Thursday, March 29, 2012

Homeless Again

Please excuse my upcoming absence... I am preparing for homelessness.

The place I raved about earlier - not going to happen. Rather, the landlord won't consent to it. Our family is too large and the time is too short. So we are going to rip our family apart. The kids and I living with our family in another state, my DrH living here in medical student housing.

I am really sad. I don't like being away from my DrH that long. He doesn't like it either.

I will most likely miss his graduation. I had visions of us together, all of us, celebrating at his official graduation. Now, it will be him alone - or possible just he and I (if we can swing it).

Things don't ever turn out how you expect.

I am kicking off my long weekend early why we try to find yet another place in another state. I hope we can find something there - I don't think we can live with our family, or apart for long.

Wednesday, March 28, 2012


I am paralyzed.

Today is Monday the 26th of March. My home closes on Friday April 13th. We have 18 days to be packed up, moved out, and house cleaned up. Technically less than that unless I want to be pulling out of the driveway on the same day we are supposed to turn it over to someone else. Realistically I have 14 days.

Want to know how many boxes I have packed? NOT ENOUGH!

I have been steadily making progress, but have been on the books for a week. When you start putting books in boxes you realize that you may have an obsession. On the book shelf it didn't look like that much.

I have my boxes organized into three categories. 1) Boxes we will pack and use for the 3 months we are living somewhere else. 2) Boxes we will pack and unpack only when we arrive at our fellowship destination. 3) Boxes we will pack and will NOT unpack until we arrive at our final resting place in the future.

I love books, I can not part with them, but I know there are books that we aren't going to read in the next 1-3 years. Those books will stay in their boxes. My original intent was so that I wouldn't have to pack them up again in a year. But I am hoping that our next move includes a paid moving company with professional movers and then I won't care how much stuff I have to pack up and move out.

But for the moment, it is my headache, and I don't want to do it! I am doing a remarkable job procrastinating. This blog is providing me with ample opportunities for avoiding my elephant in the room. I should go pack something right now.

Please make this go away!

Tuesday, March 27, 2012

Anniversary Gift to DrH

My DrH are celebrating our 8th wedding anniversary today and what did I get him? Another BOOK!

I previously mentioned that I have been packing up books. Lots and lots of books. During that process I discovered that DrH had 6 of the 7 Harry Potter books in hardcover. He was missing the very first volume. So that is what he is getting, thanks to the good folks at Amazon - I love you.

Harry Potter books, I am not sure which anniversary that is technically supposed to be but for us it will be the 8th. My DrH started reading the Harry Potter series in medical school (obviously before we met) as a way to wind down and take his mind off the heavy stuff he was studying. I teased him.

I have never read a Harry Potter Book. I think it was primarily out of rebellion. I didn't have kids when the books were in their heyday and I had other things I wanted to read. A friend of mine bought be a paperback book and 9 years later I haven't read it. I have given it to my 7 year old son.

Even though I have yet to read the books, I am sure I will to my kids (maybe), I have watched each and every one of the movies. Although I would never pay to watch them in the theater. DrH has the collection on DVD and last November we had a marathon Harry Potter movie night that technically spanned over two weeks. They were good, but I am in no way a fan in the same way he is.

Monday, March 26, 2012

A Place To Rest My Head

Trying to find a place to rent for less than 3 months was proving to be difficult. With the help of our realtor we were able to find someone who was needing out of their lease at precisely the same time we need one, for exactly the amount of time we need. Another miracle from heaven in my book.

We went to look at the house/apartment and it will work. I have always wanted to live in an old house, and this fits the bill. It is 100 years old. It is an old Victorian home that has been turned in to 4 apartments. A main apartment on the lower lever, two apartments on the second, and one on the third.

The apartment that is available happens to be the main floor, thank heavens. It is really a 2 bedroom apartment but the rooms are large with closets and we aren't going to be unpacking much. It is going to be a little tight for our family of 6, but you do what you have to do!

It is near friends of ours and a popular walking/biking trail so I have a feeling we won't be spending much time actually in the unit... but maybe we will. I told my DrH that this place is exactly what I would have loved to have had for 6 years, provided it had 3 bedrooms. Who knew places like this even existed? Oh, yeah, we would have had we not been so set on buying. Now we know!

But the BEST part is the coin operated washing machine and dryer in the basement that is shared by all four units. I am going to have to load up on rolls of quarters and start baking cookies for my neighbors. We generate a lot of laundry around here!

I can't tell you how good it feels just thinking about NOT being responsible for maintaining a home. I am looking forward to renting - what a relief to not be the owner!

Friday, March 23, 2012

Did I Forget Anything

I know I have rambled on about budgets, income, housing, mortgages, etc. I hope I didn't scare you away, or lose you forever, but this particular topic is something I am passionate about and couldn't rest until I said everything I wanted to say.

If you have stuck out the past few weeks, thank you!

If you are interested in re-reading these posts, or directing your medical friends, I have created a new page tab that contains the links to each post in the series.

Now that I have finished my frantic writing, let me ask you: 

Did I miss anything? Do you have any questions for the doctors wife?

Is there anything you would like my take on (since I so willingly give my opinion on everything)?

Feel free to contact me via email  at or leave a comment on this post if you have suggestions for other topics.

What is next? I don't know. I do know that I need to start packing up this house, I need to move in just a few short weeks, find a place to live (2 actually), and move cross country. No problem!

Time to catch my breath and make a new plan for the next chapter in our medical history: Fellowship!

Thursday, March 22, 2012

Making It Work

There is a very good chance that even after my warnings and my story, which incidentally is not as unique as you might think, you will still find yourself in a precarious financial situation.

Take a deep breath.

Do you have a plan?

Right now is the time to sit down with your spouse/significant other and talk about what your strategy will be when trouble comes. Not IF, but WHEN.

Where will that extra money come from? Not just the extra money for your regular living expenses, but the extra money for the "Oops, that wasn't supposed to happen".

Here are some examples of things that did go wrong over 6 years. But they didn't all happen in the 6th year, they came like rolling waves from the very beginning, one right after the other.

  • Paid off car blows head gasket, now has cracked engine block.
  • Paid off car only fits 5, our family now is 6.
  • Financed car loses a transmission.
  • Water heater goes out.
  • Air Conditioning unit goes out on July 4th:-)
  • Dishwasher needs to be replaced after having been serviced twice without success.
  • Deck is peeling, needs sanding and painting (twice in 6 years, probably could use it again).
  • Grandparents 60th wedding anniversary and HUGE family reunion, want to go!
  • Grandfather passes away, want to attend funeral.
  • Sister gets married out of state, want to go!
  • Baby(s) is born, not free.
  • Tires need to be replaced.
  • Brakes need to be replaced.
  • Student loans are coming due, and can't be postponed any longer (TRUE)!
  • Garage door opener gives up.
  • Aluminum fascia on house blows off in wind storm needs repaired.
  • Roof needs replaced.
  • Trees need trimmed and they are too big for you to do.
  • Grass needs fertilized, treated, weeds destroyed.
  • Chimney needs cleaning.
  • Lawn mower needs repaired.
  • Screens torn, need repaired thanks to those big trees that didn't get trimmed in time because you have no money.
  • More babies, more diapers, more beds, more food, more, more, more, more. (But I love them:-)
  • Son starts school, registration fees.
  • Computer crashes, needs replaced.
  • Gas prices go through the roof.
  • Property taxes increase.
  • State income taxes increase.
  • Healthcare insurance increases.
  • Fellowship costs (seriously, expensive).
This isn't even everything, but hopefully will give you a good idea about what could happen, and what does happen and how creating a plan will never be a bad idea.

What are some options for adding extra cash to your reserves so you are prepared when IT happens?

Our story I have already shared in bits and pieces. Here is the readers digest version. Six months into our intern year (after having bought a house that would be too expensive to sell e.g., fees) we ran through our savings. In January I started working from home (with an infant and 2 year-old). I worked for a year but didn't make that much and my ability to perform my real job as wife/mother was compromised. It took up so much time and energy to juggle my responsibilities that I didn't have time to make and keep friends, or be involved in anything. I worked and took care of my family. There wasn't an extra moment.

After working for a year we found out we would be expecting again and I told my husband there was no way I could continue doing what I was doing. Our family was suffering, and with three kids everything would suffer and for what? We were both stressed nearly to the breaking point.

Making a commitment like this isn't for everyone. He had previously looked into the Military Reserves and was interested, but I didn't want him to commit. That was before we were broke, tired, stressed out. Six months later, and in the second half of PGY2 he joined the reserves.

Without their stipend there is no way we could have made it this long. The long list above... the only way we were able to take care of those things was because of the extra income we received. The only way we were able to save anything for when the next thing happened, was because of that extra income. There is no possible way we could have made it work on just his resident salary - No Way.

And it wasn't possible because we lived an extravagant lifestyle. We didn't. It wouldn't work. Our housing costs (mortgage and utilities) took up one entire paycheck plus some every single month. Don't let that happen to you!

Make your plan NOW!

Some of these we have used, others are not options, others are things I have heard of. Use it as a spring board to create your own plan.

  • Borrow from family
  • Use credit card
  • Obtain work
  • Moonlight
  • Signing with a large hospital affiliation, like HCA
  • Getting a stipend from a specific group or hospital that you will commit to
  • Joining the military full-time or reserves
  • Selling valuables
  • Cash out stock, life insurance policies, 401(k)

A note about the above options: these might not be available to you.

Before you make assumptions about borrowing from family, moonlights, getting a job, etc. Make sure that is possible!

Family may not  be willing or able to lend money. If you use a credit card where will the money come from to make the payments? Getting a job could prove difficult or counter-productive. Moonlighting may be prohibited. Signing with a hospital group may not be available in your specialty or they may not have a hospital in a state you are interested in working in.  Getting a stipend at the beginning of residency isn't heard of very often, don't assume you will be the exception. Joining the military (we did reserves), they might not need anyone in your specialty and it doesn't happen over-night. Selling stuff, eventually you will run out of stuff to sell - then what? Cashing out long-term savings instruments can be expensive or you may not have any.

My husband had a life insurance policy his parents had set up for him, that he was paying on. Not only was it a monthly expense ($25 or something like that) it had monetary value that we needed. Maybe not the wisest decision, but he was covered through work now so we eliminated that expense and cashed out his policy. I think it amounted to $2,500 but that was money we sorely needed.

I worked prior to our getting married and had some assets in a 401(k) plan. Taking money out of retirement plans isn't something to be done lightly. It is taxed heavily, and is further penalized through the tax code. You only get about 70% of the amount you take out. It could push you into another tax bracket in some cases negating whatever gain you realized.

Take another deep breath, and make a plan. Please. You will feel better knowing it is in place even if you never need it, and I really hope you don't.

NEXT: Did I Forget Anything?

Wednesday, March 21, 2012

Renting Myths Debunked

I know many people feel that renting a home is like throwing money away. I hope in my previous posts I have adequately demonstrated that sometimes owning a home IS throwing money away!

Public policy is partly to blame for the negative stigma attached to renting. I found this article in my research that you might find interesting. You might be thinking that you could use the tax advantage associated with paying interest. Calculate that very carefully. If you don't have enough deductions to itemize you will take the standard deduction anyway. Taxes = politics and politics can change. The mortgage interest deduction may not always be around.

Let me remind you that we are a unique group, but we are still in training. There will be time for home ownership later. This is the time to enjoy the consistency and security that comes with renting a home or apartment. Let someone else be responsible for the maintenance, replacement, upkeep, potential depreciation, wear and tear, etc that comes with home ownership.

Owning a home is not all it is cracked up to be! When you rent, you know what your rent is. When you own you never know what problem is waiting around the corner or when it will strike. I might add that it will never come at a good time, and you will never have the money when it does. When you rent, you have someone to call to fix what is broken. If they don't fix it you have recourse. When you own your home, there is no one to call unless you have the money:-)

I could never have dreamed of the expenses we incurred just in maintenance. Owning a home has an untold number of hidden expenses that I have tried to detailed. The fees getting in, the maintenance staying in, and the fees getting out. All of which are expenses that are associated only with owning.

You may make the mistake of thinking that you don't need to worry about what happens when you go to sell because you will be a rich doctors' wife. Don't take that naive approach to this very important decision.

There are too many variables that can sabotage your best intentions. You don't have to look very hard to find someone whose:
  • Residency programs closes
  • Program isn't a good fit
  • Husband changed their minds about specialties
  • Husband decided to do a fellowship:-)
When you own a home you are tied down. It is a burden you will carry every month, every year.

I hope the housing market recovers enough to provide families a sense of security in owning a home. I really do. Buying a home was never intended to be a short-term situation. For people who will be living in their home a long time, buying and paying that mortgage off as quickly as possible is a great idea. For those of us just passing through the last thing we need is a mortgage and house to take care of.

Remember you are not like everyone else. This financial situation is temporary for you. Your light at the end of the tunnel is at least a light! Because your future is different, making money (or losing it) on a house is not something you need to be concerned with. 

Right now your job is to get trained and move on. What is an immediate concern is providing for yourself and your family. The best way to do that is to eliminate unnecessary risk. Owning a home right now is an unnecessary risk. Your budget will have a better chance of survival if you can keep your largest monthly expense constant, no surprises, no hidden fees.

I love this quote by Dave Ramsey,  


Your time will come! It will be here before you know it!

I know you have dreams of decorating and painting. Guess what? Many landlords will let you do whatever you want, provided it is tasteful or is painted the original color when you leave. Don't let yourself get hung up on paint! The good news is that there are many people in tough situations who need to rent their homes - there is no shortage of rentals.

Entire industries exist telling you that buying a home is always the right decision. Realtors (I know I have at least one realtor reader:-) make commissions every time a home is sold. In the last 6 years our home has generated $17,000 in brokerage fees alone.

HGTV would have us believe that we can take any house and with a couple hundred dollars turn it into a magazine worthy show piece. Home Improvement stores are like Disneyland to a person who owns a home! Home inspectors, appraisers, radon mitigators all profit from the buying/selling of homes. Local governments must love the constant turn-over, they collect transfer taxes. Bankers will let you borrow more than you should. Home buying and selling might not be a good deal for you, but it is a heck of a deal for everyone else.

The only person looking out for your best interests is YOU! The only person who is concerned about the welfare of your family is YOU! The only person who can make this very important decision is YOU!

Next: Making It Work

Tuesday, March 20, 2012

When It Is Time To Sell

This is the final (I think) story in my housing saga.

We sold our house!!! Yeah and congratulations to us. It was on the market for 5 days, sold for $500 less than our asking price. We close on April 13, 2012. Why am I not happy?

When you buy a house the last thing on your mind is selling it, but I suggest you may want to consider it first.  We have sold our house too early! Which I agree is better than selling too late. Homes in our area are on the market an average of 57 days. That would have been perfect, and what we were counting on. We don't finish residency until June 30 and will be homeless on April 13.

Why homeless? Because finding a rental property for 3 months is nearly impossible unless you are willing to pay for 6 months. So.... our options at the moment are:
  1. DrH live with a friend (or sleep in the call room), kids and I drive across country and stay with our family.
  2. Temporary corporate suites (hotel) at $3,000/month
  3. Kids and I go to fellowship location early and wait.
  4. Live in a friends house that is for sale, unless she sells it before then.
  5. Find someone who is wanting out of their lease and just the right time.
I don't know where we are living! 

Hint: if we had been renting we would just tell our landlord when we will be vacating the premises. Much easier! Something to think about.

But the purpose of this post is to wrap up the costs associated with owning a home. Buying a home costs a little up front. Owning the home, costs a fair amount, if you keep it up. Selling a home is an expensive endeavor.

To recap expenses up to this point:

Settlement/Closing fees at time of purchase: $3,331.09
Improvements/Maintenance to home: $20,000
Settlement/Closing fees SOLD $ 11,828
Total Expenses = $35,159 (not including depreciation)

This is how those seller closing fees breakdown (this is from our estimated proceeds sheet, which I told my realtor the name should be changed because there are NO proceeds).

State Taxes ($1.50/$1,000) = $201.60
Title Policy ($4.00/$1,000) = $537.60
Release of Mortgage = $40
Home Warranty to Buyer = $475
Attorney Fee= $300
Brokerage Fee (6%) = $8,064.00
Property Taxes = $1,075 (partial year)
Radon Mitigation = $800
Inspection repairs = $335
Total = $11,828

Here is another way to look at how much owning a house has cost us over the last 6 years.

Getting in the house = $3,331.09
Staying in the house = $20,000
Getting out of the house = $11,828
Total = $35,159

This total represents real dollars associated with buying, selling, and maintaining a home. This is money directly from our pocket. This is money that had nothing to do with paying our mortgage payment every month.

Let me put it in perspective this way. Even if we didn't make a single repair or improvement, just the total fees of getting in and out of a house for our family totaled $15,159.09. We will have been in this house for 69 months. Those fees divided by 69 months equals a cost of $220. That is what it cost us each month to live in this house in just fees! And the fees would be the same regardless of how long we stayed here. One year or ten, the fees are based off the purchase price and have nothing to do with how long you have owned the home. The shorter the stay the more expensive the fees per month. The longer the stay the less expensive.

For all of that expense what did we get in return?

Purchase price in 2006: $145,000
Selling Price in 2012: $134,400
Value Lost = $10,600 - this represents that portion of our mortgage payment that was applied to principle every month, gone.

After we payoff our mortgage balance of $128,000 and pay our closing fees of $11,828 we will still have to pay $5,428 to sell our house. That is money directly out of our "deep" pockets.

Between equity lost, fees, and improvements the total amount we have lost is $45,759.

I can hear you! You just said that things are different now. Really? Tell me about it in 5 years, maybe it will be. Maybe it won't. Are you willing to take that risk?

Next: Renting Myths Debunked.

Monday, March 19, 2012

Rent To Own

We are all familiar with the concept of rent to own. Hopefully, not from personal experience.

It works like this: You don't have any money for a washing machine, furniture, computer. You don't have adequate credit to borrow. You want something now but have no money. In many of these cases the buyers who rent to own end up paying nearly twice as much for an item than they would have if they had the money to buy it.

We are so much smarter than that, we would never think about renting to own anything. We can smell a trap when we see it.

BUT, we fall for it when it comes to our homes. We can't afford them. We don't have any money. Everybody has one. We want one. So we borrow the money and essentially "rent to own" a house.

When you sign your mortgage documents you will receive a large stack of papers. One of which will be a disclosure statement with the following information:

Your Annual Percentage Rate - the cost of your credit as a yearly rate.
Finance Charge - the dollar amount the credit will cost you.
Amount Financed - the amount of credit provided to you.
Total of Payments* - The amount I will have paid after I have made all payments as scheduled.
*note this amount is only the principle and interest, it doesn't include the property tax or insurance you will also pay.

What if I told you, that if you were to finance your home with a 30 year mortgage and made payments for those 30 years (without refinancing, or taking out a 2nd mortgage against your equity, etc) that you will come close to paying double. Sounds like rent to own to me.

It is true.

This is what our Disclosure Statement(s) told us 

APR 4.925% (2009 - I know they are lower now)
Finance Charge  $114,475
Amount Financed  $137,206
Total Payments $251,691

You will also receive an amortization schedule that will map out when each payment is due, and if paid on that date, what amount will be paid towards interest and towards principle. It is a fascinating document. You can play with one here.

But that is just part of the story. You will inevitably spend money on your house which will increase your actual costs of owning a home outside of the mortgage.

I have already warned my husband that we will never have a 30 year mortgage. I don't care how long we have to wait.

Next: When It Is Time To Sell - The Final Story.

Friday, March 16, 2012

The Mortgage Payment Breakdown

If you are considering buying a home I recommend reading/watching a series of articles/videos that I discovered while writing this post (here).

There are so many factors that go into determining your particular mortgage payment. The same price house, with the same interest rate will not be the same in every state.

When we first started looking for houses it was easy to get excited about all the affordable houses we found. And we were excited! I know you are, too. We would search and other housing websites to see what was available in our "supposed" price range and become giddy at how seemingly cheap houses were compared to where we lived. You have seen them too. You find a house you like and over in the corner they give you a number of what the approximate mortgage will be.

That LOW number only to tells a small portion of the story. The low number is the one that hooks you and gets you thinking you can do this. Your mortgage payment will not be that low.

Many of those sites do not have accurate information, or any, regarding the current property taxes assessed on that particular home. Depending on your state, property taxes could represent a significant portion of your mortgage.

Since I have been using myself as an example, here is what our current mortgage payments look like  5.5 years into our mortgage.

Monthly payment:   $1,167
Principle:  $308.64
Interest:   $539.80
Property Taxes:   $260
Insurance (property/flood):   $60

When I look at the total amounts we have paid over the years (5.5) this is how they breakdown into percentages

57.37% Interest - this is money that you pay the bank for the pleasure of using their money instead of your own to gamble with.

20.26% Property Taxes - this is the amount you pay to your city/county that funds schools, local projects, etc. - unlike a fixed rate mortgage, your property tax may increase every year like ours did.

17.32% Principle - this is your real contribution that becomes equity assuming your house is still worth what you bought it for.

5.05% Homeowners Insurance/Flood Insurance - this is what the bank requires you to have to protect their investment should something happen to the property.

Having a mortgage of any size is in reality using someone else's money to invest with the hopes that the investment pays off. You assume all of the risk and you pay a hefty price for that arrangement.

Next: Rent To Own = Mortgage

Thursday, March 15, 2012

How Much Does Buying A House Cost

If you don't have any money to put down on a house that should be your first indication that you have no business buying a house.  Even if you have a little down payment, you should consider renting and keeping that down payment as an emergency fund!

It is harsh, but it is true. If you haven't been able to save anything of consequence before buying a house, your chances of accumulating any savings when you do buy a house are next to zero. If you aren't able to save anything you will not be able to maintain your house, or your car, or your kids.

I remember being a young twenty something and wanting to buy a car. At the time I didn't have a car payment, but had a car - I just wanted a nicer one. My dad suggested that I "test drive" my car payment before I committed to it. He said to pretend to make car payments to my savings account for 6 months. If I was able to do that I probably would be able to make the payments and would have a down-payment to add to it. My parents didn't drive a nice car, shy would I listen to them? Parents are so wise, and we think they are so foolish. What makes them so wise? They have been down this road before. I am not saying I am wise, but I've been down the road. By the way, I didn't even try his way - I should have.

Not that long ago people used to have 20% of the purchase price as a down payment. Why? It demonstrated financial responsibility! Slowly over the years it became less and less and now we are in the place we are today where people can buy a house with almost "zero" of their own money.

People who demonstrated no financial accountability (measured by savings) were able to buy houses. They gave us one (and we even put some down), what were they thinking! One little bump in the road and life gets hard real fast. It gets hard for you, it doesn't get hard for the bank. No one at the bank is losing any sleep over the fact that you are (or will be) struggling.

Here is a basic truth about money that can explain why things get more expensive (e.g., tuition, houses, etc). When money becomes cheap and easy to acquire then the actual price of things matters very little. The only thing that matters is can I afford the monthly payment. Who cares how long those payments will be required.

What difference does the price of my tuition make when I am not actually going to pay for it. I will eventually, but not now. What difference does the price of my home make when I am not going to pay for it right now. I will eventually, but not now. Or in most cases because no one stays in their home very long they are just "renting" from the bank with no intention of actually owning that home.

I went over my loan documents from our home purchase in 2006, here are the facts about the costs associated with just getting into a home. (Yes, I know this is just one example and there are others - some more, some less - it is an example, a real-world example).

The agreed upon sales price for our home in 2006: $145,000
Settlement charges/closing costs: $3,372.42
Gross amount due from borrower (that's me/you): $148,372.42

Mortgage amount: $137,636
Down payment: $7,225.89
Credit from seller: $1,000 (to fix sinking driveway, that amount only covered 25%)
Property Tax credit for previous year: $2,510.53
Total: $148,372.42

May I direct your attention to two items: settlement/closing costs & down payment

What were the settlement charges paid by the borrower (me/you)?
  • appraisal fee $275
  • credit report $20
  • commitment fee $255
  • underwriting fee $150
  • flood zone certification $11
  • interest 6/16/2006-7/1/2006 $315.82
  • hazard insurance $186.51
  • county property taxes $1529.43
  • aggregate account adjustment -$124.34
  • settlement or closing fee $100
  • attorney's fee $300
  • title insurance $133
  • recording fees $51
  • mortgage recording fee $23
  • state surcharge fees $40
  • assignment recording fee $21
  • overnight fee $15
  • POA recording fee $21
And that is how you get $3,372.42 in fees in addition to your mortgage before you even step foot in your house.

When we purchased our house in 2006 the interest rate we received at the time was 6.674%. Guess what, interest rates dropped and we refinanced our home in 2009, exactly 3 years later. We were fairly confident that all would be well. Our home had increased in value by $8,000 and we were making improvements that would increase its value (or so we thought). But the real reason we refinanced was that our budget was squeezed and we needed more money in our pockets every month. We had just had another baby, making us a family of 5.

We refinanced from 6.674% (2006) to 4.925% (2009). A difference of almost 2 percentage points made a significant different in our payments.  From $953 to $827 (PI), a savings of $126 per month over the next three years.

BUT refinancing comes with it's own costs too: $3,154.03
  • appraisal fee $300
  • credit report $15
  • commitment fee $245
  • underwriting fee $160
  • flood zone certification $10
  • overnight fee $20
  • interest 6/19/09-7/1/09 $186.56
  • hazard insurance $218.04
  • county property taxes $1665.93
  • aggregate account adjustment -$163.50
  • settlement or closing fee $110
  • title insurance $220
  • recording fee $40
  • assignment fee $76
  • overnight fee $20
All of these fees we added into our refinance, and to make the number we financed round we received $677.53 in cash.

Before you start saying that it looks like we made some poor financial decisions, let me remind you that when you are getting squeezed by your budget you will start to make choices that under other circumstances you would not. And you will justify it by saying it is the responsible thing to do. No one wants to pay more in interest than they have to! But in the long run whatever we saved was essentially wasted on fees, and additional interest. In the short term we survived another day.

When I total all the fees that were associated with this house in both obtaining a mortgage and then refinancing it (not counting property taxes) we spent $1,842.99 the first time and $1,488.10 the second time for a grand total of $3,331.09.

$3,331.09 for FEES and we are going to have thousands more in fees when it closes (that post will be fun). Regardless of what the housing market, or interest rates are doing there are fees everywhere! Fewer on the front end, and more on the back end. There is no way around it when you buy.

Owning a house is EXPENSIVE getting in, staying in, and getting out.

Next: The Mortgage Payment Breakdown

Wednesday, March 14, 2012

The Mistake My Budget Couldn't Recover From, Ever.

It is the single largest expense of nearly every budget: Housing.

In my original estimates I wrongly assumed that the only thing that would change in our expense equation was the cost of housing. We previously didn't have any, so I looked at our budget compared to our anticipated income and came up with what I thought we could reasonably afford.

Using my target number of $950/month I set out to find a house that would fit our price range and needs for our family. Thanks to the Internet you can research home prices all over the country. And thanks to the Internet you don't really get the full picture of what that house will cost.

I figured that at $950/month we could afford a house in the $135,000-$145,000 range (in 2006). I should add that $950/mo would be our top end. But then I started to discover that the seemingly affordable housing in the area we were relocating to wasn't as affordable as the numbers made it seem thanks to property taxes. Property taxes are a mere annoyance in some areas of the country, like where we were from. Property taxes in other parts of the country represent a large % of the costs associated with housing, like where we were going.

All of a sudden the price range we had to look in to meet the $950/month that I thought we could safely be in dropped dramatically to about $100,000. See in our state property taxes run on the low side about $2,500/year to $5,000/year about the low-average. Finding a home that was in good condition, that would meet our needs over the next 6 years was all but impossible to do in one week.

That probably explains why the realtor we were working with started showing us more expensive homes than the ones we asked to look at. Not to mention that she had a personal stake in showing us more expensive homes, her commission was based off the sales price!

When she showed us the house we eventually bought we were skeptical that we could afford it (those gut feelings are usually right), but the bank assured us that we could. What does the bank know about how I spend my money or what is important to me. What did they care about how many children we had, or if we ate rice and beans for every meal. Did they care that we would never take a vacation, see a movie, or get a babysitter? No.

On top of that we only had a week to look at potential properties. We had already spent so much time looking that turning back and starting over seemed to represent a failure on our part. What was the point of spending the money to come out to look if we went home empty handed.

Rentals? We had already convinced ourselves that we were going to buy a house. See, we were finally responsible adults with a family, and that is what people in our stage of life do. Don't fall for the lie. Buying is a good decision for some people, in some situations, in the right areas, under the right conditions. Interns and residents aren't always those people.

In the end we convinced ourselves that we could squeeze an extra $300 out of our budget. Really? Where did we think it would come from? We were so naive! To think we could eat less, drive less, buy less than we did as medical student with more children coming was just plain stupid. But the really foolish thing was to think that this house would never need any maintenance - that it would just take care of itself.

No Home Is Self-Sufficient! Over the last 6 years we spent $20,000 maintaining this home. That works out to an extra $277/month every month. Add that to the $300 we thought we could squeeze out of our budget and our budget was squeezing us by almost $600/month - just for a house, and that was before our property taxes increased.

Buying a house stretched our budget to the breaking point. We took on a mortgage larger than we felt we could handle, and we were right. But then as any homeowner will tell you, a house can be a money pit. You want to make your house your home. That means paint. With new paint all of a sudden your furniture looks drab and sad (we waited 3 years before we bought a piece of furniture). You don't go to movies so you watch HGTV all day.

You think of all these little DIY project that don't cost much, but pretty soon every dollar adds up. The free piece of furniture you are going to refinish may look great, but when the supplies are all purchased - free is now $40 and you didn't have time to go grocery shopping so it's fast food for dinner. Paint may be cheap, but you have to buy supplies that go along with painting.

A yard is nice, but now you have to buy a lawn mower. How about a snow shovel and other yard implements so your neighbors don't report you to the authorities for yard neglect. What about the tools you have to purchase to fix things yourself so you don't have to pay someone to do it for you... it all costs money.

Does your budget have the room? What are you willing to sacrifice just to say you own a home?

ADVICEDon't buy a house before you start internship. WAIT. Move into a rental for 6 months. Get a feel for your new income. Get a feel for what your expenses will be in a new city/state. Get to know the area. Pay attention to the things that come up (car repairs, medical bills, etc). Monitor your expenses. If you feel your budget can handle buying a house and all the things that come with it, Great! And because you are renting you can take your time and find just the right place without being under undo pressure.

Next: How Much Does Buying A House Cost?

Tuesday, March 13, 2012

My Budget Exposed

Here is a look at our first year.  I was SOOOOO prepared. I spent hours, days, weeks working on this (6 years ago). You see as soon as we found out where we were matching I hit the numbers hard. I came up with a budget that I thought would work, based of course on how we had been living that year, payroll calculators, tax estimators and then tweaked a little to make it work (e.g., forced it to work). I was congratulating myself for my responsible approach and wise calculations.

What you will see next is really three budgets. The first is the one we were living with during medical school. The second I projected while planning for internship/residency. And the third was reality in internship/residency (an average of the months July-Dec). 

As medical students we were poor, or I thought we were poor. We were living in my DrH parent's second home so we had no rent, we did pay utilities, but even then our income was gone. Granted it was a large metropolitan city in the west and just insuring our cars was expensive, not to mention cooling a house in the summer. But we didn't do anything! We did have a baby and one on the way ($$). But I am not kidding when I say we didn't do anything.

I was foolish to believe that we could continue living like we were then long-term, and even more foolish to believe that the only thing that would change in our budget equation was a mortgage payment. That I could somehow keep everything else constant. Life was going to teach me a lesson the hard way. No matter how much you plan and prepare, if you don't plan for the "what if" you aren't prepared.

I am going to admit right now that I am embarrassed when I look at this budget. Another benefit of anonymity. Even with all my knowledge about budgeting, even though I had been successful at it, I still fell into traps. The same traps that are waiting for you. Even with all my best laid plans my budget didn't have any room to breathe. In my calculations, nothing could go wrong 6 years. That just isn't likely. By Christmas we had used up all our savings and were financially suffocating.

I am feeling the need to defend my spending to you. When I look at it I am appalled that I was so "off" when I made my estimated budget and what actually happened. The only pleasant surprise in the whole thing was that is cost less to insure our cars in our new state so we saved a little money there. But just a little. Everything else was more than I expected. We just bought a house! I was pregnant! We were having a new baby! We had the baby! Our toddler grew!

This wouldn't just be a one time deal either. How were we supposed to survive the next 5 1/2 years? How did this happen to me, I thought I was prepared? This wasn't supposed to happen.

I also want to point out that I had a line item on our budget for credit card payments. I previously said that from the day we married we committed to never put anything on a credit card that we couldn't pay off that next month and we have lived that way ever since. Unfortunately, before we were married we weren't so disciplined and had one credit card with a balance of $4,000 that we made monthly payments on until the day it was paid off nearly two years ago. That was $115 dollars a month out of our budget for those years that we were spending on something(s) we purchased and consumed in the past when we probably didn't need it. Using credit is robbing your future at precisely the same time your future needs it! I am unaware of a credit card that will allow you to charge without making payments. They have to be paid, and your budget cannot afford it.

So, go ahead and say that this won't happen to you. You will be better prepared, you will make better decisions, you will be different. But what if you aren't? What will you do?

Next: The Mistake My Budget Couldn't Recover From

Monday, March 12, 2012

A Close Look At Expenses

A budget deals with two items: income and for expenses. We have previously covered what you might expect on the income side as a new intern/resident. Now let's talk about expenses.

Most people live on a fixed income. They may make more or less than average but their income still stays about the same every single month. Would you be surprised to know that people who make several hundred-thousand dollars a year run into the same kind of money problems as people who bring in much less? The issue is not how much money you make, it's the way you spend your money that makes the difference.

Do you know what your expenses (obligatory and non-obligatory) are and the frequency in which the occur?
Do you know what expenses you might incur in the future?

When I started budgeting I learned something very quickly. I couldn't use a budget created by someone else. The ones that say you should spend x% on rent, x% on food, x% on movies, etc. I am not generic, I am unique and so are my expenses. No two people are going to spend their money in exactly the same way, that's why only you can make your budget. I could do it for you, but guess what... you wouldn't like it and it would not respect your priorities for your money - it would reflect mine!

You have to do it yourself (or with your spouse/significant other). The good news is it is not difficult.

If you don't already know what your expenses are it might be tempting to guess. That would be a fun exercise! You see expenses are a lot like calories. I always think I eat less than I actually do. Same goes for spending. If I didn't already know what I spend on certain categories I would be very surprised by some of the results. So if you are interested in seeing how close or far from reality you are, try making an estimate.

I believe that our past performance is the most accurate indicator of our future performance. You need to know what your baseline is for spending. Without trying too hard to change your behavior, spend your money as you normally do and record your expenses as you go.

This is going to require some work on your part. I do all of my financial transactions through my debit card and they are recorded online. I then transfer them to a spreadsheet. If you use cash you will need to write down your purchases or keep receipts. You can use cash, debit cards, a combination of both. You can keep track in a notebook, the back of an envelope, a spreadsheet, fancy software, or an app on your phone - you decide! The bottom line is that whatever method you use to track your spending habits that YOU TRACK THEM!

Once you have a months worth of expenses you need to start categorizing them into groups as large or small as you feel appropriate for your situation. Here are some suggestions to get you started:

Auto loan(s)
Child Care
Home maintenance
Credit Card Payments
Student Loan Payments

Now that you know what your expenses are you can compare that number to the income you received for that month. My hope is that your expenses were less than your income, but I am also a realist and know that they seldom do if you haven't been keeping track before.

That's okay, don't get discouraged. Now we can start creating a budget for this month based on what we already know we have spent in the past. Warning: do not get stuck in the tracking phase... you eventually will need to move on to the budgeting part. Tell your money where to go, don't let it tell you where it wants to go. Take charge!

Remember: each of these budget line items are trying to get as much of your money as possible for themselves. My clothing budget wants much more than it gets. My food budget would have me eating yummy expensive foods every day. My entertainment budget is screaming for me to do something, anything just to make an entry! You get the idea. If it helps you can imagine your budget items as small children who are trying to grab as much candy as they can when the pinata breaks, also know as payday. They don't care how much anyone else gets, they just want to make sure they get as much as they can.

As you start to categorize your spending habits, you may immediately begin to see some patterns. I had no idea I ate as much ice cream as I did! Seriously. I also didn't guess that I ate out as often as I did. I spent money on things I didn't even need, but used shopping as entertainment... I spent money because I was bored! Note, this is all past tense. Not anymore, except the ice cream part - that still gets me, but now I budget for it:-)

The idea is to look at the patterns you have noticed and decide whether the spending was necessary or unnecessary. Sometimes just being aware is enough to change our behavior. Other times it requires some determined action on our part.

As you review your expenses items will begin to come to mind that you could have done without. You will start to see places you should avoid because you seem to always spend money there. For me it is Target, I always find something there I don't need - so I stay away! You will look at the frequency with which you do things and begin to make notes in your head to not do that so often. It will happen.

After doing my budget for a few months I started to break these down into even smaller categories. I wanted to know how much I was spending on eating in vs. eating out, how much of that clothing allowance was for me or the kids, how much was for gifts we were giving to each other and how much was for gifts for others. Knowing specifics made it easier for me to identify my unique problems.

That's what is great about making your own budget, you can decide what to do with it... you make the rules!

Even though you might make the rules, the equation doesn't change. If you always spend more than you make, you are in serious trouble. If you spend exactly what you make, you are in trouble and trouble is coming. If you spend a little less than what you make, you are probably worried and you should be. That worry is a warning that you need to do something.

I don't know what the magic number between income and expenses is, because it will be different for everyone. But I do know that spending everything you make is a recipe for disaster. Even the most carefully crafted budget is unable to predict every possible scenario. But your budget can provide a way for you to save and prepare for what you can't see today.

Next: My Budget Exposed!

Friday, March 9, 2012

Getting Started

I am going to spill a little secret. I didn't always budget, but I should have. In fact when I think about how much money I HAD and don't know where it all went, it makes me ill!

My obsession with budgeting came in 2002. The financial institution I worked with sponsored a series of classes on all things related to money at a non-profit whose focus was on empowering women. I volunteered to teach a budgeting as a way to boost my resume and hopefully increase my chances of a promotion. It worked, but what I got out of that experience was even better!

The classes were well attended and I am nearly positive that I learned more than any of the women I was "teaching". I can imagine their surprise to be taking a budgeting class from a mid-twenty something. What did I know about money? They were partly right. Everything I learned about budgeting came from preparing to teach them how to budget! If I was going to teach something, I had better figure out how to live it. Personal experience is the best teacher, and it wasn't brain surgery, I just needed to learn how.  From the day I volunteered to teach that class I have kept a budget in one form or another.

Prior to that moment I spent what I made and at the end of the month if I still wanted to buy something but my checking account said "no" I put it on my credit card. I justified it by saying it wasn't a big deal because I would have the money, I just didn't have the money right now. Savings? That wasn't even in the picture. Only people who have "extra" money save it. I didn't ever have any extra money, and you won't either if you spend like I just described.

There are a few easy things you need to know before you get started on your personal budget journey:

1. How much money do you make?
2. How much money are you obligated to spend?
3. How much money do you spend (or want to) on non-obligatory items?
4. How much money do you want to save?

How much money do you make?  You can find that information on your payroll stubs. But don't stop there. Do you have any other sources of income? I bet you do. For example, I know that every Christmas my DrH employer gives him a $500 bonus as a gift. That is income, and we count everything. I know that twice a year I get 1 more paycheck than the other 10 months - my budget loves those months:-)

How much money are you obligated to spend?  That is another easy one. Obligatory spending is rent, mortgage, insurance, car payments, utilities, credit card payments, student loan payments and anything that you are contractually obligated to pay - or to make it easy, anything that has a bill (in the mail or online) attached to it.

How much money do you spend (or want to) on non-obligatory items? This one is a bit trickier. If you have no idea how much money you spend on things like food, clothing, movies, a morning donut - you have some homework to do. I know that every December is Christmas, and that every August school starts, each with opportunities for expenses.

How much money do you want to save? I want to save a lot, duh. But do you really know how much you want to save. Is it a certain dollar amount, is there something you want to save for, what is it? Yes, every budget can find money to save.

I am going to leave you with a little object lesson:

Imagine for a moment that every day you walk to a river and pick up a pitcher of water to fill your reserve tank. Every day you (and/or your spouse) make this walk (work) to fetch this water (money) to put into your tank to take care of your family. Some of us have very long walks! Over and back, every day you are putting money into this tank.

Now imagine that the reserve tank you are pouring your water (money) into has leaks - lots of leaks.

What can you do? You can make more trips to the river (work) to fill the tank faster than it leaks out, or you can stop the leaks (spending).

A good budget identifies the leaks and plugs them so more of your dollars stay in the tank with you and your family and less falls to the ground, soaked up by the earth never to be seen again.

Next: A Close Look At Your Expenses

Thursday, March 8, 2012

Intro to Budgeting

I left off yesterday with some very bad predictions that had to do with suffocating around Christmas time. I apologize that was probably harsh, but still true.

Budgeting is not just for people with who are making less than xyz. Budgeting makes good sense for all people regardless of their income or potential for income. I like to amuse myself with creating budgets for the day when I have a larger pool of money to work with. I am that geeky.

I understand why some people don't want to budget. I really do. But ignoring the facts doesn't make them go away. I like to know what I am working with. I like details. I like numbers. I like making projections. I like making charts and graphs and spreadsheets. That is just me. You can make your budget complex and detailed (like mine), or you can do one simply and generally. Whatever method you will USE is the one you should choose!

The primary goal of a budget is to identify what sources of income you have coming in and what expenditures you have going out on a monthly basis. Simple.

If it is so simple why don't you it?
  • It takes up too much time
  • I don't have enough money to budget
  • I don't know how
  • I don't want to know, it is depressing
Let me give you some (more) sobering news:

"The American Bar Association has indicated that 89 percent of all divorces can be traced to quarrels and accusations over money. Others have estimated that 75 percent of all divorces result from clashes over finances. Some professional counselors indicate that four out of five families are strapped with serious money problems."

"Marriage tragedies are not caused simply by a lack of money, but rather by the mismanagement of personal finances... Peace, contentment, love, security in the home are not possible when financial anxieties and bickerings prevail."

Being married to an intern/resident comes with its own set of stressors, I don't need any additional stress in my life or my marriage. A budget could save you from many sleepless nights, unnecessary arguments about spending, and can help you identify things that are important to you and your spouse.

Budgeting is a family affair. In our household, I am responsible for the budget. I create it, I track it, I monitor it. My husband fully supports my efforts and doesn't attempt to thwart my plans very often. It took some time to get us both on the same page. He is at the hospital working all day, he isn't paying the bills or doing the shopping. In his mind it seems like he is making enough and why are we always so tight. A budget keeps the entire family in check, up to date, and on the same page when it comes to how you will spend money.

I recognize that if you have a spouse or a significant other that doesn't share your same view of money and budgeting this process can be difficult. Money can be an emotional subject to talk about. I can remember one conversation in which my husband felt like I was suggesting he wasn't providing adequately for his family. He also from time to time gets upset that he can't "reward" himself with something seemingly small for his hard work and long hours. I have also felt trapped by our budget at times. Retail therapy is a close second to chocolate. Chocolate usually wins because it is more budget friendly. But abandoning it has never been a consideration. We have fallen off the wagon at times, but the majority of the time it works and we know where our money goes.

Our budget has protected us from making poor choices. Our commitment to not make purchases on our credit card that cannot be paid off immediately have made us accountable to living on what his income provides. Trust me, had we not made that decision we would easily have tens of thousands of dollars in debt that we could not "assign" to any one purchase. It would have been dinners out, movie tickets, weekend trips, clothing, groceries, etc.

It is easy to justify taking on more debt because the amount of debt we carry from medical school is hefty! What difference does another ten thousand dollars make when your totals are already nearing the $300,000 mark and beyond? It does matter. Those bills have to be paid. Shuffling money from one place to another and playing games so as not to get behind is not a reality I can live with.

Another argument we might make to justify additional debt is that we will be making more than enough money to pay it off in the next 3-7 years. While that may be true, spending money you don't currently have is one of the behaviors that lead to the economic crisis we are still living in. Not to be Debbie Downer, but what if that day never comes? Hopefully tragedy will not strike, but what if it does? We can't continue to borrow our future earnings.

I realize this is just my own personal belief. I understand that every situation is different and that the line I draw in the sand for my family about personal debt is rather black and white. For me it is easier to deal with that then dealing with gray areas, because eventually everything can become gray.

Next: How To Set Up A Budget

Wednesday, March 7, 2012

The First Year is the Roughest

Yes, but not always. Yesterday I showed your our first real payroll check as an intern. It was from 2006 and yes our program has made some changes to the salaries of their residents. Don't get too excited yet. Here are the comparisons between the starting salaries when we first started and where they are now.

Net Income Per Pay Period (every two weeks, 26 per year)

Residency Year
Salary   2006
Net Annual Salary
Net per pay-period

Yes, starting salaries have increased over the last 6 years. Yes, during the six years there were two salary adjustments made. Yes, we made more money every year than we did the previous year. All good news, right?

If you are thinking "if we can just make it through the first year everything will be fine" you are partly right, and wrong. If the first year was bad, the next year will only be mildly better. You are approaching these numbers thinking that your expenses today will stay constant, and that your income will only increase. If you can't make it work the first year, it won't work the second or the third. It rarely does.

The truth is that your expenses are going to change. There are things that are completely beyond your control that you cannot predict. You may drive exactly the same number of miles each year. You may buy the same number of groceries. You may keep the same healthcare insurance. You might do everything in your power to keep these things consistent, but you have no control over how much each unit of xyz will cost you from day to day, month to month, or year to year. 

In a previous post I compared the cost of gasoline when we started internship to the cost of gasoline on that particular day. Since then it has gone up another .20/gal. That single budget items costs us at least $100/month more now than it did then.

Our insurance premiums through the hospital have changed 3 times. The cost of our food has increased, partially because the size of our family has increased. With those kids came hospital bills. The cost of our taxes, both state income tax and property tax, have increased. We had cars that needed major repairs, more than once.

Yes, I know it is possible that all those costs could come down too. They could..... but the only thing that has become cheaper in the last six years, that I am personally very aware of, is housing prices and interest rates. That's it. The things you buy and consume every day e.g., food, gasoline, electricity, water, services, postage stamps - all up.

If your anticipated expenses equal your anticipated income you don't have room to breathe and you will suffocate before Christmas. That sounds really bad. It feels even worse.

Next: Introduction to Budgeting

Tuesday, March 6, 2012

Taxes and Net Income: The Real Numbers Story

I left off yesterday with the encouragement to approach residency like medical school. Depending on whether you took out Student Loans to the maximum, minimum, or some where in the middle, will determine how you view your first paycheck.

Your first check will be much smaller than you anticipated depending on when in the payroll cycle you actually start working. Even though we started our first day on July 1st, our first check wasn't issued until July 13 and it was only for the time period July 1 - July 8. Small. Because it was so small, it didn't have federal income taxes on it. And because it was the first, it didn't have our health care premiums withheld.

The next paycheck was on July 27, but it still wasn't the "real paycheck" because it was still too small to have any federal income taxes withheld, but this check they took out the current health care premiums for that pay period, plus the pro-rated amount from the previous check. Obviously we weren't completely enrolled until then.

Our first real paycheck with all the appropriate with holdings wasn't until August 10th. This would be the paycheck we needed to use to base our budgets on going forward. Take away message: just because you start working on July 1st, doesn't mean you actually start getting paid on that day.

The example I provide here is our actual paycheck from intern year (2006). Don't discount the date saying that salaries have increased so much. I'll explain why in tomorrows post. Also note that this isn't our actual first check.  This was our third payroll check as an intern that included all of our health insurance premiums, taxes, etc.

Your check is obviously going to look different, and the numbers are going to be different. The point is to demonstrate the often dramatic difference between gross and net pay. 

Gross pay = $1,654 per pay period      $43,000 per year
Net pay = $1,349 per pay period          $35,086 per year  

A difference of $7,936 is a big deal. When you hear the gross salary that you are being offered as an intern/resident it is tempting to think you will actually have all that money to use - you don't. You'll have about 20-30% less. 

The reason I say that your actual numbers may be different is because each intern completes a tax withholding form (W4) during their orientation. This document tells the payroll department how much of your check to withhold and send to the federal and state income tax authorities. 

There is a worksheet attached to the W4 form that will assist you in calculating your exemptions which in turns determines your % of withholding. They even have a box that allows you to select an additional amount to include.

Based on our calculations, and our estimated taxes for that year, we selected 9 federal exemptions and 3 state exemptions. We have kept our federal exemptions the same for the last 6 years. Why did we select 9? We knew based on our tax estimates for the year that we would be getting a refund. Why wait until April 15th to get your money when you could have it every month when you could use it. 

This strategy worked for our family (married with children). It may not for yours. The end result is that our federal tax returns were smaller, but during the year we had more money in our paycheck. Your calculations and amounts may be different. They may be smaller, they may be larger. 

Don't be surprised when your payroll checks don't look as large as you thought they would.

Next: The First Year is the Roughest... Not always.

Monday, March 5, 2012

An Intern Must Make More Than A Student, Right?

In my last post I wrote about the differences between those who graduate form medical school and those who graduate with other advanced degrees. Think law and business school grads. That is where we get these rules, because everyone who graduates and lands a job feels as though they have arrived. But alas, the medical profession is the exception to the rule.

In the real world you graduate, get a job, and your career starts. In our world, we keep training and our income shifts from student loans to paid training, but the numbers don't change that much.

I went to our medical school website to see what the current tuition/personal allowances were for the academic year 2011-2012. These numbers are probably fairly close to your personal allowances too, regardless of where you trained.

This budget information is provided to assist you in estimating your monthly budget and managing your available financial resources (e.g., employment earnings, financial aid, and assistance from your family members) for the 2011-2012 academic year. You should refer to the base expense budget given below when estimating your expenses. The average monthly living allowances listed below were derived from the 2011-2012 Cost of Attendance figures developed by the Office of Student Financial Services. Your expenses may vary from the "average" cost of attendance for your class. Consequently, you should calculate your monthly expenses based upon your anticipated expenses for the 10-month academic year. These monthly estimates should be derived to ensure you have enough funds to complete the year.

Student Service Fee                                      512
Health Insurance                                           2,700
Disability Insurance                                     50
Books & Supplies                                         3,398
Room & Board (rent, utilities, food)
     On Campus                                              13,090
     Off Campus                                              16,490
     With Parents                                             2,100
     On Campus                                              1,104
     Off Campus/With Parents                        3,092
Auto Insurance/Registration                        1,650
Personal Expenses                                      3,650
Loan Fees                                                     1,177
     On Campus                                             27,331
     Off Campus                                             32,719
     With Parents                                           18,329

These numbers need to be broken down into manageable numbers for purposes of comparison. The information from the school says that these figures are intended to cover a 10-month academic year, not the entire 12 months of the calendar. Easy math: divide the total by 10 to get the monthly amount you have to work with.

It may seem silly to compare a medical student budget to a real doctors budget (ha, ha, ha), but I am telling you now you may have had it good in medical school! And that is no joke.

Depending on whether you lived on campus, off campus, or with your parents makes a difference - until you move out and are living on your own. And really, how many people did you know who lived with their parents? That is assuming your got into medical school in the same town that your parents lived, and they would LET you live there. Not very likely. So from this point forward I am going to make comparisons based on the living off campus total, since that is what you will be doing. Welcome to the real world.

$3,272 dollars a month sounds great... even now that sounds like a nice sum to work with. I know you didn't actually get all this money to divide out because the school took everything that was theirs first. This is GROSS dollars. (For the record we didn't receive anything close to this. Six years ago, our figures were closer to the living with parents numbers). 

So what are the interns at our program making this year gross? $45,990 annually or  $3,832.50 monthly. But here is the catch. Not only is that gross (pre-tax & withholding), it is also misleading due to one BIG factor. Our program doesn't pay semi-monthly, they pay every two weeks.

Why should that matter? Well because if you are paid, say on the 1st and 15th of every month, you will have exactly the same amount of money to budget each month. If you are paid every two weeks, there are two months of the year (which we celebrate around here) approximately 6 months apart in which you will get paid 3 times. Yippee!

Before you get too excited, it isn't really good news. What it means is that the other 10 months of the year (and I would argue they matter most) you get paid less. It works like this. You take your gross divided by the number of pay periods. If you get paid every two weeks, there are 26 pay periods. If you get paid twice a month there are 24. The same amount divided by 24 will always be larger than if it is divided by 26. It is math, there is nothing I can do about it.

The reality is the gross paycheck of an intern at our program is $1,768 per pay period. Because 10 months only have two pay periods the real amount of gross dollars you will be working from would be $3,537/month.

It still seems like a nice sum to work with, but because you have gone from borrower status to earner status you are also expected to pay taxes. I am sorry to be the bearer of such bad news. When it is all said and done you may even have less money to budget as an intern than you did as a student.

Next: Taxes and Net Income, the Real Numbers Story