What to do when your expenses exceed your budget

It can happen. It’s happened to me time after time. I remember in grade school, lunch meals were $1.25, and I usually brought $1.25 to school every day. Except the many days where I forgot to bring an extra quarter or simply lost the quarter that I so carefully kept in my front pocket.  Those were the days where my expenses exceeded my budget.

Fast forward several decades into medical school. I was purchasing a latte and a pastry from a cash-only local barista, and ordered a ‘tall’ cup. Rookie mistake. On their menu ‘short’ was the smallest size, and I only had $10 to my name. I exceeded my budget once again (I opted not to take the pastry so that I actually had enough to pay).

Fortunately both of those financial faux pas were trivial, but recurrent large expenses can leave you in financial ruin especially if you are in your later years of your career.  These are situations that we all hope to avoid, but just because you crushed your board exams doesn’t mean that you won’t make financial mistakes.  Exceeding your budget is incredibly easy, with credit card companies extending incredible lines of credit to doctors who otherwise earn slightly more than minimal wage.

Don’t allow your expenses to exceed what you can afford

The easiest way to bail yourself out of budget-breaking activities is not to get yourself into that situation.  If you don’t have the money to buy something, then don’t do it.  With the number of physician bloggers out there, it’s clear that many of us have some sort of fundamental understanding of frugality, whether from our upbringing or experience.  I don’t expect the majority of the online crowd to have a spending problem, but the majority of doctors still do not have that mindset.

If you aren’t sure if you have a spending problem, then do yourself a favor and figure out how much you have leftover every month after your expenses. Track your expenses on free software like Personal Capital. You can see how much is coming in, and where your hard-earned dollars are going towards.

What can you do if you do end up overextending your pay rate? While I hope that no one ever gets herself into this situation, but the following are some short-term strategies to dig yourself out of a financial disaster.

Balance transfer checks can actually bail you out

I get these blank checks relatively frequently in the mail from credit card companies. Some of them actually have 0% interest for even two months. After that, mega-interest rates kick in and destroy any hope of repayment.  If you are in a high-interest repayment sort of situation, perhaps from a credit card or [loanshark], you can potentially negotiate a balance transfer to buy you a month or two to get your act together.  I kid you not—I have seen doctors use these to make short-term repayments on loans.

Figure out what is bleeding your savings

The next step is to figure out what is destroying your bank. As most doctors generally have high incomes that negate most bad financial choices, it usually isn’t enough if you have multiple streams of big-ticket expenses.  Multiple vehicle leases, multiple mortgages, bad real estate investments that require recurrent contributions, kids’ education, and expensive hobbies are some of the items that can destroy you.  One of the doctors that I work with actually cut short her lease on a Mercedes SUV and purchased a Honda Civic (I’m not sure of the circumstances, but I suspect it was financial-related).  Plan to unload any property that’s bleeding your savings.  Too many handbags or outfits in storage that aren’t getting use? Consider unloading them on ThredUp, and figure out how to stop making unnecessary purchases.  You can always ease back in slowly once you get your financial act together (try not to).

Puppy strollers can definitely bleed your earnings

Expenses for your children are harder to deny, but remember that financial support does exist for education.  This is a valuable lesson for everyone to realize that there is always a cost-benefit analysis involved with education.

You might also like: Is a degree from a prestigious medical school advantageous for doctors?

Your kids will have to learn that few opportunities come for free, and the earlier that they become involved in financial decision-making, the more likely they will be equipped to make financial decisions for themselves.  If they choose to go to fancy private primary school, they have to realize that mom and dad had to make sacrifices to make it happen.

Generate more income

If you need extra income to bail yourself out of a financial pickle, you can try to work more.  Specialties that are structured around shifts like Emergency Medicine or Hospitalists will be more conducive to earning income.  I’ve seen some people take locums positions while on vacation from their primary job too!  Working harder isn’t necessary the best long-term solution to our financial problems, but our profession fortunately can help dig us out quickly.

Once you’ve bailed yourself out of short-term financial disaster, head over and read: A financial plan for busy people – finance.

What other ways can you destabilize your budget?

P.S. Try out Personal CapitalIt’s come a long way, and does a nice job with graphs and trending on your net worth.

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