How to get ahead in your finances: Pay yourself first.

If you’ve ever delved into the world of personal finance, you might have heard of the phrase “pay yourself first.” In fact, many investment gurus mention this approach as one of the keys to getting your finances on track and building your net worth.

What does “paying yourself first” mean? This concept can seem confusing initially, so let me break it down. Paying yourself first simply means making yourself a priority. It’s actively choosing to invest in things that build your net worth before you spend money on anything else. 

Pro Tip: This can be hard to do at first. As responsible adults, our first inclination may be to pay our bills, buy necessities, and use whatever is leftover to “invest in ourselves.” The problem with this approach, at least for me, was that there never seemed to be any money leftover. Some unexpected expense would occur or I’d end up spending money on something else that didn’t even need. I never seemed to have money leftover to save or invest. “Paying myself first” helped me change that. Now, instead of spending the majority of my check and wondering where my money went, I do things differently. I invest in myself first, then use the leftover money to pay my bills, reserve money for food and transportation, and spend the remainder on entertainment and incidentals. 

How is it done?  Do exactly what it says. Pay yourself first. In other words, the very first thing you do when you get paid is use a certain percentage of your check to build your net worth.  This means having a set amount of money reserved for the sole purpose of paying down debt, saving for retirement, or investing in other types of lucrative deals. When you reserve money for these purposes, you are actively investing in your future in a way that builds your net worth and puts you in a better position financially. 

Pro Tip: Make this automatic. Outline a budget of your monthly expenses and estimate how much you can afford to save for retirement or use to pay off debt each month. This can be anywhere from $5 to hundreds of dollars each pay period and beyond. Once you have a set amount that you can spend on investments and debt pay down, go into your mobile banking app and get this amount automatically deducted from your check the same day you get paid. Doing this ensures that you are “paying yourself first” and makes building your net worth a priority. It also prevents you from spending your “extra” money on things you don’t need.   

Why does it work so well? Most of know we need to invest in ourselves. We realize that having money is important and that spending all we earn isn’t the wisest thing, but sometimes life can get in the way. Either that or our bad habits can stop us from doing what we know is right. It’s this reason that the concept of paying yourself first was born. It forces us to implement the strategy of investing in ourselves before we do anything else, especially when set up this automatic withdrawals. Unlike other strategies, this method doesn’t rely on our own self-control or fail due to our lack of self-discipline.

Pro Tip: Before I got my first paycheck as a doctor, I set up the payroll from my job in way that would virtually ensure that I achieved my financial goals. The first thing I did was determine what percentage of my income I wanted to store away for retirement and choose the index funds I wanted to invest in to help my money grow. Then, I went to the “banking” part of my work payroll website and decided that I would have 25% of my check directly deposited into an entirely separate savings account. I use the money in this separate account to pay down debt and save up an emergency fund. Because I don’t have a debit card for this account, it’s almost impossible for me to spend this money. Since I don’t really “see” this money in my main checking account, I’ve gotten use to living on the remaining 75% of my take-home pay. 

My point? Paying myself first has helped me in so many ways. I’m investing in my retirement without even thinking about (since my retirement contributions are deducted before I ever get my check). I am also saving more money than I ever have before. I have a separate account for travel that I can now use to pay for my future vacation(s) in cash. Plus, I have paid off a substantial amount of credit card debt that I had from my years as a graduate student. This combination of paying off debt, saving money in separate accounts, and investing for retirement is helping me build my net worth faster than I ever would have thought. As my net worth increases, my credit score gets better. Paying myself first has given me reassurance that I’m on track to reach my financial goals.

Tell me, in what ways do you “pay yourself first?” If you haven’t yet started, is this something you’d be willing to try? 

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?

6 Reasons I’m Not Buying Whole Life Insurance (and you shouldn’t either)

If you’re a physician or high-income earner, you’ve probably been approached to purchase whole life insurance. While many of your fiscally responsible colleagues may warn you not to buy it, many other financial advisors seem convinced that whole life insurance is a must-have. With such conflicting advice, you may be confused on who to listen to and unsure about what to do. Several of my physician friends are in the same boat. In fact, many of them have asked me to help them understand why “whole” life insurance is so bad and “term” life insurance is ideal. Here was my response:  

Most whole life insurance policies, universal life insurance policies, indexed life insurance policies, (and basically anything other than term life insurance) is sold to us under false pretenses. These policies are branded as a way to “guarantee” our family money when we die. However, if you delve into the fine print of these polices you will see that they aren’t nearly as good as they sound. In fact, there are 6 main problems with whole life insurance:   

1.     You don’t need it. Unlike disability insurance, where we insure against the unpredictable risk of becoming disabled, life insurance is different. We already know that we will “pass away” at some point. Thus, dying isn’t necessarily a “risky” event, it is an EXPECTED event. Any event that you can expect to happen, you can plan for yourself. Since you can plan for this event yourself, you only need to insure against the risk that you could die before this plan is fully carried out. In other words, you don’t need life insurance for your “whole” life. You only it for a certain period of time or “term.”

2.     It’s inefficient. In order for whole life insurance companies to guarantee your family money after you die, they must have money to give them. Insurance companies aren’t charities, so they definitely are not giving your family money out of their own pocket. What they do is collect a large amount of YOUR money to pay into THEIR system. In fact, the financial advisors who sell you whole life insurance put a large portion of your money into their own pockets as profits, then take the rest and “invest it” into low-yield accounts. If you die young, your family may not get much of anything at all because you’ve haven’t paid into the system for long. If you die old, your family won’t get nearly as much as they should because the insurance company still needs to make a profit. With whole life insurance, you end up paying a huge chunk of money to an insurance company that will give you and your family much less in return.

3.     It’s expensive. Whole life insurance policies pay out to your dependents after you pass away. Thus, insurance companies will want you to pay for the cost of that benefit upfront. Paying for this benefit is insanely expensive. In fact, whole life insurance costs about 10x more than term life insurance. This means you could easily be paying hundreds if not thousands of dollars each month for this policy. That’s a lot of money to spend on an inefficient insurance product you don’t need.

4.     There are lots of hidden fees. The vast majority of whole life insurance products have a slew of hidden fees. These expenses take away from the value of the product and drastically decrease the benefit your dependents receive when you die. In fact, most of the money you pay the insurance company for a whole life insurance policy is paid directly to the agent who sold you the policy as “commission.” I can think of many more ways you can spend your money, than to pay tens of thousands of dollars in commission fees to an insurance agent.  

5.     The benefit isn’t as good as you think. If you look at the fine print of these whole life insurance policies, you’ll see that the benefit it provides to your family isn’t very good. In fact, the “returns” are actually negative in the first few years. This means that if you die shortly after you purchase a whole life insurance policy, your family may not get anything at all, even though you’ve paid thousands of dollars in premiums. If you die much later in life, the average returns on your money are only 2-4%. In contrast, average returns from the stock market are 7-10%. This means that if you had simply placed your money into an index mutual fund, you’d have been able to give you family drastically more money and paid much less in fees.

6.     There’s a better alternative. The biggest reason I’m against whole life insurance is that there is a much better way to proceed. You can save money for your loved ones without ever having to purchase whole life insurance. How? By maxing out your retirement accounts so that you can save and invest money in a tax-efficient way. By converting money each year to Roth accounts (like a Roth IRA) so that your family can inherit the money you save tax-free. By purchasing a “TERM” life insurance policy so that if you happen to die before you’ve been able to pay off your student loans and stack enough money for your family, the insurance company will provide a hefty benefit to your family.

My point? As busy young professionals, we already sacrifice a lot. The last thing we need to do is to get tricked into purchasing an insanely expensive insurance product that has lots of hidden fees. There is a much better alternative. Save money for your family yourself and purchase a “term” life insurance policy to cover yourself in the meantime. Don’t buy whole life insurance.

My residency spending plan: a new way to think about budgeting

As a young professional with many competing expenses, it is paramount for me to prioritize my spending. However, adhering to a strict budget can seem a bit daunting and restrictive. To get over this anxiety, I started out with a spending plan that mirrors the “50-30-20 rule” by allocating money into 3 different buckets: things I have to buy, things I want to buy, and things I should buy. Let me explain.

Category #1: Things I Have to Buy 

This category is for my fixed expenses. It includes the bills and necessary purchases I must make to survive. This includes my monthly rent and other bills (like electricity, internet, water, and sewage). I also use this category to pay for groceries, gas, and different types of medical insurance (i.e. vision, dental, and disability). For young adults just starting out in their careers, this category of fixed, necessary expenses can take up about 50% of your take-home pay. For young professionals established in their career, it may be a much lower percentage. For me, this amounts to about 45% of my take-home pay. 

Pro Tip: If your fixed expenses add up to over 50% of your income, consider ways you can cut costs or increase your income. I tried to do both. In order to decrease costs, I decided to live with a roommate. This not only lowered my monthly rent payment, but it also allowed me to split many other bills, which substantially lowered my living expenses. Along with decreasing costs, I also created a second source of income. As a resident physician with limited free time, I couldn’t get a second job, nor did I want to. Instead, I decided to turn something I love (blogging) into a second source of income by monetizing my blog and accepting paying offers to write for other platforms. Whether you enjoy writing or have another area of interest, think about what you love to do and consider different ways you can turn your hobby into a second source of income. 

Category #2: Things I Want to Buy 

This category is for my discretionary spending “aka” non-necessities that increase my quality of life. These expenses can differ for each person but for me they include: entertainment (like weekend outings to the movies, sporting events, and restaurants), self-care (like personal grooming, hair appointments, and gym memberships), and incidentals (such car maintenance, birthday gifts, and other unexpected expenses). This is also the area I dedicate to giving. As a Christian I try my best to give to the less fortunate and donate to organizations that do the same. 

Pro Tip: Everyone’s list of discretionary spending may vary. I choose to drive an older car and spend extra money on entertainment and self-care. You may, instead, choose to drive a much nicer car and opt for a car payment. The items you choose to purchase can differ from mine. The goal is to keep your discretionary spending to about 20-30% of your take-home pay. Mine is 25%.

Category #3: Things I Should Buy 

This category is for monetary growth. It is the part of my take-home pay I use to increase my net worth and build financial security. This can be done in a variety of ways, but I use this section of my budget to save, invest, and pay down debt. For example, I put a certain percentage of money into an emergency fund and secondary savings account (which I will use for unexpected expenses, a future vacation, a house down payment, etc). I also allot a portion of money from this category to invest in my employer-sponsored retirement account (which is a 403b retirement savings plan through which I invest in a combination of stocks and bonds). Lastly, I use this category of money to pay down student loans and credit card debt. 

Pro Tip: You can increase your net worth by either paying down debt or increasing your investments. I do both. The goal is to reserve at least 20% of your take-home pay to this category to ensure you have an adequate emergency fund and are saving enough money for retirement. Since I was unable to work during my time in medical school and incurred some credit card debt when I moved to another state, I am allotting about 30% of my budget to this category to “catch up.” However, your exact percentage may differ from mine. You may need to start off by allocating a much smaller amount to this category and increasing the percentage over time.

Generally speaking: the amount you allot to these 3 categories may vary. The important thing is to make sure you have a portion of your budget reserved for all 3 areas.

Tell me, was this helpful? What percentage of your check do you have allocated to these 3 areas?

6 surprising benefits of having a spending plan

In order to practice good money management, we must put a valiant effort into getting our spending habits under control. Although challenging, creating a monthly budget or at least having a “spending plan,” can really help us get on the right track. When I finally started following a budget not only did my finances improve, but I also noticed these 6 surprising benefits:  

1. I am better organized. Before I created a budget, I used to “guesstimate” how much money I spent each month. After a few weeks, I’d realize that my bank account was lower than I anticipated and would just tell myself to “try harder” next time. As you can imagine, that didn’t work. I was still spending too much money and barely making ends meet. When I finally sat down and made a monthly budget things changed for the better. With a budget, I actually know how much I can afford to spend on certain items and can plan better strategies on how to meet my financial goals.

2. I know what is happening to my money. Now that I have a realistic budget, my spending habits have changed. I am more aware of fixed vs variable expenses and have a rough idea of how much money is in my bank account at all times. Because of this awareness, I no longer have anxiety opening my mobile banking app or logging into mint.com. I know how much I can afford to spend on food and which times I can splurge on other items. Instead of getting to the end of the month and wondering where my money went, I am now the one telling it where to go. 

3. I feel less guilty when I spend money on myself. Before I created a budget, I felt guilty spending money on myself. Even though I worked hard, I always felt like I should be using the “extra” money I had to pay off credit card bills or save for retirement. At one point, my guilt was so bad that I could barely walk into the nail salon without feeling financially irresponsible. All of that changed when I actually created a budget. Each month I allocate a certain amount to “personal grooming and self-care.” I now have a small portion of my budget set aside for a monthly pedicure and trip to the hair salon. This minor change adds so much to my quality of life. It makes me happy knowing that I can enjoy myself from time-to-time and remain on track to meet my financial goals. 

4. I worry less about my bills. Before I had a spending plan, paying bills near the end of the month gave me anxiety. Even though I knew the bill was coming, I had usually spent too much money earlier in the month so paying that bill would lower the balance in my checking account to a level that I was not comfortable with. Facing that reality caused me great angst on a regular basis. When I created a budget, things changed. Fixed expenses that come out of my check are no longer a surprise to me, regardless of when the money is deducted. I am more aware of my spending throughout the month which makes me better prepared to pay those mid-month bills when they come.

5. I actually save money each month. Before I had a budget, saving money was something I didn’t think I could afford to do. I swiped my card whenever I deemed it necessary and was genuinely surprised that I didn’t have much left over at the end of the month. When I created a budget, this changed. I became much more aware of how my unhealthy spending habits precluded by ability to save. Nowadays, I solve this problem by actually “paying myself first.” I have a portion of my check directly deposited into a totally different bank account. Since I hardly ever use this secondary account, I don’t really “see” the money I am missing. As result, the money in this account has continued to build over time. As I continue to work in residency, I’ll have this separate bank account serve as an emergency fund, new car fund, and vacation savings account. 

6. I finally started giving. As a well-intentioned Christian, I try to give to others. Generosity not only blesses the other person, but it does something internally to the giver as well. Every time I give, I get this wave of gratitude knowing that I helped make someone else’s life better. Creating a budget has allowed me to continue these good deeds on a regular basis. Instead of feeling like I can’t afford to share with others, having a spending plan helped me see where I could make room in my budget to tithe and make small charitable donations. It might take me a little longer to become financially independent, but to me, this sacrifice is worth it. Giving to others brings me so much joy and helps me maintain perspective. It also allows me to enjoy the work I’m doing so much more. Without a budget, I wouldn’t be able to continue this practice.

For these 6 ways and more, creating a spending plan has really enhanced my life. If you haven’t already, sit down and make a budget and see if you experience some of these same benefits. As the old saying goes “Do something today that your future self will thank you for.” Believe me, creating a budget (and sticking to it) is something you won’t regret.  

Tell me, was this helpful? What other benefits have you gotten from creating a budget?

Yes I’m a Doctor, yes I still live on a budget: 4 steps I took to change my spending habits

To the outside world, I’m a rich doctor who can buy what I want. In reality, I’m a sleep-deprived resident physician struggling to keep my head above water. No one told me life would be like this, at least not before I started taking out tens of thousands of dollars in student loans each semester, but I digress. The point is that even [future] high-income earners like myself need to have a budget. Without one, our money disappears faster than a post-call resident leaving the hospital. 

Unfortunately, realizing I needed a budget and actually creating one were two different things. Like a diabetic struggling to shed those unwanted pounds, it takes time to actually move from one step to another. Coming to terms with the fact that I work super hard and still can’t afford all the things I crave is its own beast that has taken me several attempts to tackle. Just in case some of you are in the same boat, let me shed some light on my own come-to-Jesus moment.

Step 1: I had to let go of my pride and accept that I was spending too much money. 

I’m almost ashamed to admit, but a few years ago I didn’t think a budget was necessary. I thought they were for poor people living paycheck to paycheck. Now that I’m a doctor living paycheck to paycheck I have a lot more sympathy (and humility too). It wasn’t until 6 months ago that I finally let go of my pride and began to accept that my habits needed to change. I was tired of running out of money at the end of each month. I was tired of relying on my credit cards for basic living expenses or holding my breath every time I had to pay for an oil change. 

Step 2: I had to sit down and actually write down my budget.

Honestly, I think the only reason I finally sat down and tried to make a budget was because I had this incredible distaste for debt. I had heard horror stories of older doctors whose student loan burden was sapping all of the happiness they once had with their jobs. It’s as if their lack of financial independence had turned the job they once loved into one they despised. I didn’t want that to happen to me. I wanted to know that my bills were paid on time each month and that my credit card debt was getting smaller and smaller. I wanted to make sure all my bases were covered. Creating a budget was one of the first steps I took to get on the right track. 

Step 3: I had to download a budget app to track my spending, and actually check it. 

Sounds simple, but for me, this was not an easy feat. The anxiety I had even thinking about opening Mint.com is one I cannot even begin to describe. But...I got through it. Slowly but surely I began to look at the numbers. I saw how much money I was actually spending on food each week. How my impromptu trips to the mall resulted in unnecessary clothes and holes in my budget. How the Uber rides, overpriced drinks, and club fees from weekend shenanigans added up to much more than I anticipated. I finally opened the app, stared at the numbers on the screen, and faced the fact that my spending was out of control. 

I was barely staying afloat and knew I had to do better. I couldn’t use the fact that I was a med student living on loans as an excuse. The spending habits I had wouldn’t magically change once I started getting paid as a resident physician or even as an attending physician. I needed to get rid of the bad behavior now, so that when I do experience an increase in pay in the future, I don’t just squander my wealth. 

Step 4: I had to put boundaries in place and stick to them. 

It wasn’t enough for me to track my spending each month. I needed to put some protections in place to “save me from myself.” I opened mint.com and set up budget notifications that send an alert to my phone whenever I’m nearing my weekly allotment for food or entertainment. For example, if I limit myself to $100 every two weeks for transportation, the app will send me an alert whenever my Uber rides approach the $80 mark. That way I know when I need to forgo that weekend party invitation and maybe host a game night at my place instead. I was well-intentioned before, but setting boundaries through budget apps and spending notifications has really challenged me to stick to my goals.

Full disclosure, I am still a work in progress. There are times I ignore those alerts only to face regret when I log into my bank account afterwards. Thankfully, those times happen a lot less frequently than they used to. When it comes to my spending habits, I am far from perfect. I still struggle, but by simply making these 4steps my spending habits have improved exponentially. 

Tell me, what steps have you taken to improve your spending habits? What was it like when you first tried to make a budget?

Retirement Account 101: Answers to questions you were afraid to ask

I’m a recently graduated medical student who is about to begin my new job as a resident physician. Along with creating a monthly budget, getting disability insurance, and making a plan for my student loans, I also need to start saving money for retirement. Several of my friends and co-workers wanted me to help them get their finances in order as well. Here are my answers to some of their most common questions about retirement accounts.

1. What are the different types of retirement accounts? Technically speaking, there are two main types of retirement accounts: Employer-sponsored plans and non-employer sponsored plans. Employer-sponsored plans are things like a 401K (offered by for-profit organizations), 403b (offered by non-profits), and a 457 (offered by government institutions). Non-employer sponsored plans are called Individual Retirement Accounts (aka IRAs). Through traditional IRAs or Roth IRAs, you can choose to save earned income for retirement in a way that is not dependent on your employer.

2. What is the difference between a Roth account and a regular retirement account? Many people have the option of contributing to “Roth” accounts like a Roth 403b or a Roth IRA. While Roth accounts may have different contribution rules, the main difference between Roth and non-Roth retirement accounts is the timing on when you pay taxes on the money. Roth accounts are considered “post-tax” because you contribute to them AFTER you’ve already paid taxes. Employer-sponsored accounts are considered “pre-tax” because you contribute to them BEFORE you pay taxes.

For example, with a Roth IRA you pay income taxes on money you make now, then you contribute to the account with “post-tax” dollars. Your money builds and accumulates interest over time. In retirement, you WILL NOT have to pay taxes on the money you withdraw or on any profits you made in the account. Non-roth accounts like a 401K are different. You contribute to these accounts with “pre-tax” dollars and your money builds and accumulates interest over time. In retirement, you WILL have to pay taxes on the money you withdraw and on any profits you made in the account.

3. Should you contribute to a Roth account? It depends. If you feel your salary is going to increase in the future, then consider paying taxes now (while you are in a lower tax bracket) and thus opt for a Roth account. In contrast, if you are already near your peak earnings or may experience a decrease in salary in the coming years (due to working part time or opting for a lower paying job with more lifestyle balance) then you may want to postpone paying taxes now and opt for the non-roth retirement account.

The goal is to pay taxes on the money when you are in the lowest tax bracket. The average person will want to do Roth retirement accounts (like a Roth IRA) when they are young and just starting out in their careers (unless they have other competing expenses that make them want to defer the taxes). As they earn a higher salary, they will want to do non-roth accounts (like their employer sponsored 401K, 403b or 457 plan) to avoid paying so much in taxes on those earnings.

4.How much should you contribute? It depends. You have to figure out how much money you need to retire and contribute enough money each year into retirement accounts to meet that goal. Of note, different types of accounts have different rules about how much money you can contribute each year. As of 2024, the max a single person can contribute to employer-sponsored plans like 401K, 403b, or 457 is $23,000 a year. The max you can contribute to traditional IRAs and Roth IRAs is $7,000 a year. (This amount can increase overtime due to inflation)

5. What happens to the money you put into these accounts? Once you put money into a retirement account, you can choose to invest that money in a way that will earn a profit. Employer-sponsored plans like 401Ks may offer a variety of options with different ways you can safely invest into the stock market, purchase bonds, or do a combination of both to earn a profit on your money. Non-employer sponsored plans like IRAs tend to be more flexible and can be used to invest in things like individual stocks, index mutual funds, commodities (like gold), or real estate. Regardless of the type of plan you choose, most people use the money in these accounts to invest in the stock market by purchasing index mutual funds. These are large, diversified funds that invest in hundreds of different stocks (or bonds) and earn a profit ranging from 7-10% each year.

6. What if you own your own business, do contract work, or earn money from a side gig? Once you set aside money for taxes, you can choose to save and invest that money for retirement. Depending on your income level, you may be able to put that money into a Roth IRA (provided you have not already contributed the yearly limit of $6,000). You may also choose to open a SEP-IRA or a solo 401K through a company like Vanguard, Fidelity, TD Ameritrade, etc. These accounts allow business owners and self-employed individuals to contribute up to 25% of their earned income (or $69,000, whichever is lower) into those accounts each year.   

7. Are there any special caveats I should be aware of? Yes. Oftentimes employer-sponsored plans will “match” your retirement contribution by placing an identical amount of their money into your retirement account, alongside your original contribution, up to a certain percentage of your salary. This is basically “free” money given by your employer.

Of note, people with really high incomes (i.e. physicians) are phased out of a traditional Roth IRA when their income gets to a certain level. They can try to work around this rule (legally) by doing something called a “backdoor Roth IRA” which is explained here.  Some high-income earners may also be able to contribute to a 403b plan in addition to a 457 plan, which allows them to save even more money for retirement.

To summarize, there are many different types of accounts that help you save and invest money for retirement. Determine which employer-sponsored plans you have at your job and compare to them to an IRA. Traditional and Roth IRAs tend to have lower contribution limits but offer more flexibility in the types of investments you can make. Employer-sponsored plans have higher contribution limits and may even offer a “match,” but may be limited in the types of investments you can make.

Tell me, was this helpful? Do you have a better understanding of the different types of retirement accounts?

8 Affordable Ways To Take a Vacation

It’s summer time and most of us would love to take a vacation. Unfortunately, planning and actually paying for a vacation can be tough, especially for medical students and young professionals who are on a tight budget. Here are a few things I did to lower costs when I traveled:  

1.     Travel during a different time of the year. Most people like to travel in the summer. The weather is nice, kids are out of school, and it’s easier to take time off from work. However, vacation prices are usually more expensive in the summer. To cut costs and save money, I tried to go on vacation during other seasons. Going to warmer places in the spring not only saved me money but also spared me from the insufferable summer heat. Planning tropical vacations in the winter allowed me to escape the cold weather and snow from up north.  

2.     Find cheaper flights. Call me crazy, but I do not have allegiance to one airline. I try not to make myself suffer through a flight on Spirit or Frontier but besides those two exceptions, I’m open to booking an affordable flight on just about any airline. In fact, I have a separate email address I use for coupons and store discounts. Before I book a flight, I look through those emails for any discount codes, then search kayak or google flights for cheap round trip tickets.

3.     Use Airbnb instead of hotels. As a female physician in her late 20s, I like a certain level of class. I’m not a huge fan of hostels or sharing a bathroom with random people I’ve never met. I left the dorm life in college and I do not want to go back, ever. Airbnb is different. The last two times I’ve traveled out of the country (to Puerto Rico and Mexico) I’ve stayed at an Airbnb. The places were clean, the hostess was reliable, and I had zero issues. Plus, it was drastically cheaper than hotels or resorts and was conveniently located within walking distance of the places I wanted to visit. If you’re traveling with a family or in a group, Airbnb’s can save you lots of money and even provide that “home away from home” feeling that is hard to recreate in a hotel.

4.     Travel with people. Vacations are cheaper if you can split the cost with other people. Sleeping 2-4 to a room drastically lowered my cost per night. Sometimes I would even split an entrée with a friend at a restaurant if the portions were large enough. Traveling with friends can decrease your lodging and food costs, and the make the trip even more enjoyable.

5.     Visit friends and family. If you’re working a tight schedule and can’t coordinate your vacation time with other people, consider the alternative. Go visit your friends instead. As a medical school graduate, I have many classmates who are starting jobs at various places around the country. In an effort to save costs (and maintain the friendship) why not go visit them? It might be nice to go skiing in Utah, hike the mountains in Colorado, or attend a Seahawks game in Seattle. Visiting close friends in other places will not only provide me with a place to stay but will also allow me to explore a new area with people I enjoy. Win-Win.  

6.     Search Groupon. Once I’ve settled on a vacation area and found affordable lodging (or a friend’s couch), I need to also search for things to do in the area. One of my favorite apps for finding affordable entertainment in a new area is Groupon. On this site, I can find discounts for almost anything. When I went to Napa Valley, my friend and I got a private wine tasting at one of the most beautiful vineyards for only $25. When I was in Georgia, my mom and I got spa and massage deals for half the price. That site has discounts for almost anything you can imagine.

7.     Think about going to a conference. This may sound random, but hear me out. As a physician, and even as a student, there were tons of medical conferences each year across the country. From general medical organizations like the AMA to specialty specific organizations and recruitment trips, each year of medical school I attended at least 1 conference in a different state completely free. As a resident physician, I get CME (continuing medical education) money that I can use to attend conferences. Instead of forgoing this money or spending it on phone apps I may never use, I decided to allocate this money for conferences that just-so-happen to be in a place that I want to visit (wink-wink). Regardless of your profession, ask your colleagues if there are educational conferences your job could help you attend. Doing so may allow you to travel to a new place completely free.

8.     Consider a cruise. As a person who went to medical school in Florida, cruises were a viable option. I only lived a couple hours from many of the major ports, which means I didn’t have to spend money on a flight to get to the dock station. Cruises are usually all-inclusive, so I also didn’t need to worry about lodging or food. There was free entertainment on the boat (i.e. Comedy shows and dance clubs). Plus, I had the opportunity to get off the boat each time we docked at new country. Cruises can certainly serve as an affordable vacation.

Tell me, what tips do you have on ways to take more affordable vacations?