Tuesday, May 12, 2015

The Mechanics of Budgeting

Liana left some interesting questions in response to my previous post about budgeting, and I thought I'd turn my answers into a blog post, as I think budgeting isn't something we talk nearly enough about, especially in medicine.

There's a common perception that physicians don't need to budget.  The assumption is that we will all make a shitload of money over the course of our careers, thus enabling us to buy whatever giant homes and ridiculously overpriced cars and designer handbags we desire, without any thought to how much things cost.  In reality, we often start our careers with a shitload of debt (approximately $200,000 in my case*), and after more than a decade of training (16 years for me), we may not want to work as hard as is required to earn a shitload of money.  So budgets are good.

In my case, I started the budgeting process by figuring out how much I was making and how much I was spending on "fixed" expenses (rent, utilities, insurance, parking, housekeeping**, etc.).  I then figured out what my financial goals were - specifically, to pay the interest on my line-of-credit every month, to save $500 per month for retirement, and to not spend more than I was earning.  I then entered everything into an Excel spreadsheet, and I was left with a certain amount of money per month for all of my "variable" expenses (groceries, travel, eating out, clothing, cats, etc.).

To track my "variable" spending, I use an iPhone app called "Visual Budget".  I chose this one because it doesn't link to my bank accounts, and it's pretty user friendly.  It also allows me to create multiple "accounts", which enables me to separate my spending into different categories.  It's taken me a while to come up with a good way of dividing up my spending, but my current (pretty good) setup is as follows:

1)  General Expenses:  This is the account I use for all of my day to day expenses.  It is set up to give me a daily "allowance", which is all the money I can spend on food, entertainment, etc.  Every time I buy something, I immediately record it in the app, and the cost is deducted from my "allowance".  Anything that I don't spend gets carried over to the next day, allowing me to obsessively track all the money that I'm not spending.

2)  Vacation:  Kinda self evident.  I give this account a monthly "allowance", which accumulates until I decide to buy plane tickets or book hotel rooms or do other fun things.

3)  Time Off Fund:  After much internal debate, I decided to reward myself for finishing 16 years of training by giving myself seven weeks off from work.  Unfortunately, I don't have a generous benefactor, so I actually have to fund this on my own.  I was initially planning to dip into my line-of-credit to pay for this, but as I get further along the path of debt repayment/financial responsibility, the thought of increasing my debt becomes more and more appalling, so I decided to save up for my time off instead.

I give this account a weekly "allowance", which I generated by decreasing the "allowance" on my General Expenses account.  Every once in a while, I throw in some extra money from my General Expenses account if I've been particularly frugal and accumulated some surplus.  I'm currently on track to be able to fully cover my expenses during my seven weeks off, which makes me irrationally proud of myself and my ability to not spend money.

And that's it.  The mechanics of my budget.

Initially, sticking to a budget was hard, as I was transitioning from a life of carelessly indulging in everything my heart desired (ooooh....$100 dinner at my favourite tapas restaurant....yes please!) to actually behaving like money is real.  I felt really deprived by not being able to buy whatever I wanted, and I got stressed out when I needed to make a large purchase.  (Such as cat food.  One of my cats has a skin condition that only gets better with $60/bag cat food, and I have a minor heart attack every time the cat food runs out.)

(I represent 10% of my mom's "variable" expenses budget.)

Over time, though, sticking to a budget has gotten vastly easier.  I've started to figure out which expenses are necessary (food, gas, personal hygiene items), which items improve my quality of life (budget travel, eating out at less expensive restaurants, hosting pot lucks at my apartment), and which items I can entirely live without (cafeteria food, cable tv, books that don't come from a library, silly $5-10 self-indulgent purchases that add up really quickly).  It's actually become an entertaining challenge to see how much fun I can have for little to no money, or to come up with the tastiest meals possible from the leftovers in my fridge***.  I expected that sticking to a budget would be an act of white-knuckled self deprivation, but in reality, it has opened me up to all kinds of things that make my life better.  If anything, I'm happier for having less money to spend.

**Yes, I am a spoiled "rich" person who has a housekeeper.  I love it, and it is one of the last expenses that I would ever cut from my budget.
***The girlfriend is an expert at this.  Give her flour, milk, eggs, and cheese, and she'll make crepes or quiches or any other number of amazing things. 


  1. Thank you for this post! I started out in med school where 'keeping up with the Joneses' was the norm, even though they all had loans and I had a fixed stipend. Now that I'm doing the PhD, I'm much more conscious of the spending because I'm with a group of people who are in the same financial situation as I am. I actually (and I'm slightly ashamed it took me 25 years to do it) sat down with Dad and Mom this past break and looked at my expenses, income and made a budget with their help and suggestions from way back when they were in the same boat (Mama gave cooking advice, Dad explained how he cut corners in grad school). Thankfully, Indian food is cheap :)

    It's really hard (or it was, a few weeks ago) to not go to the coffee shop by my house and buy a $5 latte, instead of just making coffee at home, but I've stopped giving myself excuses!

    Also, I recall from your old blog that you enjoy Indian food-more than happy to send you the DV Family recipe for our north indian curries :D

  2. Dolce Vita - I'm glad this post resonated with you! You're going to be in waaaay better financial shape when you're done than I am.

    I love Indian food, and I would be very excited to receive family recipes. Did you by any chance post a recipe on your blog for aloo gobi a long time ago? I made aloo gobi from a recipe I found online, and it was amazing, but I haven't been able to find it despite a lot of searching....could the recipe have been yours?

  3. Thanks for the post! I use Mint, and really like the graphs and trends that are available with it. Like you, I have a "fixed expenses" budget and then a "variable" budget. I do want to have a "vacation" budget as that seems like it would make more sense than just taking it out of the variable budget each month.