Simply put, a budget is a plan of how you intend to spend your money based on your unique set of values, goals, and aspirations. A budget can be as simple a set of principles or as complicated as a spreadsheet with endless line items of data. Most young medical professionals may find something in between to be helpful. Budgets are important because they assist us in understanding where we’ve been, where we are, and where we are going. Let’s consider several principles that are important to the budgeting process.
Track your spending.
This is where it all begins. Tracking your spending will help increase your awareness of money in general, it will help you see where your money is going, and it will enable you to identify your unique spending habits. All three of these outcomes are essential to developing and implementing your unique money vision. You can use an app, a spreadsheet, or the notes function on your smart phone to track your spending. Just tracking your expenses often leads to reduced spending because you’re paying more attention. Try it for a month and see if it helps.
Know your minimum expenses.
Many young medical professionals may decide to create budget but could find it difficult deciding what categories to track and how much should go into each one. A great way to handle this is to calculate your minimum expenses. This can be done by identifying the minimum amount of money you need to survive on each month. Your minimum expenses will include the three biggies: housing, food, and transportation. Minimum debt payments should be included here as well. Minimum savings, while not an issue of survival should also be a part of this consideration. These expenses help create a baseline for your categories and your amounts. From there you can figure out what you have left to spend on the rest, the non-essentials.
Determine your financial priorities.
In an ideal world young medical professionals would have had an endless supply of money to support all the interesting and fun things there are to do. But in the real world, you must make tradeoffs. Deciding your financial priorities involves identifying your unique values and bringing your spending in line with them. For instance, you may love travel. Because this is a
priority, you decide you are willing to spend less on eating out. The result, you have more money to put towards the next great travel adventure.
Make your budget flexible. No one can predict the future and a budget should not be expected to either. No matter how carefully you plan, life will roll out a bit differently in actuality. This is ok. A budget can allow for the unusual and the unexpected. One way to do this effectively is to have a category like, “Unexpected Expenses” or “Stuff I Forgot to Budget For.” Allowing “room” in the budget may allow the budget to assist you, not control you.
Let your budget evolve. Budgeting is not a one-and-done proposition. Budgets change as you gain more experience at managing your money, as you move from one season of life to another, and as you adjust and refine your values and goals. Budgeting is a lifelong process that may add depth and perspective to your financial habits.
At R&R Financial Advisors, we are assisting young medical professionals to develop and
implement sound budgeting habits. _________________________________________________________________
Investment advisory services offered through Brookstone Wealth Advisors, LLC (BWA), a registered investment advisor. BWA and Brookstone Capital Management, LLC are affiliated companies. BWA and R&R Financial Advisors, LLC are independent of each other. Insurance products and services are not offered through BWA but are offered and sold through individually licensed and appointed agents.
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