Money matters

Budgeting after your first doctor paycheck

Fresh out of residency or fellowship is a good time for new physicians to give their finances a check-up and map out short- and long-term goals.


Getting that first big paycheck after your residency is rightfully a cause for celebration. You might even want to treat yourself for a job well done. But managing your money and mapping financial goals should take priority over instant gratification.

“The initial reaction when you get your first paycheck is to want to reward yourself, but it’s important to stay modest,” says Roozehra Khan, DO, critical care attending physician at Keck School of Medicine of the University of Southern California in Los Angeles, adding: “It’s OK to get a small celebratory gift, but you really should focus on the big picture.”

To prepare financially for the road ahead, here are some steps to take.

Set financial goals. Identify your short-term and long-term goals and determine how to achieve them. Examples include saving up a down payment for a car or paying off student loans. Prioritizing your goals will help determine how much money to set aside.

Dr. Khan, who is also an assistant professor of clinical medicine at Keck School, lived with her parents in California during the three years of her residency, which allowed her to save money and devise a strategy to get out of debt.

Create a budget. Where does all the money go by the end of the month? Prepare a budget and you won’t have to wonder.

The first step is identifying how much money you have coming in. Then list all your fixed expenses such as rent, student loan payments and retirement contributions. You will also want to track variable expenses, including utilities, dining out, groceries and fuel costs.

Early in his career, Tyree Winters, DO, an osteopathic physician in Princeton, New Jersey, kept a careful record of his spending.

“I went strictly based off my budget,” he says. “If I wanted to go to the movies, that was in the entertainment budget. There was a budget for every single thing in my life, and I made sure it was realistic.”

Savings. Accumulate three to six months of savings to cover unexpected costs.

Dr. Winters, who is also an associate professor of pediatrics at Rowan University School of Osteopathic Medicine in Stratford, New Jersey, encourages establishing a rainy day fund.

“Even if you have to start off with something small with the amount of money that you are able to put aside with every paycheck, don’t become discouraged,” he says. “Those small amounts will eventually add up.”

Set up a banking transfer for each payday that automatically moves money from your checking account to your savings account. That makes it easy to build up your savings.

Pay down student debt. In 2016, about 86 percent of new osteopathic medical school graduates were burdened by education debt, according to a survey by the American Association of Colleges of Osteopathic Medicine. Among graduates with education debt, the average amount rose to $240,331 from $229,934 in 2015.

If you have several student loans, consider deferment or forbearance as options for short-term payment relief. Extended repayment terms, income-driven repayment plans and use of a federal loan forgiveness/repayment program can also help borrowers. Another option is to refinance through a private lender, ideally for a better term and the lowest possible interest rate.

Doctors Without Quarters, a national student debt advisory firm, provides helpful information about reducing student debt on its website.

As part of Dr. Khan’s compensation package at a Michigan hospital, defraying some of her student loan debt was a successful negotiating point. The hospital wrote a check directly to Dr. Khan’s student loan company after her first year of employment.

Reduce credit card debt. Avoid relying on your credit card to pay for everyday purchases like groceries, gas or going to a movie. Use cash or a debit card instead.

In Dr. Khan’s first job as an attending physician, she made the most of her signing bonus, using it toward paying off a credit card bill.

Dr. Winters says having a credit card in college with an “astronomical” interest rate put a strain on his finances.

Though his credit limit was about $1,000, he didn’t make regular credit card payments, which led to a domino effect of a higher amount to repay, late fees and interest accruing daily.

Dr. Winters took steps to repair his credit, including paying off debts and checking his credit report regularly.

Live within your means. Avoid trying to accumulate too many luxuries too soon.

Dr. Khan, a blogger on women in medicine at, says that although she has achieved financial freedom and enjoys the fruits of her labor, she maintained a frugal lifestyle for a few years after completing her fellowship program.

“Once they get that doctor title, a lot of new physicians have this urgency to live that doctor lifestyle,” explains Dr. Khan. “They want to buy new cars, nice clothes, go on fancy trips and do everything in excess. If they could just be patient for a few years out of their training, it can help them build a pathway toward financial freedom.”


  1. Patrick Malie

    Informative article, but I wouldn’t necessarily discourage the use of credit cards for every day purchases and/or other bills. With cash reward cards in particular, you can earn free money just from purchasing/paying for things that you would otherwise need, assuming you pay off the balance at the end of each statement. I regularly get anywhere from $20-50 automatically deposited into my checking account each month depending on how much I spend, and I wouldn’t get that if I used cash or a debit card. Key point is that you have to pay off the entire balance at the end of the month, or else you get hit with interest which would defeat the purpose of using it.

  2. Jules

    Don’t get suckered into buying disability insurance. Unless you engage in high risk sports or activities, disability insurance will dry up funds better put to use, i.e. investments, mutual funds, stocks. After my first year of paying 10K/mo on a 40K/mo benefit IF I got hurt, it made no sense. I put that 10K/mo in a fund and now after 10 years I have $1.6M. I did stop skiing, skydiving, mountain biking, etc., but I did workout daily. It was worth it.

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