Saving Money In Medical School

In medical school one is given large loan "disbursements" at two times every year. Because very few people have any other source of income, you can minimize the amount of debt that you end up with by following several rules. I'll list them from most-to-least insightful:

1. Invest Extra Loan Money

At every disbursement, transfer 50% or so of the money into a brokerage account. This helps in many ways. First, since the money is no longer in your bank account, there will be a psychological effect of thinking that there is less money for you to spend. In effect, even if you aren't one to make a paper budget, we all still spend with an idea of how far we need to stretch out our money.

The second benefit is that many of these brokerages, such as TD Ameritrade (which I use), will give you 5 free trades. What this means is that you can transfer your money into a short term CD, safe stocks, or a mutual fund without paying $10 to put your money in and take it out.

Of course, they hope that you fashion yourself Gordon Gekko and move your money in and out of different stocks, thereby making 6+ trades and giving them money. You are smarter than that. Additionally, if all you do is move 50% of your money into the account at the start of the year, you will get close to 1% in interest, which is better than you would get from a bank's savings account.

In short, if you can put the money into a CD or mutual fund you may even be making money on the loans (depending on the interest rate), which is much better than losing 4-6% as the interest piles up in a checking account.

Feel free to compare TD Ameritrade to other sites, I like them and they are not giving me anything to push their site over any other.

Not a good idea with loan money:

2. Make a "Per Day" Budget

Take all of your monthly expenses: rent, car payments, gasoline, groceries, cell phone bills, etc. and put them in an excel spreadsheet. Then divide them by 4.3 (or whatever Google tells you is the number of weeks in a month) to show how much each thing costs per week. Then break that down into per-day expenditures.

Not only will this give you a rough idea of how much discretionary money you have on a day-to-day basis, but it may also give you insight into areas where you can save. For instance, my wife and I found that we could save close to $3,000 if we were able to pay off our car loan early.

You may find that you are saving more, if only to see the amount that you could be saving per day increase. In other words, it can become a game where you are rewarded for saving, by picturing what you could do with that money, e.g. spring break trip or new bike.

Hope these are helpful, they have both helped me tremendously, feel free to post other tips in the comments section.