Does it ever feel like you slept through the lesson about personal finance in nursing school? Exactly when did they cover the difference between a Roth IRA and a 401(k)?
If you feel like you’re in the dark when it comes to managing finances as a nurse, you’re not alone. Nurses are experts at managing health, but when it comes to personal finances, it’s can be hard to know where to start.
We spoke to Daniel Tran, a registered nurse and financial coach who has made it his mission to help nurses with money. He shares some key tips on what you can begin doing today to prepare for a better future for yourself.
We talked about:
- What to do when you get your paycheck
- Which types of accounts you should have
- How to begin planning for retirement
- How to think about investing
Pay yourself first
Tran says that the biggest mistake he sees nurses making is the order in which they spend money. On payday, your paycheck is most likely deposited into a checking account. From there, many nurses divide funds into other accounts to pay bills and spend whatever’s left on the fun stuff.
Instead of divvying up your money that way, Tran recommends paying yourself first. You can do this by setting up automated savings and investment accounts that pull a fixed amount from your checking account as soon as you get paid. This will allow you to set aside money before you even see it.
“If your money goals are a priority, it should be reflected in the way you manage it,” he says.
Which types of accounts should you open?
While you’re considering how to divide up your funds, Tran recommends starting with a checking account. He also suggests opening a high-yield savings account, which can earn you more money than a standard savings account.
This type of account allows you to separate funds for specific savings goals. For example, if you are saving to buy a home, you can set up an account to place money into specific “buckets” to help you meet your goals. To do this, Tran recommends using a service like Ally or Yotta.
Start planning for retirement now
Many healthcare employers offer their staff standard retirement accounts such as a 401(k) or 403(b). Tran suggests enrolling in a retirement account if you can and finding out how much your employer will match. Nurses should elect to contribute just enough from each paycheck to receive the full employer match.
You can have other retirement accounts outside of your employer program, too. Tran suggests also opening a Roth IRA and maxing it out, which means contributing up to $6,000 per year. There are benefits to either type of account, and a financial advisor can help choose which is the best fit for you.
Focus on one financial goal at a time
Whether you’re saving for a house or looking ahead at retirement, remember to choose one goal as a priority. Tran says when you try to make too many financial changes at once, it’s easy to lose focus and get off track.
“It’s extremely difficult to save for an emergency fund, pay off credit card debt and student loans, invest, and save for a house all at the same time,” he says.
Tran often sees nurses take on too many projects and lose motivation. To avoid this, he says to choose one or two goals to focus on and be laser-focused on achieving them. “Over the course of the next few years, you’ll be amazed at the many milestones you’ve accomplished. Meanwhile, those that have continued to multi-task still won’t have made much ground,” he says.
Allow your money to work for you
When it comes to investing, a good place to start is with a retirement account. This is because they carry tax benefits that may not come with other investment accounts.
You may also consider investing in stocks or cryptocurrency. When making this type of investment, Tran says to do plenty of research to understand what you’re buying into. He warns against impulse buying stocks because a friend or coworker says it’s a good idea — you want to be confident that the money you’ve invested will increase in value over time.
If you have an investment account, make sure it is set up so that dividends are reinvested back into the account. This means that as a shareholder, you won’t miss out on earnings that your stocks have made for you. Tran says investing is a good to way earn compound interest on your money—which is another way of saying, “your money is making money for you!”
You can take the next step to a better financial future
It’s never too early to begin planning for your future. While it can be challenging to learn financial concepts or even know where to start, resources are available to help you get started. Here are a few of Tran’s recommendations:
- Read books about finance
- Complete online courses
- Work with a financial coach or mentor
Remember to make realistic goals for yourself and work toward them one at a time! Investing in your financial education will help you prepare for a better financial future as a nurse.