If you’re like most people, your expenses increased during the summer. Between vacations, birthdays, entertainment costs, and weddings, many people tend to spend a lot more in the summer than they do in almost any other season. Fall is a time to get back on track. Make a plan to balance your budget, stick to a spending plan, and make some strides forward in your finances. If you’re not sure where to start, here are 6 money moves to make this fall:
1. Set aside money from each check for entertainment expenses. As a young professional, entertainment expenses can be a challenge area for my budget. Some months these expenses are lower than expected. Other months, I’m shocked when I check my debit card balance. Perhaps you feel the same way? Instead of repeating the same patterns, make a decision to act differently. Set aside money from each check for entertainment and put a limit on how much you will spend on social outings each month. The purpose of setting aside money for entertainment is not to restrict you from living your life. The goal is to help you enjoy life in a financially responsible way. By setting aside a set amount of money for entertainment each month you can spend money in this area guilt-free with boundaries in place so that you don’t go overboard.
2. Make a travel budget for every trip. As a young professional with lots of friends and good health, I love to travel. Work can be stressful and taking the time off to explore a new area or relax with my loved ones is the refresher I need to remain productive at work. While travel clearly has its perks, as adults, we must prepare in advance for it. It’s not wise to plan a trip and charge all the expenses on a credit card. The goal of vacation is to use the time away to recalibrate not to go on an expensive trip that puts you in debt. Create a travel budget and plan ahead so you don’t overspend.
3. Plan in advance for special events. This is vital when it comes to special events. As a young professional in my early 30s with quite a few friends and associates, many of the people in my circle are undergoing life events. They are getting married, having babies, and buying houses, among other things. As one of their friends, I’m frequently invited to partake in the celebration. While I love to support others, I recognize that doing so can be expensive. Maybe you’ve noticed the same thing? One way to decrease the financial burden of special events is to plan ahead. One of my budget coaches suggested that I create a wedding/life event fund and put a couple hundred bucks from each paycheck into it. That way, when I get invited to special events, I have the financial means to participate while still maintaining my financial goals. Perhaps this is something you can try as well.
4. Have a spending limit when you eat out. I don’t know about you, but I love to eat. Good food warms my heart and is a consistent source of joy. Although it tastes good on my palate, it can sometimes be detrimental to my wallet. I cook a good deal at home but there are times when I want to eat out. Maybe I’m too tired to cook or one of my friends has invited me out to a happy hour or meet up over dinner. Although I have good intentions, sometimes I spend too much or accept these invites too frequently. As a result, I find myself spending way too much on restaurant outings. One way I’ve tried to limit this is by having a spending limit. I glance at the menu before I go and have a max amount that I plan to spend while I’m out. Having a spending limit allows me to still partake in the outing but do so in a more responsible way.
5. Establish a second source of income. One of the major things to do this fall is to try to increase your income. If you can’t get a raise at work, perhaps you can try creating a second source of income by monetizing one of your hobbies. While some folks opt to work overtime or get a second job that is similar to their main job, that may not be the right move for you. Spending too much time do any one thing can create burnout. Instead, find something you enjoy, a passion project you’d love to explore, or an area of expertise that you can provide to others. Discover ways to monetize it. The goal is to increase your income in a way that brings you more joy and allows you to use the money you make to have more of the experiences you desire.
6. Make your savings and investments automatic. This is probably one of the most important money moves I’ve ever made. Automation. Instead of having to remember to contribute to my work retirement plan, save money, or invest in my Roth IRA, I do all of these things automatically. Setting up automatic savings and investment contributions helps ensure that I meet my financial goals. It also helps ensure that my money is growing. Consider doing the same. Don’t rely on your memory. Make a decision today to save and invest a certain amount of money per month then set up automatic withdrawals and contributions from your paycheck to make it happen.
I’m a firm believer that we can enjoy the money we’ve earned while also investing it in a way that allows it grow. This fall, let’s make a commitment to do both. Plan ahead for expenses and experiences with others. Automate savings and investment contributions. Be a young professional who does both.
5 Things To Do Financially In The Month of July:
July 1st is a big day in the medical world. It’s when graduating medical students start their first day as doctors, and experienced resident physicians get “promoted” with more responsibilities and a pay raise to match. Whether you’re in the medical field or not, the start of July marks the halfway point of the year and can be a great time to re-evaluate your finances and make any necessary changes. Here are 5 things we should all be sure to do in July:
1. Create a spending plan. For the interns who are now getting paid, the residents physicians experiencing a salary increase, or the attending docs that have more money than they ever have before, now is the time to create a spending plan. Going from barely having any money to a steady [large] paycheck can be exciting. However, if you don’t manage your money wisely, you may find that your money is gone sooner than you think or realize that you wasted it on things you didn’t need. Having a spending plan can help prevent this from happening. It’s having a basic outline of the things you need to purchase and reserving money for other things that may be important to you, without going overboard. It’s determining which bills and other costs you need to cover each month (rent, electricity, internet, car insurance, etc) and thinking about how much money you also need to set aside for other things like groceries, gas, personal grooming, etc. The goal is to figure out the max amount you can afford to spend on certain items each month so that you never have an issue paying your bills and have also managed to save money for other priorities and still have some money left over to enjoy.
2. Make sure you have insurance. You can try your best to plan for certain life events and expenses, but you can’t predict everything. For large expenses that we can’t predict, we need to have insurance in place to cover those costs. Although signing up for insurance may not be the most exciting task to complete, it’s absolutely essential. We all need some form of medical insurance to cover basic health expenses, prescription costs, and any hospital bills. We also need long term disability insurance so that we have income security in case we get diagnosed with an illness or get an accident that precludes us from working at our full capacity. Lastly, those with families or other people who rely on their income also need term-life insurance so that their families have a means of financial support if they happen to die before they have become financially independent.
3. Get a handle on your student loans. Many people have student loans. Physicians who are in residency or young professionals who work for non-profit hospitals and public institutions may qualify for public service loan forgiveness (PSLF) or some other type of student loan forgiveness plan. In order to sign up for this program or ensure that your payments over the last 12 months were properly counted, it is essential that you complete the employer certification form each year. Anyone with federal student loans may also want to consider signing up for an income driven repayment plan like PAYE or REPAYE so that your monthly payments are based on your income instead of a much higher amount that you may not be able to afford. Those who are already enrolled in an income driven repayment plan must complete the mandatory annual recertification to remain in the same plan each year. Once you determine a repayment plan and re-certify any forms, it may also make sense to have your monthly payments automatically withdrawn from your bank account. Many loan servicers will even lower your interest rate if you sign up for these automatic payments.
4. Pay down your debt. For those who want to build wealth and become less reliant on each paycheck, it’s imperative that you prioritize paying off your debt. Many people accumulated credit card debt in their early twenties or have used credit cards to cover moving expenses, furniture costs, or previous vacations. Other people may have taken out car loans or borrowed money from other sources to make ends meet. Although it may not be feasible to pay all of our debt off instantly, it’s important to come up with a feasible payment schedule to get rid of the debt sooner rather than later. Simply paying the minimum amount each month will cause us to pay a lot of extra money in interest and may really impede our ability to build wealth and financial security. Making a goal of having at least one of our credit cards or loans completely paid off within the next 12 months might be a decent place to start.
5. Start investing. Part of adulting means setting aside money for retirement, creating a savings account and investing money in a way that helps build your net worth. Many people have elaborate investment plans or try to play the exhausting game of picking individual stocks to purchase. While that may work for them, investing doesn’t have to be complicated. You can start by funding your employer-sponsored retirement account and a Roth IRA (or backdoor Roth IRA). Simply choose a percentage of your income you want to contribute towards retirement (ideally, you’d want to start off around 10%) and choose to invest the money in various index funds or a target retirement fund that invests your money in thousands of different stocks and bonds. When I started residency, I prioritized paying off debt and only contributed about 5% to retirement. Once I paid off the debt, I drastically increased that percentage and started fully funding my emergency fund and other savings.
My point? If you want to ensure you’re on the road to financial stability and independence, start by completing the 5 steps above.
Money Moves I Should Have Made As a Grad Student
As the saying goes, “Hindsight is 20/20.” Looking back over my time as both a grad student and a medical student there are a few things I wish I would have done differently to put myself in a better position financially.
1. Set up automatic withdrawals for recurring monthly payments. This may seem obvious, but as a female in her early twenties who did not have much experience paying bills, this was not common sense to me. I didn’t like the idea of money coming out of my account automatically and always feared that an if an emergency occurred I might need the money that had already been automatically deducted. As a result, I would often rely on my memory and attempt to pay my credit card bill, car note, and cable bill on time. Unfortunately, that didn’t work too well.
I would occasionally forget to send a payment in by the due date and have to call the company in a panic to pay over the phone and beg to get the late fee removed. After a few months, I started setting alerts in my phone to remind me of the payments. This worked well most of the time, but I still missed a few payments. Not because I did not have the money, but because sometimes I would be busy doing something else when the alert would go off. I would then silence the alarm notification and forget to pay the bill later. Finally, I let go of my pride, saved up a small emergency fund to ease my worries, and set up monthly automatic withdrawals. The moment I did that, my life got so much easier. I started doing that about 3 years ago and I don’t think I have missed any payments since then. I paid off my car shortly afterwards and my credit score improved. It’s amazing how much better things got when I relied less on my memory to pay monthly expenses.
2. Cancel unnecessary [cable] subscriptions. You may be already doing this, but I’ll be honest and say I was not. Many people do not rely on cable and would rarely use it if they had it. I am NOT that person. I love tv. Not because I have an abundance of time to watch it, but because when I can spare a few minutes watching it, I’m better able to relax. I love being able to come home and marvel at the homes on HGTV, watch old comedies to get my mind off of a stressful day, and cheer on my beloved Duke Blue Devils during basketball season. Cutting cable was never something I even remotely considered. From my perspective, it was a necessary stress reliever and source of enjoyment.
Instead of just accepting this as fact and sending Cox Cable $100 a month, I should have done more research. It wasn’t until I was a 4th year medical student that I learned about services like YouTube TV which would allow me to watch live TV for around $35 a month. It also wasn’t until I was 4th year med student that I learned Hulu was free with my $5 student-Spotify account and had a live TV option that was cheaper than cable. If I had simply done more research sooner, I could have saved hundreds of dollars and still maintained my same standard of living. If only I could go back in time...
3. Consider side hustles for additional cash. As a medical student I could not work. In fact, I think they made me sign some form agreeing to not accept any full-time positions as a student. As a 4th year medical student, I had much more time than I had the previous 3 years of medical school and should have considered side hustles or other ways to increase my cash flow. When I graduated, I desperately wanted to travel the world and make the most of my freedom before starting my first hospital job, but I also needed money for moving expenses. Having money saved from babysitting or some other side hustle would have been very useful.
Ironically enough, some of my friends who had already started their respective careers, told me about things they were doing to supplement their income and fund their tropical vacations. One was getting paid to test out new hair products on Instagram. Another was teaching English to kids online and tutoring current students on academic subjects she had mastered. A few others had created online blogs that were starting to gain traction, offering personal training services to people trying to get fit, and making diet plans for clients seeking to change their eating habits. I even knew of someone who charged people for consulting advice on how to manage finances and invest in the stock market. Regardless of the route, I wish I started thinking about my potential side hustle earlier. Even though I am starting my career as doctor, the high-paying salary is still years away and I needed cash sooner rather than later. Having a side hustle is a great solution to that problem.
4. Make friends with people who are good with money. We pick up habits and emulate the behavior of our friends. Although the people in my life are amazing, I did not have anyone close to me who was “money savvy.” Most of us were in the same boat with similar spending habits. In fact, with my background in finance and passion for investing, I was the person all of my friends went to whenever they had questions about money. I wasn’t necessarily lacking in knowledge, I simply needed someone to help me implement some of the wise money practices I wanted to create.
I wanted a person around me who had actually created a budget they could stick to without getting discouraged. Someone who would caution me to think twice before splurging on a dress I didn’t need and advise me not to purchase overpriced food from restaurants that I could make at home. Since I didn’t have this ideal person, I decided to seek it out in the people closest to me. I started talking to my brother who showed me a few budgeting tools and apps that could help keep me motivated along the journey. I then let my friends know about my savings goals and we all made a pact to save and invest a similar amount of money each month. Having this kind of accountability and support has helped me so much. I wish I had thought of this sooner.
Tell me, was this helpful? What money moves do you wish you had made as a college student?