As a resident, Dr. Saira Z. worked in one of the most expensive places in the country — the New York City area. Besides managing the high cost of living on a residency budget, Saira was also paying back medical school loans.
Figuring out how to stretch her $68,000-a-year medical resident salary wasn’t easy, even after she got married. She and her husband tried to be as frugal as possible, and when they took stock of their spending, they found places to cut back.
The couple drew up a budget to help them stay the course through Saira’s three-year residency and when her medical fellowship salary dipped. It also allowed them to set good habits that still serve them well. Saira and her husband now have twins, and she’s in a private practice.
As Saira learned, residency can test your finances. While you’re finally drawing an income — the average annual salary of a first-year resident averages $68,166 according to 2025 data from the Association of American Medical Colleges (AAMC) — a residency budget needs to cover a lot. Your medical school finances likely include considerable student loan debt. According to the AAMC, the median medical school debt for the class of 2024 is $205,000, which doesn’t include undergraduate student loans, credit card balances, or other debt.
Having a financial plan enables you to make the most of your income and set yourself up for the future. These budgeting tips for residents may help you get started.
Table of Contents
Key Points
• Track your spending to identify budget busters and redirect that money toward savings.
• Pay off high-interest “bad debt” and build an emergency fund covering three to six months of living expenses in accessible accounts.
• Protect your income with disability and life insurance policies to safeguard against unexpected events that could derail your finances.
• Contribute to retirement accounts, such as a 401(k), a 403(b), or an individual retirement account (IRA).
• Create a student loan repayment plan using strategies such as the snowball or avalanche approaches, and explore refinancing only if it aligns with your financial goals.
Identify Your Biggest Budget Busters
A budget can serve a variety of purposes. It can help you make progress toward your savings goals, adopt healthier spending habits, and pay down debt. It can even allow you to spot the biggest drains on your money so you can look for ways to curb spending.
For Saira and her husband, meals out with friends were a top budget buster. But they had no idea that was the case until they reviewed their finances. “You don’t realize eating out is such a huge expense until after the fact,” Saira says. As a result, the couple decided to temporarily stop going to restaurants, which allowed them to put that money into their savings.
Build Your Financial Foundation
Budgeting for medical residents should include working on your financial foundation, says Brian Walsh, Certified Financial Planner®, Head of Advice and Planning for SoFi. “These foundational pieces are so critical to establish,” Walsh says. “Then, once you get that big paycheck, it will be much easier to sock away 25% or more of your income toward retirement.”
Here are a few steps he recommends:
• Pay off “bad debt.” Walsh defines “bad debt” as anything that accelerates consumption and carries a high interest rate (such as credit cards).
• Build up an emergency fund. This stash of cash should cover three to six months’ worth of your total living expenses and be placed in an easy-to-access place, such as money market funds, short-term bonds, a certificate of deposit, or a high-yield savings account.
• Protect your income. There are two types of protection you may want to consider. Disability insurance covers a portion of your income in the event you’re unable to work due to an injury or illness. Monthly premium amounts vary, but generally, the younger and healthier you are, the less expensive the policy. You may also want to consider purchasing a life insurance policy if other people depend on your income.
Recommended: Short Term vs. Long Term Disability Insurance
Start Saving for the Future
Next, Walsh suggests putting any leftover funds into retirement. Over time, as your emergency fund grows and bad debt diminishes, you’ll be able to put more money into retirement.
One simple way to build savings now is to contribute to your employer’s 401(k) or 403(b) retirement plan, if one is available, and take advantage of any matching funds program. There’s a limit to how much you can contribute annually to either plan. In 2026, the amount is $24,500. If you’re 50 or older, you can contribute up to an additional $8,000.
There are other investment vehicles Walsh suggests exploring if you have additional money to save, don’t have access to a 401(k) or 403(b), or simply prefer to have more control over your money. These include an IRA, such as a traditional IRA or Roth IRA, both of which can offer tax advantages.
Contributions made to a traditional IRA are tax deductible, and no taxes are due until you withdraw the money. Contributions to a Roth IRA are made with after-tax dollars, so your money grows tax-free, and you don’t pay taxes when you withdraw the funds. However, there are limits on how much you can contribute each year and on your income.
Another option is a health savings account (HSA), which may be available if you have a high-deductible health plan. HSAs provide a triple tax benefit: Contributions reduce taxable income, earnings are tax-free, and money used for qualified medical expenses is also tax-free.
Recommended: Budgeting as a New Doctor
Come Up With a Plan to Pay Student Loan Debt
As a resident, you have several priorities competing for a piece of your paycheck: lifestyle expenses, long-term savings goals, and medical student loan debt. Loan repayment typically starts six months after graduation, and options vary based on the type of loan you have.
If you have federal student loans and need extra help making payments, for example, you can explore a loan forgiveness program or an income-driven repayment plan, which can lower monthly payments for eligible borrowers based on their income and household size. You can also postpone payments during residency, but the interest will continue to accrue and add to your total balance.
Medical student loan debt may feel overwhelming, but there are a couple of ways you can tackle it. With the avalanche approach, you prioritize debt repayment based on interest rate, from highest to lowest. With the snowball approach, you pay off the smallest balance first and then work your way up to the highest balance.
While the right approach is the one you’ll stick with, Walsh often sees greater success with the snowball approach. “Most people should start with paying off the smallest balance first because then they’ll see progress, and progress leads to persistence,” he says.
Find Out if Refinancing Is Right for You
You may want to consider refinancing your student loans as part of your repayment strategy. When you refinance, your existing loans are paid off and you get one new loan. You may be able to get a lower interest rate, which could potentially reduce your monthly payments. You may also pay more interest over the life of the loan if you refinance with an extended term. Some lenders, including SoFi, also provide benefits for residents and other medical professionals.
Though the refinancing process is fairly straightforward, “People overestimate the amount of work it takes to refinance and underestimate the benefits,” Wash says. A quarter of a percentage point difference in an interest rate might seem small, but if you have a big loan balance, it could save you quite a bit.
However, refinancing may not be right for everyone. By refinancing federal student loans, you could lose access to benefits and protections, such as income-driven repayment and student loan deferment. Your best bet is to weigh all of your options and decide what makes the most sense for your situation.
The Takeaway
After years of medical school, you’re finally starting to make some money. But you also likely have a lot of student loan debt that you need to start paying back during your residency. Having a solid plan for repaying your loans and using a few key strategies to start saving money for your future can help position you for long-term financial success.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
How should I budget as a new resident?
Track your income and expenses, prioritize essentials, and allocate a portion for savings. Making small adjustments early can help prevent financial stress.
How can I start saving for the future on a resident’s salary?
Even modest contributions to retirement accounts or an HSA can grow over time. You can automate your savings to make your contributions consistent.
Can I refinance my student loans during residency?
Yes, but compare rates carefully. Some residents choose federal programs for deferment or forgiveness benefits before refinancing.
Photo credit: iStock/Andrei Orlov
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