Earning a salary is an exciting part of being a resident, but it doesn’t necessarily equate to financial success. Improving your financial management skills can help you pay off your student loans faster, make progress with your goals, and develop healthy spending habits.
Ready to boost your financial health? Keep reading.
1. Review your salary and expenses
The first step is getting an accurate picture of what you’re earning and spending. Start by reviewing your paychecks to find out exactly how much money you earn each month after taxes and insurance.
Next, go through your bank statements and make a list of all your expenses, including essential and non-essential costs. Essentials include your monthly minimum student loan payments, for example, as well as rent, utilities, groceries, transportation, and any medications. Non-essential costs might include entertainment, gym memberships, or dinners out.
Once you have a better understanding of your income and expenses you can start developing a budget.
2. Create a budget
Following a monthly budget is key to staying on track with your spending. Total up your essential expenses to find the minimum amount of money you should set aside each month to cover your costs of living.
Next, subtract that number from your total monthly income. How much money you have left determines what you can put toward savings and discretionary spending. In general, it’s a good idea to put 20 per cent of your income toward savings in case of emergencies, but you may want to set aside even more money if you’re saving for a big investment like a wedding or house.
Then, depending on your salary and savings goals, you may have a comfortable chunk of change left over or very little discretionary money. However much you have, figure out what you’re comfortable spending it on — whether that’s entertainment, shopping, or activities with friends — and set appropriate parameters.
3. Develop a plan for debt
Forming a plan for paying down your debt can save you time, stress, and money after residency. Look at your loan’s principal and interest rate to figure out how much you can realistically afford to pay off each month. Even paying 10 per cent more than the minimum payment may save you thousands of dollars in interest and help you get rid of your debt sooner.
Revisit your budget to see if there are areas where you can cut your spending. Maybe you can take 10 per cent for your loans from a monthly skincare subscription box or video game allowance, for example. Or perhaps you can rein in meal spending for three months by cooking dinner at home six nights a week.
Having a game plan — even a tentative one — can help you make progress and avoid financial surprises down the road.
4. Automate payments
When you’re a resident it’s crucial to streamline as many areas of your life as possible, including your finances. Start by setting up online bill payments for your utilities and loans so you don’t have to write and mail checks. Next, set up an automatic deposit or use bank’s saving tools like RBC NOMI Find & Save to help you put a certain percentage of your monthly income into your savings account.
There are also other free digital tools (like RBC NOMI Insight or Wellspent), which can help you track your spending, analyze the patterns and help you maintain your monthly budget. For more financial advice, talk to one of our dedicated RBC Healthcare Specialists.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.