What is Zero-Based Budgeting and Should Doctors Use It?


There are dozens of budgeting methods and finance philosophies out there. With all the options, it can be difficult to choose which one is the best, especially if you don’t have the time to research them all. One method that tends to stand out from the rest because of its popularity and effectiveness is zero-based budgeting. Many people use this budgeting tactic because it leaves no penny unaccounted for. For the same reason, it can take a lot of time to manage. But, is this method compatible with a doctor’s busy schedule? Let’s discuss this question in this article.

What is Zero-Based Budgeting?

Zero-based budgeting is a budgeting method where the goal is for your expenses to be the same as your earnings. This can sound like you must spend as much as you earn on things like food, entertainment, and clothing. However, the goal is to set aside as much money as possible towards things like debt repayment, investments, and savings. You set reasonable budgets for each expense in your life and put every penny possible towards the area you’re focusing on.

For example, say you make $4,000 per month and you would like to start investing more in the stock market and your emergency fund. Your mandatory monthly expenses like bills, car payments, groceries, and credit cards cost $3,000. You may want to go shopping for new clothes or go out with friends one evening. Let’s say these cost $300 combined. This means you have $700 left to put towards stocks and your emergency fund! You would want to put every penny into these two areas according to the zero-based budgeting method.

Reasons For Doctors to Use Zero-Based Budgeting

Many people, not only doctors, struggle with setting up a strict budget for themselves. This is even more so the case for people with busy work schedules like healthcare workers. It can be tempting to just live your life and simply make sure you’re not over-drafting each month. Not to mention, the zero-based budgeting technique is one of the most strict budgets around, so it does take a lot of maintenance. But, there are some amazing benefits to it, especially for doctors. Below are some of the top reasons to use this budgeting method as a doctor.

To Pay Off Students Loans More Quickly

One of the primary reasons people choose to use the zero-based budgeting method is to pay off debt. Considering up to 89 percent of medical students1 graduate with debt, doctors can greatly benefit from this budgeting method. With zero-based budgeting, you can allocate a large figure to go towards your student loans, and then plan the rest of your budget around that figure. You can allocate less money for going out with friends or for groceries so you can put money more towards your student loan debt.

For example, if you make $5,000 per month, you can budget based on paying off your student loans quickly. In this case, your zero-based budgeting could look something like this:

  • Mortgage: $2,000
  • Student Loans $1,500
  • Groceries: $400
  • Bills: $300
  • Insurance: $200
  • Emergency Fund: $300
  • Eating Out and Entertainment: $200
  • Gas: $100

Of course, your spending likely does not look exactly like the budget above. But, the point is, you can prioritize student loan payments and strategically cut costs elsewhere. It gives you a great overview of where you need to spend less so you can focus on what’s most important.

To Build an Accurate Emergency Fund

As a doctor, you, more than anyone, know how important it is to build an emergency fund. Emergencies can happen to anyone, no matter who they are or how healthy they are. There’s no way of knowing when a medical emergency, or another situation, may arise. So, building an emergency fund should be a top priority for you. With the zero-based budgeting method, you can set aside a specific amount of money each month to go towards an emergency fund. This prevents the urge to just spend any leftover money and neglect your fund.

In addition to having money set aside to go towards your emergency fund, zero-based budgeting can give you an accurate figure on your spending. An emergency fund should have enough money to cover six months to one year of your regular expenses. For many people without budgets, this can be a challenging figure to come up with. But, when you budget and account for every penny you earn and spend, this is much easier.

Make More Investments

Perhaps you have already paid off medical school and have an emergency fund. Should you still follow this budgeting method? We think so! One reason being it helps you put aside money for investments. When you have money remaining at the end of the month after paying for your mandatory expenses, you may choose to either keep it in your standard checking account, or you may spend it on something you don’t need. Whereas with a zero-based budget, you can allocate your extra money towards investments. In fact, it may encourage you to invest even more, as you will be less likely to make impulsive purchases online or at the grocery store as you stick to your budget. This will help you grow your wealth over time, making it a highly profitable budgeting tactic.

So, Should Doctors Use the Zero-Based Budgeting Method?

The short answer to this question is; It depends. The reason there are dozens of budgeting methods is that people prefer different things. Some people prefer to save and invest before they spend their paycheck, and then they spend everything they have leftover with no thought into where they are spending. Or, they may have a budget for only groceries and online shopping. On the other hand, some people have no strategy, so they spend until they are about to overdraft with no room left for investments or savings.

When deciding if the zero-based budgeting method is compatible with your busy doctor’s schedule, consider the benefits versus the time. Is the time it takes to calculate all of your expenses worth paying off your student loans more quickly? If the answer is yes, then this method is a great idea! But, if you would rather spend your time elsewhere, consider a different tactic. Remember, you can always discuss budgeting with a financial professional if you need professional advice, or try something new later on.

1 “Average Medical School Debt” Melanie Hanson educationdata.org, July 10, 2021

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