saving vs. seizing the day

[TigerSoup]

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Now that I'm about to start med school, I'm thinking about how to be more mindful about how much I'm spending -- but I also don't want to go overboard either and miss out on opportunities that I will regret later once I start pulling an income again (whether that's going out with friends occasionally or traveling while I still get breaks between semesters etc).

The complicating factor is how I decided to go with the med school that gave me the best financial package (full tuition) while my family all thought I should be going for the one that was the best ranked but full price. Now I don't have much to worry about financially, which is great, but I am now having a hard time putting my expenses into perspective. I'm falling into the thinking that everything is affordable, because it's so small relative to how much I *could* have been spending if I had gone to the more expensive school. I also now have extra money saved up because I've been living very frugally up to this point under the expectation of having to pay for school (living at home to save on rent, haven't gone on vacation or taken time off for 2 years, etc).

I guess my question boils down to how to discriminate between what you can "afford" and what you can't when you're not actually living on a very tight budget. If I wanted to, I could take out Stafford loans to pay for my daily expenses, and blow a lot of my current savings. Is there an inherent value in saving as much as you reasonably can, or do you think the enjoyment and life experiences that someone would get out of seeing the world etc would be a better investment than saving beyond what you actually need to get through medical school? I donated a substantial part of my savings to charity (thanks Peter Singer), but I'm torn about how to approach the rest.

 

[Blade28]

Wow...you're definitely fortunate for having this scholarship - congrats! 👍

Lots of us (myself included) probably can't help since we all lived off financial aid during med school. 100% of my money was from federal and private loans, so I lived sparsely and tried to limit any unnecessary expenses.

If you can afford it, though, nothing wrong with trying to keep some savings. I don't know if I'd take out loans if you have a lot saved up in the bank, though...since the interest rate on student loans will always be higher than the interest rate you're earning in your bank's savings account.

 

[sprinkibrio]

Take a deep breath and stop being so responsible. There will be plenty of time for that in the coming years.

 

[joyrunner]

I'm in the same situation, and I'm trying to find the sweet spot where I'm not constantly worrying about my budget but not going overboard. My strategy for now is to go ahead and take out only the subsidized loans for living expenses. If I only have to take it out one time all four years, it won't be a big deal to pay it back. Regardless of how many cool opportunities come up that I just don't want to miss out on (i.e. research trip to peru next summer), I want to stay under the $25,000 mark, because there are residency programs that will pay back your loans, but the ones I've seen only pay up to $25,000 a year.

On top of that, I like being on the envelope system. It's not just about saving, but I'm not constantly asking myself if I can afford $50 in gas or groceries or whatever. If it's in the envelope, I can spend it. I'm sure not everybody would feel the same way, but it does help me feel like I have a realistic idea of where I am financially. One of those Keep it simple stupid things.

 

[shantster]

I don't know if I'd take out loans if you have a lot saved up in the bank, though...since the interest rate on student loans will always be higher than the interest rate you're earning in your bank's savings account.

If you are able to get subsidized loans, there's no reason to not take out at least something in loans. That's 0% interest that you can do something with now and then you can pay it back later with the money that you kept in savings that's earning interest.

 

[45408]

but I'm torn about how to approach the rest.

On a case by case basis. It's not all-or-nothing. You simply have the luxury of choosing the more expensive option, but if it's not important to you, it would be foolish to always choose the more expensive option. If you don't mind having a roommate, then you can cut your rent/utilities/cable/Internet bills in half. If the latest greatest car doesn't matter to you, buy a reliable used vehicle. Don't buy half a dozen rounds for your class after your exams, but you can obviously afford to go out for drinks.

Don't go on frequent lavish vacations, but you do only live once. I'm pretty sure I'll never regret going to London and Paris for a few weeks after my M1 year with my wife. It was an amazing time. I also went to Colorado for a week with friends, but I declined a few other trips down the road because I didn't think it was wise to spend that much more money. I just moved to a trendier part of town, but we shopped around for a while to get an apartment that only cost us a little bit more each month.


Basically, I'm suggesting that you go ahead and spend money on those things that really matter to you, but you should still cut corners (and coupons) when possible. The less money you have to pay back, the better. You'd much rather have interest working for you than against you.

 

[Sondra]

I have more money than I need each year, so I could spend a lot more than I do. I created a budget for myself which includes all my bills plus spending money and still allows me to save a portion of my money each month. I live within my budget. I don't have to spend every dime I have, but I also know the value of having something in the bank for emergency or extravagent purchases or trips.

I spent five years working and saving the money I had during undergrad. I didn't take any personal vacations unless it was to visit a family member for the weekend, and I regret it. Once I realized that I could have done so much more with my time and money, I started living differently. It is easy to pass up a vacation and spend the money on a new couch, but in 15 years, who is going to remember the new couch compared to the great time you had with your friends in the bahamas?

 

[TigerSoup]

Ack, I forgot to thank you all for your very thoughtful advice. I don't know if the envelope method would work for me because I tend to lose any document with importance, but I will definitely need to figure out some way to stay aware of my spending. And I think those of you who reminded me to keep it all in perspective and be sensible without splurging or abstaining from too much are definitely right. I'm sure I'll work out a balance eventually, I guess I just freaked out a little because med school is starting so soon and I thought I'd need to have it all worked out before then. Thanks so much for all of your input =)

 

[samenewme]

Ack, I forgot to thank you all for your very thoughtful advice. I don't know if the envelope method would work for me because I tend to lose any document with importance, but I will definitely need to figure out some way to stay aware of my spending. And I think those of you who reminded me to keep it all in perspective and be sensible without splurging or abstaining from too much are definitely right. I'm sure I'll work out a balance eventually, I guess I just freaked out a little because med school is starting so soon and I thought I'd need to have it all worked out before then. Thanks so much for all of your input =)

If the envelope system won't fit in your wallet, you can also budget weekly. Everything, groceries, gas, movies, etc., must come out of your weekly budget. If you blow it all on a fancy dinner on Monday, eat leaves until next Monday. It's a more onerous system in the sense that you can be pretty miserable if you mess up, but it's simpler to keep track of: Do I have money? Yes= Can spend. No= Cannot buy anything.