As a young professional, I'm finally feeling as though my finances are on track. Although I've done several things to put myself in a decent position, there are 5 things that have helped me get on the right track and may help you as well. They are:
1. Learning about money. Many young professionals were not taught the basics of personal finance and investing in school. I myself had to seek out this knowledge and even when I did, I still had questions I had to ask other people. Despite the effort I put in, taking the time to learn about money management was one of the best decisions I ever made. Once I learned the basics, I was able to quickly get out of credit card debt. Doing so, saved me hundreds of dollars in interest payments and allowed me to start investing for retirement much sooner than I would have otherwise. The decision to aggressively pay down debt and increase my investments has allowed me to become more financially stable and create the foundation needed to build wealth.
2. Picking a career that pays a high salary. Not every job pays the same, but choosing a career that compensates well has done wonders for my finances. Instead of worrying about whether or not I can pay my bills on time, I can now focus on increasing my investments. Although one shouldn’t pick a job solely for the compensation, if there are multiple jobs you like equally choosing the one that pays more can have a positive effect on your finances.
3. Buying a slightly used car instead of financing or leasing a new one. When I was a medical student, I chose to buy a slightly used reliable car instead of buying or leasing a new one. When I became a resident physician, I again chose to buy a slightly used car instead of buying or leasing a new one. This decision saved me thousands of dollars both time. Instead of having a monthly car payment of $400-600, I use that money to invest in my Roth IRA and save money for future vacations and travel.
4. Living with a roommate for most of my twenties. This decision was hard to make at first. I was in my late twenties and really valued my own personal space. However, living with a roommate gave me the ability to live in a really nice place while still saving and investing a good chunk of my income. I had to prioritize my desires. Would I rather have the place all to myself or share a place for a few years and stack money I could use to pay down debt, invest, and save for fun trips? For me, living with a roommate was worth the sacrifice. As I enter my 30s I’ll likely get my own place, but choosing to live with a roommate in my twenties helped advance my finances in ways I can’t begin to articulate.
5. Investing early into retirement accounts. One of the ways many people build wealth and become financially independent is by investing money. One of the main ways they invest money is by utilizing retirement accounts (like their job’s 401K or opening up their own Roth IRA). By utilizing retirement accounts I am able to invest money in a tax efficient, passive way and build money over time. A big advantage to starting early in my twenties instead of waiting until I was in my 30s was that I gave the money more time to grow. The earlier I invest, the more time my money has to let the magic of compound interest work, which allows my money to make even more money overtime. Plus, investing early into retirement accounts taught me how to live below my means instead of inflating my lifestyle.
I’m a Doctor Who Drives a Toyota Corolla, here’s why:
1. It was cheap. Let’s just call a spade a spade. When I first got the Toyota, my life was much different. I was 24 years old and nearly broke after spending two years in Washington, DC. I used public transportation (and rides from friends) to travel around the city but things were about to change. I was moving to Florida to begin medical school and needed a car of my own. Considering my subpar savings rate, I also needed one that was affordable. This Toyota was about 3 years old with only 30,000 miles and in my price range. I bought it for $10,000.
2. It’s reliable. During my time in medical school this car was extremely reliable. It never broke down, overheated, or required expensive maintenance. I got oil changes every 3 months and was able to move from point A to point B with zero complaints. As a current resident physician, I feel the same way. Whether it’s to and from the hospital or back and forth to my family’s place, I can easily drive around the city with no problems.
3. It allows me to be discreet. Although I love my Corolla, it looks a little dated. As a 2012, it has an older body style and doesn’t shine like it used to. There is no camera screen for me to look at when the car is in reverse. There is no blinker on the side mirrors to alert me when someone is driving in my blind spot. While the older look and lack of updated features may be deal-breakers for some people, I’ve gotten used to my car the way it is. Driving it around allows me to fly under the radar. No one assumes a doctor would drive this car, so being in it gives me a chance to be a little more discreet. It also allows me to resist society’s expectation of doctors that causes physicians to inflate their lifestyles too quickly.
4. It saves me a ton of money. Driving an older car has its perks. Perhaps the biggest one is that I don’t have a car note. While many people spend $400-600 on their monthly car payment, I don’t. This means I have an extra $5,000-$7,000 each year that I can use on other things like saving for retirement, paying down student loans, or splurging on an expensive vacation. Along with not having a car payment, I also save money in other ways. Since my car is older, I’m not as concerned with how it looks. If I happen to discover a minor scratch or small dent, I don’t feel compelled to spend extra money getting it fixed. Plus, I never have to worry about anyone trying to steal it or anything in it.
5. It keeps me humble. If I ever start to think more highly of myself than I ought, I’m often quickly humbled when I look at my car next to the rest of the vehicles in the physician parking lot. While some doctors may start to feel a little envious, I’ve taken a different approach. Humility and gratitude. Despite its outdated look, my car is a constant reminder that I drive a vehicle that is completely paid off. It’s a reminder that I’m driving this car to pay down debt, save money for retirement, and increase my net worth. This attitude of humility and gratitude has also enhanced other areas of my life. It removes any roots of arrogance and gives me the “drive” I need to work even harder, treat others with respect, and maintain better relationships with those around me.
So yes, I’m a medical doctor who still drives a Toyota Corolla…and I plan to keep doing so for the near (and distant) future.
Tell me, have you ever considered driving a different type of car to save money and meet your financial goals faster?