how to manage cash flow budget for physician families

2017 Guide to Budgeting for Doctors

Budgeting lays the foundation for doctors to make progress toward their financial goals like paying off student loans, buying a home, saving for college and investing for retirement. A well calculated budget brings clarity to where a physician family’s money is being spent and how much they have to invest in their financial future. After measuring their spending, most physicians are surprised to find that certain personal expenses may be reduced or eliminated altogether, freeing up extra cash to pay down medical school student loans, purchase a medical office building, buy into a practice, and save for college and retirement.

Budget Techniques For Every Physician

Shoebox Budgeting for Busy Doctors

Obtain a shoebox or similar size container and place every receipt into it. At the end of the month, separate the receipts into expense categories (e.g. entertainment, gas, automotive, household, etc…) 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 is great for those busy doctors who do not have a block of time to sit down and calculate a budget using spreadsheets or budgeting software.

Geeky Physicians Build a Budget Spreadsheet

Using a spreadsheet program on your computer, such as Excel or Google Sheets, create columns for the upcoming three or four months. Create rows with expense categories (e.g. entertainment, gas, automotive, household, etc.). 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 three months and then average the monthly totals to get the monthly expense amount. There may be a small learning curve for those doctors who do not regularly use spreadsheets but for the geeky physicians who are comfortable with spreadsheets, they will be able to easily create a budget which they can print or share with other family members and financial advisors.

Organized Physicians Budget with Software & Apps

Physicians can purchase budgeting software such as Mint or Quicken, which will link to their checking account and will report and categorize all transactions. Some transactions will be miscategorized by the software and will require manual adjustments to report accurately. This will require a doctor to login once a month and review the expenses in the software and if necessary, adjust the category of some of the transactions. With minimal effort, a physician can produce a monthly expense report. The organized physician who invests time up front to categorize their expenses will find it easy to produce a quick report with a few clicks or taps.

Efficient Physicians Can Budget with the Inbox/Outbox Method

The inbox/outbox checking system requires a doctor to have two checking accounts, one labeled “Inbox” and the other labeled “Outbox”. All incoming funds, such as payroll, are deposited into the inbox checking. Money that will be spent each month will transferred into the outbox checking account at the beginning of the month. A physician will pay all their bills, including credit card bills, from the outbox checking. This way, the transaction history of the outbox checking will accurately reflect a physician’s total expenses for the month. To avoid overdrafts resulting from unexpected expenses or higher than usual bills, it’s a good idea to leave a fixed amount of money in the Outbox checking account at all times rather than draining the account to zero each month. At the end of the month, any money left in the inbox checking is extra money after expenses which a doctor can use toward funding financial goals. This method is great for the efficient physician who does not want to mess around with budgeting software or spreadsheets and wants to keep track of spending by seeing a clear transaction history in their checking account.

We hope that our Guide to Budgeting for Doctors can help you make sense of the personal finance issues that affect doctors while helping you avoid mistakes and seize opportunities as you and your family plan for financial security that can last a lifetime.