By Ginger Morgan, MBA, PA-C and Evan Johnson, PA-C
Life as a PA student revolves around exams and student loans. After graduation, a new career will present you with a promotion, as well as the temptation to upgrade your lifestyle and expenses. No matter where you are in your PA journey, it can be hard to set aside time for finances. However, taking just a few minutes to review your financial situation can change your life. We’re here to guide you through a quick financial spring cleaning to make your budgeting feel lighter and brighter.
Setting your goals
Let’s start with your vision. Spend a few minutes dreaming big. Get specific! Write down that student loan balance, destination wedding, or house down payment. Another goal may be shifting to part-time work or retiring earlier. Write down your small goals too — like a new gym membership or a birthday gift. Recognizing your financial goals is the first step in achieving them. Remember: You can budget for anything you want, just not everything.
Before you can have fun with your money, there are two goals that you should address first.
The first is having an emergency fund in the event of job loss, car repairs, or illness. You want to anticipate having the worst day ever while you avoid putting big charges on a credit card. A simple first goal might be to save $1,000 for an unexpected expense, but ideally you want to save three to six months of expenses in a high-yield savings account. The second goal is eliminating credit card debt. The interest rates on credit cards are so high that it will be hard for you to invest, pay off student loans, or achieve your other financial goals. Prioritize paying off any high interest credit card debt as soon as possible. If you need to free up cash to do so, keep reading!
Creating a budget
Now that you have set goals, create a budget to help your money achieve those goals. Your budget is essentially the blueprint for those dreams. Write down your fixed expenses first. Fixed expenses are the same each and every month like your rent or mortgage, your car payment, and subscriptions.
Next, review your variable spending. Take a look at your debit and credit card for the last three months. Write down every purchase. Next to each one, note if the purchase brought you joy, fueled personal growth, or created a fond memory. Also note if there was a thoughtless purchase you regret or an emergency expense that you didn’t have the cash to cover. Group the purchases you write down into broader categories to get an idea of how much you spend each month. Categories might include clothes, restaurants, or entertainment.
After this step, you should have a good idea of your monthly spending patterns. Now look for any expenses that can be reduced. Do you notice any recurring expenses or subscriptions you’re paying for and no longer use? Do you notice yourself spending a lot in an area you don’t care much about? If so, cut those expenses from your budget to free up money to go toward one of your goals.
What if your expenses are more than your income or you need to free up a significant amount of cash? If possible, consider making a change to one of the big three: housing, transportation, and food. The average American spends 60% of their income on these three categories. You may consider downsizing or living with a roommate temporarily. If you’re paying for a new car, you may consider trading it in for a used one. Lastly, dining out and meal delivery may be eating up a large part of your budget, so you might start cooking more meals at home. Of course, any of these can fit in your budget if they’re meaningful to you, but you need to be able to afford them without sacrificing your dreams for your future.
If after creating a budget and reducing your expenses, you still need extra cash, it’s time to increase your income. If you love your job, be prepared to list your accomplishments and advocate for a raise at your next performance review. Write down all the ways you contribute meaningfully to your position and review the AAPA Salary Report for the average compensation for your specialty, area, and experience. You may also seek offers from other employers or consider a career change altogether!
Getting organized
Organizing your finances can be a chore, but it becomes effortless when it’s automated. You can automate your bills, savings, investments, and student loan payments.
The easiest thing to automate is your retirement account contributions because they come right out of your paycheck. Contribute to your employer match (that’s free money!) and more if you are able. You can increase your contributions by 1% every year or on your birthday or anytime you get a raise.
If you’re a PA-C, it’s likely you have a significant amount of student loan debt. Make sure your student loan servicer has an affordable monthly payment option that works well for you. Most loan servicers will provide a discount for enabling auto-pay for your loan payments. With any discretionary funds, you can always make additional monthly payments on your highest interest loans.
Be sure to set up auto-pay for each of your recurring bills and link them to a credit card or directly to your checking account. Now take your goals from above and break them into small chunks. If you want to save $2,000 for a vacation in a year, start automatic transfers to your savings account for $170 each month. Do this for all of your savings goals and your emergency fund goal of 3-6 months of expenses. Lastly, you can automate your investments, whether that’s through a Roth IRA or taxable brokerage account every month so you can save for retirement and plan for your future.
Find a budgeting tool that works for you. You can use the PA Money Sense Interactive Budget Guide to fit your lifestyle, or you can use an app like Mint or Copilot. You’ll be able to easily review your spending and see where you need to make adjustments to continue to reach your goals.
Ginger and Evan are both practicing PAs in the greater Houston area who host financial seminars and podcasts to promote financial literacy among healthcare students and professionals. You can follow them on Instagram @pamoneysense to learn more!