How to Hack a Zero-Based Budget as a High-Income Professional

By Alaina Trivax, WCI Columnist

During his residency, my husband, Brandon, and I fantasized about what our life would look like when he finally became an attending. We’d think about that attending paycheck—just one payday would be more than our combined monthly income at the time. What would we even do with all of that money? We imagined a life in which we had oodles and oodles of money—and assumed we could never spend it all.

Brandon is now a third-year PMR attending employed by a private practice while I work as a middle school teacher. Together, we have two young boys.

We met just before he started residency and got married two years later. Back then, it was just us and our dog living in our small home in suburban Detroit. Between his residency salary and my income, we were perfectly comfortable financially. We are both pretty conservative with our spending and, to start, didn’t have much of a budget. We had some goals, including paying down student loans, but we were pretty casual about our financial lives. It was easy to think that we’d always have plenty of money and wouldn’t need to operate from a stricter budget.

The joke was on us, of course. After completing residency, Brandon pursued a one-year out-of-state fellowship in Brain Injury Medicine. We quickly found that maintaining two households–without much extra income–really stretched our finances. We began tracking our expenses and, with some adjustments to our spending, we made it through that year. Since he’s become an attending, we’ve continued using a budget to guide our spending. Each month, we make a plan for every dollar available to us for spending—all of the money in our checking and savings accounts and our projected income for that month.

The life we imagined where we could never spend our oodles and oodles of money has not been a reality. The expenses have started to quickly add up, and we’ve had to adjust.

Do you need such a strict budget to achieve your financial goals? Maybe. Maybe not. But, hear me out—here’s how, and why, our budgeting plan works.


A Zero-Based Budget

We use a modified version of a zero-based budget, in which all funds are assigned to a category for spending, saving, or investing. The goal is for the budget to “zero out” each month. In this format, all expense categories are listed, and only the money that is currently available for spending is accounted for in these assignments. Monthly and recurring expenses receive a set amount of money; variable costs are budgeted for, as well. Future expenses, both big and small, are planned for, and money is set aside for those categories. Whether it’s the monthly cable bill or holiday gift-giving in December, there’s money being allocated for those costs.

There are lots of other budgeting formats—the envelope system, a pay-yourself-first structure, and more. We landed on this model because it enables us to prioritize multiple goals: to spend our money intentionally while also tackling our student loan debt.

In a typical zero-based budget, expected income doesn’t count. If there’s not enough money for all expenses, then funds are assigned in order of priority. The electric bill is due on the 5th and the car payment on the 17th? Guess we’re going to have to pay the electric bill first and then start setting aside some money for the car—and hope that nothing else pops up. This strategy can be helpful for people who are living paycheck to paycheck and who are struggling to get through each month.

If you’re making attending money, hopefully this doesn’t sound much like your current financial situation. Ideally, you have enough in the bank to float for a few months, along with some emergency savings and investment accounts. This kind of financial triage and stress might bring some flashbacks of medical school or residency; it was certainly something we experienced during Brandon’s fellowship year. The zero-based budget format makes it clear where every dollar is going, and it's helpful for folks who are trying to tackle significant debts.

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The Hack: Account for Planned Income

Here’s where we break the rules: rather than accounting for only the money that’s in our bank account today, we also include any planned, predictable income for the month. From there, we map out our expenses.

We use You Need a Budget, a web-based budgeting software, to track our income and expenses. To account for our future income, I manually enter a deposit for each of our paychecks at the start of the month. Once the check clears on payday, I update the date. This allows me to make sure every dollar is spent intentionally and in line with our financial plan.

Too intense? I get it—we’re a little meticulous about our finances. Here’s how it helps us


Make the Most of That Attending Money

zero-based budget hack

We’re making so much more money than in residency, but where is it all going? Despite our confidence that we could never spend it all, we’ve found that it’s actually pretty easy to do. With two kids and a home to maintain, an increase in spending has kind of snuck up on us. Compared to the fellowship days of homemade hummus and date nights in, we’re doing well—but we’re still looking at our budget like, “How are we going to send these two kids to daycare?!” We’ve tried to maintain our previous lifestyle, but the small changes—an increased grocery budget and more funds allocated for going out to eat—add up. Planning ahead using this model of a zero-based budget helps keep us in check so that we’re still meeting our financial goals at the end of each month.


Allow for Fun Expenses and Giving

My husband worked hard to get to this level and to be earning the income that he does. After years of training, it’s time to enjoy the outcome a bit. We use our budget to allow for spending on the fun stuff, too. Brandon has been trying to hone his golf game this past summer. He hits the driving range every Wednesday afternoon, and he has been picking up training equipment to practice with at home. These are the kinds of expenses that wouldn’t have fit into our lives on a residency or fellowship income, but we can make room for them now that we have more money. Planning for these expenses in our monthly budget sometimes means limitations on spending—perhaps not buying all of the new golf toys the same day!—but also ensures that we stay on track with our financial plan.


Know the Limits and Feel Confident About Spending

As Brandon has been working on his golf game, he decided he wanted an at-home golf simulator. Apparently, they can get pretty pricey—ranging from a few thousand dollars to tens of thousands; the one he was interested in was somewhere in the middle of that range. He looked at our spending plan and realized that this kind of purchase just wasn’t reasonable right now. Technically, we could afford it, but something would have to give—and we’re not ready to reorganize our financial priorities to buy a golf simulator. Instead, he’s going a more DIY route and is creating his own simulator set up in our garage at a price that we're more comfortable with. This is an expense that fits into our budget, and as long as we’re sticking with that plan, we can feel confident about our spending.


Stay on the Same Page

Dr. Jim Dahle has often pointed out that divorce can be financially devastating. Creating a plan for our money even when, or maybe especially when, we have plenty of it helps Brandon and I stay on the same page. There’s no need to nitpick the little splurges and expenses. He eats Tropical Smoothie for lunch most days of the week—whatever. I enjoy a good happy hour with my girlfriends—and am happier for it. We’ve certainly had times when we’ve been stressed about money, but I don’t think we’ve ever really fought about it. Having a budget takes some of the emotion out of it. When we do have to say no to an expense, it’s the budget that is laying down the law—not the other person. We get to stay on the same team.

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Worth a Try?

Keeping a close eye on our spending has helped us continue “living like residents” even now that our income has grown. Still, it’s hard to say if we’ll use this system forever. We’re doing this with a purpose—we have specific financial and lifestyle goals that we are striving to reach. We want to pay off Brandon’s med school loans—but not just for the sake of paying them off; eliminating that debt will free up the cash flow we need to afford a larger home that is a better fit for our growing family.

I know, I know. We’re a little intense. But I promise, using this modified version of a zero-based budget has been immensely helpful for our finances and for our relationship.

If you’re finding that your money isn’t going as far as you imagined—or as far as you need it to—maybe give this a try.

Did you find that using a budget, especially early in your career, helped you eventually build wealth? Why or why not? What kind of budget did you use? Comment below!

The post How to Hack a Zero-Based Budget as a High-Income Professional appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.

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