honda. This concept seems very simple, but it will be very tempting to enjoy yourself after all those hard years spent learning your craft. You will have to fight family, spousal, societal and maybe your own expectations in order to stay on track.

It is alarmingly easy to spend your entire salary. New car payments, that big doctor house mortgage, private schools, country club dues, and student loans can get out of control fast. It can be very helpful to track your spending and budget — you might be surprised to find that much of your money is going toward frivolous things that don’t help you reach your goals. You might also find that what you thought was a reasonable lifestyle is more expensive that you realized. There are numerous budgeting apps available (even good old pen and paper will work), but you need to track your spending.

Sorting your spending into percentages of fixed and variable expense categories will give you a map of where money is going. After you’ve done that, you can set up a budget for you and your family. It can be very specific, you can use envelops, different bank accounts, a weekly spending-cap, whatever works well for you. You just have to do it. There are many recommendations on the appropriate percentages for savings and expenses. This is important for each person to determine for themselves, but in general your home should be less than/equal to 20 - 35% of your budget and target retirement savings should be 20% or greater. If you can lower your expenses and increase your savings, of course, you will be better off!

A helpful budgeting concept is the notion of “paying yourself first”. This means putting money away for the future first (ex. savings or retirement) instead of waiting to see what‘s leftover. This requires planning and discipline. If you have money automatically set to leave your account on payday, then you won’t ever miss it. You may choose to set up an automatic transfer to your savings account for a downpayment on a house, or you may be putting extra away for retirement, or paying extra toward your debts. All of those uses of your money will help you build wealth.

Saving for retirement is covered in another blog post, but it should be one of your top priorities, as you are starting to save about ten years behind someone who didn’t choose a career in medicine. If you have an employer-based retirement account with a match, you should be contributing the minimum amount to get the full match, otherwise you’re leaving money on the table. You should also plan on maxing out all tax-advantaged retirement accounts available to you, and it is likely that you will need to save in taxable investment accounts in order to meet your retirement goal.

Another priority to help you avoid financial catastrophe is setting up an emergency fund. This is approximately 3 - 6 months of expenses placed in a liquid account (ex. high interest savings or money market fund). This timeframe is recommended because it is the usual waiting or elimination period for a long-term disability policy. If for some reason you are unable to work or you have a minor emergency (car repair or appliance breakdown), you will be able to dip into that savings and avoid high interest personal loans or credit cards.

Of the things you have to worry about once you finish training, don’t let financial ruin be one of them. If you live well below your means for a while after training and put the rest of the money toward building wealth (investment accounts, retirement, debt elimination, and emergency fund) you will be well on your way to a strong financial future. There are of course tomes dedicated to these topics, and there are many different versions of this advice. I hope this serves as a primer that will spark an interest to research this topic and find strategies that lead to your financial success.

Lindsey Rutland, MD, completed her fellowship in pediatric anesthesiology at the UPMC Children’s Hospital of Pittsburgh in 2018. She has served on ASA's Committees on Membership and Women in Anesthesiology. Dr. Rutland now practices in Austin, Texas, with Capitol Anesthesiology Association a division of USAP.

The ASA Committee on Young Physicians is pleased to present this monthly article series on personal finance. These articles are not written by hedge fund managers or real estate tycoons but by practicing physicians. Some have business degrees and some do not – but every contributor is an anesthesiologist who has some guidance to offer the rising generation of attending physicians. It is not the intention of the committee to offer definitive financial advice, but rather some pearls of wisdom to consider while developing a personal fiscal plan.


ASA Community Blog is published as a benefit for ASA members. The views expressed on this blog are those of the individual contributing writers only and do not necessarily represent the opinions of ASA.