How did you go about making a budget?

[PB&Jam]

I will be entering medical school this fall, and I've gotten some pretty generous financial aid, but will still need to take out loans. I (luckily) didn't need loans for undergrad, and was pretty financially stable without making a concrete budget. The most "budgeting" I did was deciding to go out to eat less to save money. I kept track of my finances only to the extent that I occasionally checked my bank account balance, and paid off my credit card every month.

However, now that I'll be living on loans while I'm in medical school, I want to make sure that I can minimize the amount I take out in loans while also not running out of money. I know tuition is a concrete number that will be subtracted from my financial aid package from the get-go, but everything else is extremely nebulous. I'll be living in a totally different area of the country from where I grew up, so I don't know what to expect from food costs. I don't know how much I'll want/need to travel and what incidentals I'll have. I don't know what utilities will cost. I don't know how much it'll cost to get furniture to furnish my apartment (which I will be splitting with my SO). And without knowing all this, it seems pretty difficult to figure out how much I can afford in rent--but that's something my SO and I need to figure out soon.

I want to make an informed decision on renting an apartment, and I want to keep my finances in order throughout the year, primarily so that I can adjust my spending to avoid taking out more loans, but also so that I know when it becomes necessary for me to take out additional loans. How did you all make budgets that dealt with this uncertainty? How did you figure out how much you could afford in rent? And how did you build in flexibility/wiggle room? Thank you so much.

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[RangerBob]

I will be entering medical school this fall, and I've gotten some pretty generous financial aid, but will still need to take out loans. I (luckily) didn't need loans for undergrad, and was pretty financially stable without making a concrete budget. The most "budgeting" I did was deciding to go out to eat less to save money. I kept track of my finances only to the extent that I occasionally checked my bank account balance, and paid off my credit card every month.

However, now that I'll be living on loans while I'm in medical school, I want to make sure that I can minimize the amount I take out in loans while also not running out of money. I know tuition is a concrete number that will be subtracted from my financial aid package from the get-go, but everything else is extremely nebulous. I'll be living in a totally different area of the country from where I grew up, so I don't know what to expect from food costs. I don't know how much I'll want/need to travel and what incidentals I'll have. I don't know what utilities will cost. I don't know how much it'll cost to get furniture to furnish my apartment (which I will be splitting with my SO). And without knowing all this, it seems pretty difficult to figure out how much I can afford in rent--but that's something my SO and I need to figure out soon.

I want to make an informed decision on renting an apartment, and I want to keep my finances in order throughout the year, primarily so that I can adjust my spending to avoid taking out more loans, but also so that I know when it becomes necessary for me to take out additional loans. How did you all make budgets that dealt with this uncertainty? How did you figure out how much you could afford in rent? And how did you build in flexibility/wiggle room? Thank you so much.

I was nervous too about all the unknowns. Food costs typically aren't that different. I can't imagine it being more than 25% higher, though if you were doing your grocery shopping at Grocery Outlet where you are now and Whole Foods is the only grocery store within a reasonable distance, you'd obviously see your prices go up even higher. If you decide to eat out a lot, that will have a huge impact as well. Utilities may vary more, as some areas they can be quite cheap. Also, if you're now in the upper midwest, your heating costs will go way up (or cooling costs if you're in FL or another ridiculously warm place). If you move into an old and poorly-insulated home, that can have a big impact as well.

You should be able to do a Craigslist search to get an idea of how much your rent will be. Get the smallest/cheapest place in a safe area you can find. That leaves more money left over for saving (or gives you the wiggle room you need to not borrow the full COA), and it also limits how much stuff you can buy. When my wife and I rented a large 1bd apartment (had a separate dining room and living room) we felt the need to buy furniture to fill it. Then when we moved into a 2bd place, well same problem. We're back in a 1bd now, and honestly we could manage just fine in a studio if we needed to.

Buy all your furniture off craigslist if you can--that has always saved us a lot. For less money than Ikea, you can get something of much better quality. But you have to resist the urge to go overboard.

My wife and I are learning the key is really thinking about your happiness. Money is there first of all to help you meet your needs (roof over head, food, etc.), and then to help with your happiness. If we're thinking about getting a new coffee table, we ask ourselves--will a coffee table really make our lives better/happier? And if so, will a $500 table really make us happier than a $40 one? We realized most monetary purchases really aren't going to increase our happiness. We've donated/sold at least half our our possessions over the past 6 months and we're quite happier with the simplicity. It'll make our cross-country move for fellowship so much simpler, and allows us to live more cheaply in a much more expensive city.

That happiness factor really applies to anything, including whether to rent a 2bd apartment vs home vs a 1bd. I just use furniture as an example. I wish my wife and I thought more this way when we started med school--we could have avoided borrowing quite a bit, and it would've helped us pay off more loans in internships/early residency. That would mean having a lower debt burden now. That would give us more freedom/options on where we could live/what kind of home we could afford when I become an attending. And if we kept up the simple lifestyle, that would mean buying a nice but affordable home and putting most of our earnings towards retirement, vacations, etc. And, saving more for retirement + not living as lavish of a lifestyle = the freedom to retire early (financial independence).

 

[phuynh94]

BankRate allows you to guess-timate cost of living: Cost of Living Calculator - Cost of Living Comparison Index Tool
It helped me figure out how pricey routine purchases would be in comparison to where I've lived previously.

I chickened out and rented an apartment where all utilities are included except for Internet, because I'm not used to gauging utility usage in the winter/summer time. (Highly recommend.) Most of my furniture purchases were from IKEA (bless this store), Craigslist, and student-run FB exchange groups. I didn't bring a car with me, so IKEA made sense given how many pieces I purchased and its delivery service.

In terms of disposable income, I set my budget at $450/mo, living in downtown Baltimore. I don't spend a whole ton as...a person LOL. I figured that if I end up absolutely hating cooking and absolutely must buy food, $6/meal (Subway) x 2 = $12/day x 7 = $84/week x 4 = $340/mo. The rest goes to Internet, groceries, Metro pass, etc. It can sound like a restricted budget, but I've been consistently underspending (thank goodness for Asian supermarkets) with the exception of the past month (because hauls LOL). There's often a lot of free/low-cost things to do, if you're willing to dig around or ask upperclassmen!

Of course, I don't suggest restricting your budget to the point where you are uncomfortable. It might be better to borrow the recommended amount your first semester, and to adjust your loans as necessary during the following semesters.

 

[InvestingDoc]

I will be entering medical school this fall, and I've gotten some pretty generous financial aid, but will still need to take out loans. I (luckily) didn't need loans for undergrad, and was pretty financially stable without making a concrete budget. The most "budgeting" I did was deciding to go out to eat less to save money. I kept track of my finances only to the extent that I occasionally checked my bank account balance, and paid off my credit card every month.

However, now that I'll be living on loans while I'm in medical school, I want to make sure that I can minimize the amount I take out in loans while also not running out of money. I know tuition is a concrete number that will be subtracted from my financial aid package from the get-go, but everything else is extremely nebulous. I'll be living in a totally different area of the country from where I grew up, so I don't know what to expect from food costs. I don't know how much I'll want/need to travel and what incidentals I'll have. I don't know what utilities will cost. I don't know how much it'll cost to get furniture to furnish my apartment (which I will be splitting with my SO). And without knowing all this, it seems pretty difficult to figure out how much I can afford in rent--but that's something my SO and I need to figure out soon.

I want to make an informed decision on renting an apartment, and I want to keep my finances in order throughout the year, primarily so that I can adjust my spending to avoid taking out more loans, but also so that I know when it becomes necessary for me to take out additional loans. How did you all make budgets that dealt with this uncertainty? How did you figure out how much you could afford in rent? And how did you build in flexibility/wiggle room? Thank you so much.

Hi PB&Jam. You're doing the right thing to figure this out before hand to avoid financial hardships in the future.

Write down all of your known future monthly expenses. You're car payments, insurance, expected rent based on what you see online, and go from there. I think you'll end up okay if you budget $50 a month for internet, lets say $500 (yes this is high) for food because you'll probably want to eat out a little more often during the move and adjusting to med school schedule. You can also say $150 for electric to be on the safe side if you have a one bedroom. Don't forget to put a little money in the budget for fun too! In the end, if you are worried about things, take out the max the school will allow for the first semester and you can always take out much less for the second one. Yes, you will pay interest on this money but if it helps you sleep at night then its worth it for the first semester.

Keep a detailed spending sheet or sign up for Mint.com to track expenses. About 3 months after you move you'll get a general idea of what your recurring expenses will be.

Oh, and craigslist can be your friend for furniture. Many of my friends bought all their furniture from a store and paid $40 a month to finance it. They tell you its a 0% interest loan but that's only because they often will give cash buyers 30% off. You're paying the interest one way or another. I bought all my furniture off craigslist for medical school, except my bed and it saved me thousands.