Your Financial Life

It doesn’t matter whether you make $7,000 or $700,000 a year: budgeting (balancing what you make with what you spend) is an essential step to minimizing debt and avoiding financial problems in the future.

Preparing a budget helps you plan how you’ll spend your money, so that you don’t develop a lifestyle that you can’t afford. It also lets you build in essentials you may not have considered, such as a savings plan to set aside money for future goals.

The secret to budgeting is to accurately determine what your income and expenses are each month, so that you have a plan that realistically reflects your personal situation. On the expense front, you’ll want to think ahead to the actual expenses you’ll be incurring during your residency. For example, if you’re used to accommodation costs in a smaller urban centre but plan to do your residency in a major city such as Vancouver, Calgary, or Toronto, you’ll need to increase your budget amount accordingly because your accommodation costs will likely be considerably higher.

Filling in the budget worksheet  will help you understand your personal cash inflow and outflow or do a quick check using our easy to use online budget check tool.

If you have a budget surplus, you’re in the fortunate position of having more money each month than you need. You may want to increase your monthly investment amounts or pay down your loans more quickly.

If you have a budget deficit, you’ll need to look at ways to cut expenses. Can you reduce any of your lifestyle expenses? If not, you may need to decrease the amount you contribute to your investments or perhaps reduce the monthly payments on your loans.

Once you’ve developed your budget, recording expenses on a regular basis is a great way to ensure you stay on track financially, and it allows you to make adjustments if an item exceeds your budgeted amount. It’s normal to go over-budget on certain items from time to time, but if it happens on a regular basis, you’ll want to consider whether you need to adjust your budget — or adjust your spending.
 

The use of scholarships and bursaries that don’t require repayment can significantly reduce your debt load at graduation. You may think your scholarship application will be refused, but don’t be your own selection committee. Apply even if you’re not sure you’re eligible. And remember — not all scholarships are based on academic achievement. The financial aid office at your medical school will be able to tell you the criteria used in awarding scholarships and bursaries, and can help you apply for the awards best suited to you.

Many medical schools offer scholarships and bursaries automatically, so you may not even need to apply for them. The financial aid office of your medical school will be able to tell you if that is the case. There may also be funds available for emergency loans if an unexpected cash crisis occurs.

Some large employers offer scholarships to children of their employees, as do some trade unions or fraternal organizations. Ask your parents to check on your potential eligibility for any such funding.

Many people overlook smaller scholarships or bursaries, thinking they’re not worth the bother of applying. But even small amounts can make a big difference in reducing your overall student debt load. A $500 bursary may not seem like much when you’re graduating with a debt load of thousands of dollars, but it’s still $500 that you won’t need to borrow — and more than $500 that you won’t have to repay, once interest is factored in. Assuming a loan interest rate of 6%, that $500 bursary would save you $150 in interest over five years.

You can find comprehensive information about scholarships, grants and bursaries at CanLearn. To find out about RBC Royal Bank Scholarships for medical students, contact your RBC Student Champion.
 

As we’ve seen, tracking income and expenses is a key part of smart money management. But for a busy student or resident, it can be hard to find the time — especially when you have multiple savings, credit cards and investment accounts spread across several institutions.
Fortunately, there’s an easy solution: consolidate. Having all of your financial accounts with one institution makes it easier to monitor and track income and expenses.

There may be other benefits as well. Many accounts will pay higher interest rates on higher balances. And fewer accounts may mean fewer fees.
 

As a medical student, you could have debt from a number of sources, including provincial or federal student loans, bank loans, bank lines of credit, credit card debt and car loans. If you have outstanding debts from several sources, you may want to consider consolidating them into a single line of credit.

There are two key advantages:

• It’s simpler. Paying one bill a month is more convenient than paying multiple bills — and that makes it easier for you to understand the loan terms and stay on top of your payments, so you’re less likely to inadvertently miss a payment date.

• You may pay less interest. Lines of credit generally offer a lower interest rate than fixed-term loans, and they offer a much lower interest rate than credit cards. Lines of credit can also provide a convenient source of cash when you need it, without having to reapply for a loan whenever you need money, so they can be particularly useful in a financial emergency. In addition, a Royal Credit Line® offered by Royal Bank of Canada currently allows you to defer your principal repayments until 12 months after you complete your residency — when you’ll likely be earning a much higher salary and have a much stronger cash flow.

There are two exceptions to the general rule in favour of consolidating debt. If you have government-sponsored student loans, the interest you pay may generate a tax credit, so you may want to maintain those loans. And if you’ve received a low-interest loan from a manufacturer as an incentive for a large purchase, like a car or furniture, you may want to keep that loan separate as well.
 

As a medical student or resident, you may be entitled to a number of tax-saving opportunities. Review the following strategies to make sure you’re not overlooking deductions and credits that could save you hundreds or even thousands of dollars each year. The following reflect the federal rules; however, provincial rules are generally comparable.

• Claim tuition, education and textbook credits. You are entitled to a tax credit of 15% of the following amounts: eligible tuition fees incurred, an “education amount” of $400 for each month you attend medical school full time, plus a textbook amount of $65 for each month that you qualify for the $400 education amount.

If you don’t need to claim the total of these amounts to reduce your federal tax to zero, you can carry forward the unused amounts to claim a tax credit in future years, or transfer up to a maximum of $5,000 of the unused amounts to a supporting relative, such as your spouse, parent or grandparent. Keep in mind that if you carry forward any portion of the unused amounts, you cannot transfer it to someone else in a future year.

• Claim moving expenses. If you move within Canada to be at least 40 kilometres closer to a new work location to complete your residency, you can deduct many of your moving expenses from the income you will earn in that new location.

Eligible expenses include personal travel costs associated with the move, meals and accommodation costs while en route, moving and storage charges, and temporary accommodation costs for up to 15 days. You can also carry forward these deductions to a future year.