Budgeting 101 for Veterinarian Employees (W-2)

Have you ever wondered where to start when it comes to getting your finances in order? Look no further—having a budget is essential for any financial household, regardless of income!

At its core, financial planning involves understanding what is coming in (income) and what is going out (expenses), allowing you to determine what’s left over (savings) and then deciding how best to use it. Once you’ve identified your savings, you’re one step closer to getting your finances in order.

Where to start:

1. Determine your income: If you’re a W-2 employee (meaning you receive a W-2 each year when you file your taxes), this guide is for you. (If you’re an independent contractor or business owner, check out my other articles on budgeting tailored to those circumstances.)

You can find your income information on your pay stub, which is usually available through your employee portal. If you’re unsure how to access it, your supervisor, employer, or HR department can help.

Veterinarians can be compensated in various ways: straight salary, hourly, salary plus production, or all production. If you’re on a straight salary, your paystub will show the same amount each month, making it easy to determine your monthly income.

If your income is based on production, it will vary each month, making it a bit harder to predict. In this case, take a few paystubs and calculate an average monthly income.

KEY POINT: Focus on your “Take Home” or “Net Pay.” This is the amount that actually hits your checking account each month. On your paystub, you’ll see “Gross Pay” and “Net Pay.” Gross pay is before taxes and deductions, while net pay is what you actually receive. We’re looking for your average “Net Pay” each month.

Example: Let’s say your net pay averages out to $10,000 per month.

2. Identify your expenses: This is where a budget comes into play. If you need a template, [click here to download one].

When filling out this template, remember that budgeting isn’t an exact science. Your spending will fluctuate each month, so getting a close estimate is good enough.

Tips:

1. • Separate fixed and variable expenses:
     • Fixed expenses stay the same each month, such as rent/mortgage, student loan payments, and car payments.
     • Variable expenses change each month.
   • PRO TIP: For expenses that vary widely from month to month (e.g., travel, car registration, home improvements), estimate an annual total and divide it by twelve to get a monthly average.

Once you’ve completed your budget worksheet, congratulate yourself! This is a crucial first step in getting your finances in order. For our example, let’s say your total expenses amount to $7,000 per month.

3. Calculate your savings: Now, let’s put it all together:

$10,000 – Take Home Income

-$7,000 – Expenses

=

$3,000 – Monthly Savings

Next steps:

1. • Is $3,000 enough?
   • What should you do with it to pursue your financial goals?

The answers to these questions depend on your unique financial situation. Just as with your health, everyone’s financial situation is different, requiring a customized financial plan tailored to you and your family.

Need help? Reach out to a trustworthy, competent, veterinary-specific financial advisor for guidance. You don’t need to be wealthy to hire a financial advisor—good advisors seek to help you accumulate wealth!

If you’d like to learn more about how we might be able to assist you, I invite you to click here to schedule a consultation with us.