Congratulations! You’ve matched into residency, hopefully into the field and site of your choice.
The coming years will be busy, full of learning and service; also exciting, fun, amazing, and a bit stressful.
If you are a traditional student who went straight through high school, college, and medical school, this may be the first time you have earned a decent salary that you had to live on.
You might be a little worried about your budget during residency. You probably have plenty of medical school loans, and you won’t yet be making “doctor money.” This isn’t necessarily the time to pay off all your student loans, but certainly this is a very appropriate time to make sure you are living within your means. If you do this, you are setting yourself up for financial success once you finish training and make a higher income.
To that end, I have searched the web for sample intern salaries at training programs across the nation, and used a paycheck calculator to estimate monthly take home pay under several circumstances.
From there, I propose some rough guidelines for spending. This is meant to be a guide, and of course you will decide what is best for you (and your family). But this might be a good place to start thinking about how to live on a salary, especially if previously you have been surviving on loan money.
Sample Salaries with monthly take home checks
I searched the internet for sample salaries at programs around the country. There is certainly a range, but most seem to be more than $52,000 a year for a PGY-1. I pulled salaries from programs from the East Coast, West Coast, and some less expensive states, and then used an online calculator to estimate your paycheck under several scenarios:
- Single. I assumed you had no dependents, and took 1 deduction on your federal/state/local taxes.
- Married to another intern (or someone making the same salary). I assumed here that you earned 2x salary, had no dependents, and took 1 deduction on your federal/state/local taxes, to approximate the dual income take home.
- Married to a non-earning spouse. I assumed you listed 1 dependent, and took 2 deductions on your taxes. If you also had a child, your take home pay changed very little, so I did not make another column
These amounts do not take into account any pre-tax deductions, like retirement account contributions, or insurance, or FSA/HSA deductions.
The 50/20/30 rule
After going through my old budgets, I found myself drawn more to the 50/20/30 rule, proposed by Elizabeth Warren (yes, that Elizabeth Warren) and her daughter, Amelia Warren Tyagi. They wrote a book called All Your Worth (non affiliate link), and recommend that you allocate your money in this way:
- 50% should go towards your needs: housing, utilities, transportation, basic food, required payments on loans, maybe daycare. Bills you must pay every month, or else you will be in big trouble.
- 20% should go towards savings: an emergency fund, retirement savings, a down payment fund for a house, extra payments towards your loans.
- 30% should go towards your wants: nicer groceries, eating out, vacations, treats. These are things that can be cut if needed, but hopefully make your life more pleasant or fun.
If your needs, or required payments, far exceed 50%, it makes life feel pretty tight. The authors suggest that keeping a good balance of needs and wants help a person feel less stressed about their finances.
They are focusing on people who already are watching their money, and aren’t likely overspending on luxuries (wants). For the person or family whose balance of needs and wants (let alone savings) are out of whack, they suggest either finding ways to reduce needs–cheaper housing, shared housing, cheaper transportation options–or earn more, while keeping the amount spent on those needs constant (reducing them if possible).
a Sample Budget
I decided to go with some of the higher paying programs for an example. Obviously, once you know your starting salary, run these numbers for yourself.
For a single intern, or one married to a non-earner, whose take home salary is about $3800 per month, using the 50/20/30 rule would suggest the following for budgeting:
- $1900 per month for necessities, including rent, utilities, car costs (insurance, repairs, parking, gas, hopefully no payments!), food (basic groceries), and loan payments. (*) This might look like $1000 for rent + utilities; $200 for the car costs, $200-300 for groceries (free food at lunch conferences!) and $300-400 for loan payments. Anything you can save here (say on car costs) can go to something else (groceries).
- $760 per month for savings. Please do not neglect this, even if you have tons of loans. This money should go to setting up an emergency fund (saving the entire amount for 2 months will give a nice cushion; or you can save it for 1 year, which would cover 3 months of spending if you had a true emergency), contributing to retirement ($500 a month will max out a Roth IRA contribution, though if you can finagle an employer match on your retirement contributions to a 403(b) plan, don’t miss out on that money!), perhaps paying extra on your loans. If you are doing a transitional year, and will be moving for PGY-2, saving money for a move next year can be a very smart idea.
- $1140 per month for wants. This can be going out to restaurants, buying steak at the grocery store instead of hamburger, movies (if you can stay awake), travel, cable/ESPN, Netflix, gifts for family and friends, charitable giving, etc.
For the dual-income couple, who brings home perhaps $7600 a month, your budget has a lot more wiggle room:
- $3800 per month for necessities, including rent, utilities, car costs, food (basic groceries), and loan payments. This might look like $1600 for rent + utilities; $500-600 for the car costs, $500-600 for groceries (lunch conferences are still great sources of cheap food) and $800-1000 for loan payments (this can be more complicated if you are married and enrolled in income-based payments). If day care goes in here, you will probably need to cut back quite a bit on some of the other categories.
- $1520 per month for savings. This money should go to setting up an emergency fund (even saving this amount for 1 month will mean you have more cushion than 61% of Americans, according to a poll from CNBC), contributing to retirement (saving just $1000 a month will max out 2 Roth IRAs, though again, don’t miss out if you can get a match from your employer’s 403(b) plan), perhaps paying extra on your loans.
- $2280 per month for wants. This can be going out on dates to keep your marriage strong, buying fancier groceries, vacations, a cleaning service for the home, cable/ESPN/Netflix, gifts for family and friends, charitable giving, etc.
(*) I don’t have the knowledge or bandwidth to write about student loans right now. Luckily, there are plenty of sites out there that do, including Student Loan Hero, Student Loan Planner, the White Coat Investor, The Physician Philosopher. The biggest lesson I’ve picked up is NOT to go into forbearance!
You may look at that distribution of needs, wants, and savings, and feel that it’s not a good match for you. That’s fine. If you want to put more to savings and less to your wants, you will come out ahead. If your wants and needs together total about 80% of your salary, you’ll probably be OK. But if you decide to spend a significantly higher proportion of your salary on your needs (rent, car, utilities) you may find yourself feeling stretched that first year.
I hope that this is a helpful starting point for you. Please let me know if you think I have forgotten something huge. And best of luck getting settled in your new home for the next 3-7 years!