In case you’re unfamiliar with doctor pay, there are two different tier systems: Resident physicians and attending physicians. Resident physicians are doctors who recently graduated from medical school and are still getting training in their field of choice. They are working as doctors but still actively learning at the same time. Attending physicians are different. They are doctors who have graduated medical school and have a minimum of 3 to 7 years of experience. They have a full state license, tend to be board certified, and make substantially more money. Resident physicians make the median household income ($55,000 to $75,000 per year). Attending physicians an average of $300,000 and beyond. If you’re a resident physician or a young professional who makes the median household income you should still invest money. Here are 4 reasons why:
1. Investing prevents your money from losing value. In case you haven’t heard, inflation is higher than it has been in awhile. Because of inflation, things like cars, homes, gas, and groceries cost more now than they have in the past. If that weren’t enough, the rate in which these prices are rising is putting a strain on our pockets and our lifestyles. We may have to delay buying the home we wanted, forgo that vacation we were planning, or drive our old cars for much longer than we anticipated. Since costs are rising so fast, we can buy fewer things with each dollar, than we could in the past. Unless we intentional about growing our money, it will continue to lose buying power just sitting in a savings account. One of the main reasons to start investing now as a resident, or young professional on an average income, is because it prevents our dollars from losing value. Investing gives our money a chance to grow which brings me to my next point…
2. Investing allows your money to grow much faster. You could stack money in a savings account, but that money will not grow much at all. The minimal increase of 0.25% that many people get by keeping their money in a savings account is not enough to keep pace with inflation and the rising cost of goods. Investing helps combat that because not only does it allow your money to grow, but it allows it to do so much quicker through compound interest. Compound interest is when your money makes more money (called interest) and then that interest stacks onto your original amount and begins to make even more money (added interest). This ability for you to make profits (interest) on top of existing profits (other interest), means that you get even more profit than you thought (compound interest). It is this compound interest that allows your money to grow much faster.
3. Investing gives you the chance to reach your financial goals sooner. Because investing allows your money to grow, it is through investing that you can accumulate a higher net worth sooner than you other wise would. As your net worth increases and the value of your investments rises you will be able to reach your financial goals sooner. For some people, these goals may be to accumulate a certain amount of money for a down payment on a home to use when they become attendings, for others it may be to have the ability to cut back to part time or just work one less day per week. Whatever your financial goals are, investing gives you the opportunity to reach them sooner. As your net worth grows, you start to accumulate wealth and one of the best things money can buy is control over your time. Think about how nice that would be.
4. Investing allows you to invest as you save. This is perhaps one of the biggest perks of investing as a resident or young professional. Investing money through a Roth IRA (that you can open by calling a place like Vanguard or Fidelity) gives you tons of options including the ability to invest as you save. What do I mean by that? You can contribute money to a Roth IRA then choose to invest it however you’d like (preferably in low cost index mutual funds like VTSAX or VIT). With a Roth IRA, you also have the option to take your contributions out of the account at any time. This means you can open a Roth IRA and contribute $500 per month up to the yearly maximum of $6,000 per year. During your time in training and career building this money is growing and gaining compound interest. Once you finish training you can choose to take your contributions out of the account (and use the money for a wedding, fancy vacation, or down payment on a home) but keep the profits you made on that money inside of the account. In other words, you were able to make money on your investments and still save for the big item you planned for. You can also choose not to take out your contributions and instead keep all the money inside of the Roth IRA until you retire. Having the option the take your contributions out of the account at any time allows you the flexibility to use this account as a backup savings account that actually earns interest.
What do you think? If you’re a resident physician or young professional making the median income, will you start investing money this year?
New Goals for the New Year (2022)
It’s 2022 and many of us want this year to be better than last year. Instead of just hoping this happens, let’s make some realistic goals and put steps in place to achieve them. Here are some of my 2022 goals:
1. Continue to invest at least 10% of my salary in retirement accounts. Investing money gives me the opportunity to allow my money to grow. Because of inflation (the rising cost of goods and services) money sitting in a savings account is actually losing buying power by the day. In order to prevent this, I keep a certain amount of money in an emergency fund and make a habit to invest the rest. Since I know I can’t be relied upon to actively put the money into investment accounts each month, I make it automatic by having 10% of my paycheck automatically invested into my work 403b (similar to a 401K) before the money hits my bank account. I also have a set amount automatically invested into my Roth IRA. You can do the same thing. The amount you choose to invest is up to you, but having automatic contributions into your 403b or Roth IRA will allow you to start building wealth long before you retire which will create more options for you in the future.
2. Make more money from side hustles (increase passive income). As a senior resident physician who is starting fellowship next year, I haven’t gotten the “big bucks” just yet. I make more than I did as a first-year doctor, but I still haven’t gotten that attending salary boost. Although I’m anxious to get paid more, I refuse to put my life on hold for a year and a half until that time comes. While many people choose to moonlight (work extra shifts as a physician) to supplement their income, I’ve always been concerned that doing so might cause me to burnout from medicine. So, I've tried to increase my income a different way. For me, that means monetizing my hobbies and increasing passive income. I’ve made tens of thousands of dollars doing that as a resident physician and would encourage other docs to consider passive income ideas, or monetizing some of their hobbies, to increase their monthly income as well.
3. Avoid accumulating consumer debt. When I first started residency, I had lots of credit card debt. Most of it I accumulated before I went to med school. I was unable to pay it off while getting my degree so when I graduated and started residency, I still had it. My credit card interest rate was 10% which means that each day I had the debt I was being charged extra money in interest. It didn’t take me long to realize that the sooner I paid off the debt the more money I’d save in interest fees. When I got my first job as a doctor, I prioritized making large credit card payments and paid off the debt in less than a year a half. I’m still credit card debt free, so my goal for this new year is to avoid accumulating more. It can be so tempting to use my credit card to book flights, pay for vacations, and purchase other items on sale but resisting that urge has served me well. In 2022 I hope to continue this practice.
4. Save money for future vacays. In order for me to avoid accumulating credit card debt one of the things I do is plan ahead. I save money in advance for large expenses like vacations, travel, holiday gifts, and friends' weddings so that I don’t end up charging these expenses on a credit card. I also have a percentage of money from each paycheck deposited into an entirely different bank account. I use the money in this bank account to save for future large expenses. Having these automatic deductions into a separate bank account prevents me from having to rely on my memory or self-control. I plan to continue this same practice in 2022.
5. Carve out time for self-care. As a senior resident physician who will be starting fellowship next year, life is busy and occasionally stressful. One of the ways I plan to decrease stress and improve my own wellbeing is by investing in self-care. For me, that means reading more books, finding time for rest and relaxation, having periodic therapy sessions, and maintaining healthy eating & exercise habits. Life can be hectic, but making the time for my own self-care and happiness is better for my overall mental health and longevity.
Tell me, do you plan to do some of these things this year? What are some of your goals for the new year?
5 Black Friday Budget Tips
I’m not sure about you, but I love a good sale. As a young professional who hates paying more for something than I could, I marvel at the chance to buy valuable items at a discount. The only thing I don’t like are the crowds at stores or the look of my bank account the weekend after I go shopping. If you are like me and would like to enjoy the sales without spending too much money, here are some Black Friday Tips to consider.
1. Plan ahead—set aside money for holiday spending. It can be easy to overspend during the holidays. Minimize the chance it will happen this year by planning ahead. Reserve some money from your last paycheck and find ways to lower your expenses on other items this month. Consider working some overtime at your job, try to make some extra money from your side hustle, and pull in cash from other revenue streams. I plan ahead for holiday expenses throughout the year by setting aside $100-$200 each month for holiday spending. I know other people who forgo retirement contributions during the month of December and instead use that money to pay for added expenses during Christmas time. There are even folks who sell some of the investments they made throughout the year and use the profits to pay for expenses. My point? Plan ahead to make sure you have the money you need for all of your holiday expenses.
2. Make a list of your expenses and expected purchases. One of the things that can hurt your finances is buying things you don’t need or didn’t expect to purchase. Try to avoid this by making a list of your expenses ahead of time. Include flights, money for gifts, and any social outings or restaurants you may go to. If you know you are going to do some holiday shopping, write down the things you plan to buy and leave a little extra room for unexpected purchases. Making a list of your expenses gives you a glimpse of how much you will spend and can help you prepare in advance for your purchases.
3. Search for deals but avoid the temptation to buy more. It can be great to find sales on the items you already plan to purchase but be careful. In the midst of looking at deals, try not to fall into the trap of buying more than you anticipated. If you know you need to buy clothes for one of your family members, avoid looking in the electronics section. If you already plan to buy a household appliance, avoid browsing the shoe section. In fact, if you already know what you need, then you may want to consider buying the items online to avoid the temptation of buying more than you anticipated at the stores in person.
4. Set a spending limit and stick to it. Sometimes we have good intentions but still fall short. One way to avoid that is to set an overall spending limit. Make a goal not spend more than a certain amount this holiday season, and stick to it. Set a spending limit each time you decide to go shopping. For example, my gift giving limit is $500 (which includes secret santa gifts, stocking stuffers, and gifts for each of my family members). Since I usually buy clothes during the holiday season, I also set an overall limit for how much money I will spend on myself. Once I reach my spending limit, I go home and avoid looking at additional sales. You should too.
5. Avoid credit card debt. It can be so easy to swipe a card and get all the things you desire. The temptation to buy something we really want can be quite strong. In fact, many people accumulate a substantial amount of credit card debt during the holiday season as a result. Don’t let this be you. Make a goal right now to avoid credit card debt. Don’t let one month of spending during the holidays derail all the progress you made toward your money goals this year. Simply put, don’t use money you don’t have to purchase things you don’t need. Avoid debt.
My 5 Residency Money Goals
Residency can be challenging. We are perpetually overworked, underpaid, and trying our best to make it through. Even those who aren’t resident physicians may be able to relate to this in some way. While this time has its ups and downs, we can’t lose sight of the bigger picture. We will soon be attending physicians and one of the best things we can do during residency is lay the foundation for the life and career we desire. This means doing a few things during our time in training to set ourselves up well financially. Here are 5 of the money goals I set when I started residency:
1. Figure out what’s going on with my student loans. When I graduated from medical school, I had a substantial amount of student loan debt. I remember being called into the financial counselor’s office and being told that I had over $200,000 in student loans. I don’t know about you, but I had never seen or made that much money in my life. I knew I needed a plan. I began to read about the different repayment options and tried to pick one that would give me the lowest monthly payments in residency, provide some government subsidies, and still qualify for loan forgiveness once I finished my training. I didn’t want to be stressed about student loans in residency, so I signed up for an income-driven repayment plan and had my residency coordinator sign the form needed for me to enroll in Public Service Loan Forgiveness.
2. Pay down my credit card debt. I had credit card debt before I started residency. Most of it was accumulated before I was med student, back when I was struggling to make ends meet as a post-grad student in Washington, DC. However, I had also racked up some debt when I was starting residency. Moving from one state to another, paying the deposit for a new apartment, and affording basic expenses like food while I was waiting weeks to get my first residency paycheck was tough. I didn’t have the benefit of a working spouse or cash from my parents to lighten the burden. I didn’t realize doctors could get low-interest personal loans, so I instead charged the expenses on my credit card. My goal was to pay off this debt within the first year of residency, so I set aside money from each paycheck to pay down this debt until it was gone.
3. Save money for vacays and emergencies. One of my goals as a resident is to be able to take full advantage of my vacation time by traveling and visiting friends in other areas of the country. Before COVID, I had visited friends in Seattle and Chicago. In a few months I’m planning to attend a destination wedding. In order to afford those trips without taking out additional debt or charging the expense on a credit card, I knew I needed to plan ahead. Thus, one of my goals was to save a few hundred bucks from each paycheck into a “vacation fund” so that I could afford to take nice trips during my time off. Along with saving money for vacations, I also wanted to make sure I had money in an emergency fund so that if an unexpected expense occurred like needing new brakes for my car, a new phone, or a new laptop, I had the money to pay for them. So in addition to my vacation fund, I also had a few hundred bucks from each check put into a separate emergency fund via automatic savings.
4. Protect my income with disability insurance. As a resident physician I know my income will increase when I become an attending. (And as someone who feels underpaid right now, I cannot wait for that to happen). But even as I near the finish line of my training, I realize that a lot of the goals I have for my life—to buy a nice home, spend quality time with my family, have memorable international travel experiences, finance my [future] kids’ education, and build wealth for future generations—depend on my future attending income. Because the life I envision is so heavily dependent on my future high salary, I knew I need to protect it by getting disability insurance.
Having disability insurance means that if something unfortunate happens (like getting in a car accident, being diagnosed with a chronic medical illness, or suffering from a mental health disorder) I will still have an income high enough to help me reach my financial goals. Getting disability insurance as a healthy young resident allowed me to not only protect and insure my resident salary, but it also allowed me to lock in a lower rate with guaranteed coverage so that I would be insured as an attending physician as well.
5. Start Investing Money. With the goals I had above and an initial salary of $60,000 as an intern, I wasn’t sure I could afford to have any more money goals as a resident. Fortunately, I still decided to invest. I knew that I couldn’t save my way to wealth and that if I wanted to meet my financial goals sooner, I needed to start buying assets (things that increase in value over time). I also knew that one of the best things about investing is that my money can make even more money via compound interest and that compound interest would be more effective the earlier I start investing. So yes, even though my income would increase as an attending and money was tight when I started residency, I still made a goal to invest.
Because of the tax, student loan, and asset protection benefits, I prioritized investing through retirement accounts (like a Roth IRA and my residency 403b). I also knew that I wanted to invest money in a way that maximized the chance I would make money and minimized the risk I would lose money which meant I invested in index mutual funds like the vanguard total stock market index. Because I wanted to prioritize paying off my credit card debt, I started off as an intern investing only 3% of my income into my residency 403b. I gradually increased the percentage every few months as I paid off my credit card debt and stacked up my emergency fund until I got to my target of investing 10% of my income.
My point? Even as a resident, it’s important to have money goals. Maybe you want to pay off credit card debt and start investing. Or, maybe you want to save for a wedding or set aside money to buy a home. Regardless of what your desires are, the first step in becoming money savvy as a resident and setting yourself up well as an attending is to clearly define what you want and make some money goals that you can work toward while you are in training.
6 Money Moves to Make this Fall of 2021
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.
4 Things to do before you start a business
1. Clearly define your “why.” Contrary to what you may have heard from others or witnessed on social media, entrepreneurship is a lot of work. To start a business and be your own boss requires a specific set of skills that you may not have developed before. Many business owners spend countless hours thinking of ideas, putting systems in place, and developing their product or service without compensation. It can be task that has lots of delayed gratification before you start to see the fruits of your labor. I say all of this not to discourage you from starting a business but to emphasize the importance of knowing why you want to do it. If the sole reason you want to start a business is have the ability to quit your day job or not have to answer to a boss then you may want to think twice. Make sure you know exactly why you want to start your business. Knowing your why will help you push through the less glamorous parts of entrepreneurship and help you develop the resilience needed to push through the tough times.
2. Clarify what your business does. Knowing why you want to start a business is helpful, but if you ever want your business to be profitable you must also articulate what your business does. Customers like clarity. Do you sell certain products? If so, make it crystal clear what those products are and why they would be helpful. Does your business provide a service? If so, make it clear what that service is and who it is for. If you are too vague about what your business does people can get confused which can make them hesitant to trust you or buy from you. Clarify your business’s purpose and make that very apparent to your potential customers or clients.
3. Differentiate your business from others. Unless you are inventing something completely new, chances are there is another business or website that does something similar to what you do. Just because you don’t personally know of these businesses, does not mean they don’t exist. Get your google on. Search and do research. Make of list. Figure out what these businesses do well that you’d like to emulate. Pinpoint what you want to do differently that could make you standout. Do you want to cater to a certain market? Will you offer more affordable services? Do you have additional products or better products for customers to choose from? Do you have skills in a certain area that you can leverage in a new way to increase appeal? Make it clear to your potential customers why they should choose to do business with you over someone else.
4. Identify your target audience & market to them. Figure out your target audience. What type of people would most benefit from your service or product? Is it for adults or kids? For educated young professionals or middle-class Americans? Many people try to appeal to everyone and end up being attractive to no one. Describe your ideal customer. Write down 20 characteristics about the kind of person who would buy your product or most benefit from it. Once you know what kind of customer you are looking for, market to them. Figure out where they go, what websites they frequent, and what social media platforms they use. Market to them there. You can have the best product in the world, but if no one knows you exist it won’t matter. Part of being a success entrepreneur is learning how to sell yourself and market yourself to your ideal customer.
My 5-Part Plan for Extra Money
Whether it’s stimulus checks, tax refunds, friendly donations, or work bonuses many of may receive unexpected money in our bank accounts from time to time. Although this money is greatly appreciated, without a plan, we may inadvertently spend it all in haste. As money savvy young professionals, we should have a plan for unexpected money and use it to meet some of our financial goals. Here is my 5-part plan for any extra money I receive:
1. Allocate a percentage to building wealth. As someone who has a goal of building generation wealth, a percentage of all the money I get goes towards increasing my net worth. I increase my net worth in two main ways: 1) by investing in assets (like stocks and real estate) that will increase in value overtime, and 2) by paying off liabilities (aka minimizing debt) that take away from my wealth. In other words, when I get extra money, I invest a portion of it and pay down debt with another portion. In fact, one of the first things I did with my first few paychecks as a resident doctor was allocate about 10% of each check to paying off the credit card debt I accumulated in grad school and invest another 10% in index mutual funds within my work retirement plan. My goal is to use a percentage of every dollar I get to build wealth by increasing my net worth.
2. Reserve money for taxes. Unless the money I receive is a tax refund or an untaxed gift, most of the time, when I get extra money, I will have to pay taxes on it. This is true for you as well. It doesn’t matter if you did all the work in your job, or took all the risk in that investment or business idea that has finally paid off, when you make money, Uncle Sam wants a cut. Since I don’t like having to scramble to pay extra money in taxes each April, I plan for my taxes throughout the year. Anytime I get extra money that I know will be taxed, I set aside a certain percentage for taxes and place it in a savings account.
3. Pay tithes and give to charity. As a Christian who goes to church and believes in giving back to those who are less fortunate, I set aside money for giving. One of things first things I do with extra money is give 10% to the church, as part of my tithes. I then allocate additional money for giving to charities or people outside of church. Sometimes, I invest in my friends’ businesses. Other times I donate to a non-profit or bless someone I know with an expected gift. As a successful young professional who is actively building wealth, I recognize that despite my hard work and dedication, I have several advantages and blessings that other people do not have. Because of this realization, I try to be a good steward of my resources by giving money away and making a difference in the lives of others.
4. Save money for future expenses. As someone in her early 30s who hates surprise expenses and loathes credit card debt, one of the things I do with unexpected money is save some of it, in cash, for future large expenses. I try to always have money in a savings account to pay for what I call “friendship expenses” like weddings, birthday parties, and baby showers. Between bridesmaid dresses, bachelorette parties, bridal showers, and wedding gifts these expenses are not cheap so I have to plan ahead. Along with these “friendship expenses,” I also reserve money in my savings account for vacations. I also have an emergency fund for unexpected expenses or changes in income and plan to start saving money in a “housing fund” to cover the down payment on a future home. My point? There are always large expenses I have coming up and as someone who likes to plan ahead, I like to have money set aside for these things.
5. Give myself a spending allowance. Although I prioritize building wealth, I also like to live in the moment. So although I may not treat myself all of the time, I do reserve some money to spend from time to time. I love to invest and I understand the importance of being responsible with money, but I am realistic. I know I can only delay gratification for so long without completely going insane. Thus, I find ways to “treat myself” and reserve a portion of the unexpected money I receive as a spending allowance. Sometimes I’ve gone shopping, other times I’ve booked a trip to see a friend. Sometimes I treat myself to a fancy restaurant and other times I’ve bought some new gadget or electronic device. Finding ways to enjoy a portion of your money is key.
5 Money Mistakes To Avoid This Summer
Summer is here. Covid cases have declined. Outside is officially open. As you enjoy being able to leave your home and live life as you did before the pandemic, be mindful of your spending. Despite the delayed gratification we all had in 2020, the urge to make up for lost times might be good for our psyche but bad for our wallet. If you aren’t careful, you could find yourself spending way more than you anticipated. In order to continue to progress in your financial goals, avoid these 5 money mistakes this summer:
1. Going out to eat too often. Whether it’s brunch, happy hour, or a birthday dinner many people tend to eat out a lot more frequently in the summer. I know I do. With the increased prevalence of food delivery apps like Doordash and Uber Eats, I order takeout meals more often as well. If I’m not careful, I can easily spend $100-200 a week eating out. Although the food may taste amazing and the time with friends can bring happiness, these endeavors, when done on a frequent basis, can be quite expensive. In order to be a money savvy young professional, we must be mindful of this added cost. It’s not that we can’t eat out at all, it’s that we must resist the urge to do so too frequently.
2. Not having a budget when you travel. Now that things are opening back up, one of the things many of us cannot wait to do is travel! We long to get out of our homes and away from our cities to visit someplace else. Although traveling can be fun and provide a much-needed break from our current lives, don’t forget to budget! Many of us factor in the cost of a flight and hotel, but we underestimate how much we will spend on food, uber rides, drinks and entertainment after we arrive. If we aren’t careful, those expenses can add up quickly and before you know it, you’ve spent way more than you planned and re-accumulated the credit card debt you worked so hard to pay back. Avoid this by budgeting appropriately. Before you go, estimate how much you will spend on incidentals like snacks, drinks, and transport. Find ways to cover those expenses without putting it all on a credit card. Don’t let improper planning turn your vacation into a financial catastrophe.
3. Overspending at bars/lounges and happy hours. If there’s one thing friends love to do in the summertime, it’s go out. Although many of us may no longer be in clubs until 2am, we likely still enjoy a good happy hour after work or a nice lounge on the weekends. Although there is nothing inherently wrong with these activities, they can serve as unexpected money pits that take away all of our disposable income. If you aren’t careful, you can easily drop $20-30 on drinks, another $20 on an appetizer and tip. Before you know it, you’ve spent almost $50 and still need to get dinner. While this may not break the bank if done every once in a while, hitting a happy hour every week can start to add up. Nightclubs and lounges can be even more expensive, especially if you try to get a section to sit down and split a couple bottles or drinks with friends. You can easily send $200-300 if not more, on a night out. While this can lead to great times with friends, don’t let it shatter your financial goals. Try to set a spending limit when you’re out and don’t go over that amount, That way you can enjoy the evening without overspending and regretting it in the morning.
4. Buying new clothes for every occasion. Whether it’s the desire to post photos in new outfits or the unexplainable feeling of excitement I get whenever I purchase a new dress, one of the financial mistakes I used to make a lot is shopping. Specifically speaking, I loved to buy new clothes for special occasions and in the summertime, there was ALWAYS a special occasion like a friend’s birthday party, entertainment event, or upcoming vacation for me to shop for. Although shopping and wearing new clothes brought me joy, seeing my bank account diminish soon after I got paid was definitely NOT a good feeling. If you’re like me, and can get a little carried away when it comes to shopping, try to put barriers in place and approach things differently this summer. Delete text messages from stores about sales, unsubscribe from store emails, make a concerted effort to re-wear things you haven’t worn in awhile, and resist the urge to buy something new when you have other outfits in your closet that could work just fine.
5. Underestimating the costs of weddings/special events. Another thing we need to be careful not to do this summer is underestimate the costs of special events like weddings. As we enter our late 20s and early 30s many of our friends and co-workers may start getting married and having children. This means there will be lots of engagement parties, weddings, gender reveals, and baby showers to attend. Although these events may create memories that last a lifetime, make sure you plan ahead. This means setting aside money each month for these costs and understanding that you may not be able to make ALL of the events. Set a budget and plan ahead.