4 Reasons I Don’t Buy or Trade Individual Stocks

Over the last few months, many of my friends have started investing. Because they know I love talking about personal finance, they will often ask me advice on which stocks to purchase. I tell them all the same thing: “I don’t buy individual stocks, I only buy index funds.” They usually seem a bit perplexed and want to know why. Here’s my answer:  

1. It takes a lot of work and timely information is difficult to find. As a busy doctor, I don’t have a lot of free time. Some weeks I work 80 hours in the hospital or have over 20 patient message to review. I barely have time to fold my laundry on a regular basis let alone do extra work, outside of work. When I do get a free afternoon or “golden” weekend in which I’m not on call at the hospital, the last thing I want to do is be productive. Most of the time, I just want to relax with friends and family eating good food or enjoying quality time. Trading stocks or researching companies to invest in, isn’t on my priority list.

Even if I did have the desire to learn more about various companies, finding good, timely, information can be quite challenging. Most of the time when information about a company is finally published it has already been known to Wall Street investors beforehand. This means it’s almost too late to make an investment decision that could make you money. For example, if I turned on the news and heard that Facebook was acquiring another company that could increase its profits, chances are the price of Facebook stock would have already increased to reflect this change. By the time lay people like you or I tried to capitalize on this potential increase in stock value it would be too late.

2. It requires substantial research on each industry and company. Although apps like Robinhood and Akorns have made purchasing individual stocks easier, they haven’t necessarily made it more profitable for the consumer. In order to actually make money when you purchase stocks you need to purchase companies that will increase in value and do so in a way that you will still make money even after you pay the taxes on your profits. This may sound easy to do initially. You may be thinking that you’d just purchase stock of Netflix and Facebook or Tesla and Apple then call it day. Unfortunately, it’s not that simple. If it were, everyone would do that.

There are some companies that seem to grow exponentially in ways we could never expect and other companies that seem to implode overnight. It’s difficult to predict which ones will make money over time and which ones will not. In fact, Wall Street companies spend millions, if not billions, of dollars each year on market research to help provide more information to help them make better predictions and investment choices. Even they still struggle to choose the right companies year after year.

3. The market is volatile and things change quickly. If 2020 taught us anything, it’s that life can be unpredictable. Random unforeseen events that happen in other parts of the world can affect us in ways we could never have imagined. These effects not only impact our daily lives, but they can have drastic effects on our economy and the success or failure of certain businesses.

Before the coronavirus, many of us would have assumed that airlines and travel industries would do remarkably well in the summer. The weather is great, kids are out of school, and most people have time off of work to go on vacation. We all got a rude awakening in March when the coronavirus pandemic put a drastic halt to almost all leisure travel and many airline industries found themselves on the brink of bankruptcy. Past performance isn’t always indicative of the future valuations and this makes picking and choosing individual stocks to purchase quite risky. Which leads me to my last point…

4. It adds too much risk and I don’t like losing money. When you buy individual stocks you’re essentially rolling the dice and hoping that the company’s stock you purchased will increase in value over time. As we mentioned before, stock prices are volatile. A company’s stock could be worth $20 today but then drop to $5 tomorrow due to some global tragedy or company scandal that you had no idea about. They best way to mitigate risk and decrease your chances at losing money (and increase your chance of making money), is to diversify your investments.

This means purchasing stocks in a variety of different companies from a slew of different industries. Since it would be too cumbersome to individually purchase all the stocks, most people such as myself, just buy index mutual funds. An index fund does the work of buying all the stocks for you. That way, your investments are diversified in a seamless, stress-free, risk-averse manner.  

How to Invest Money from your Side Gig

There are many different ideas for a side gig and several different options for what we can do with money from our side gig, but what about investing it? There are 4 ways I’ve considered investing the money from my side gig and each have their own pros and cons. They are:

1) Put the money into a Roth IRA. This allows me to invest in index mutual funds in a way that’s tax free and will gain interest overtime. When I take the money out in retirement, I can do so tax-free. Plus, if I happen to need this money before that to put a down payment down on a home, pay off some of student loans, invest in real estate, or pay some unexpected medical expenses I can do so without any penalties.

2) Increase the money I contribute to my job’s 401K. Technically you can’t put your side income into a work 401K but you could open up a solo 401K or increase the percentage of money you contribute to your work 401K up to the $19,000 yearly limit. The benefit of this is that you are still investing toward retirement in a way that’s tax efficient and you don’t have to worry about managing another retirement account with different investments. Plus, if you have federal student loans like I do and are on an income-driven repayment plan going for public service loan forgiveness, increasing the percentage you contribute toward your 401K actually lowers your monthly student loan payments which may leave even more money in your pocket each month.

3) Open a taxable “brokerage” account. If you have already contributed the max amount to your retirement account or Roth account but still want to invest in stocks and index funds, open up a brokerage account. This will allow you to invest in the stock market in a way that will gain you interest over time but isn’t tied to your retirement. This means if you happen to need the money for home renovations, better car, or a lavish vacation you can have your broker sell some of your stocks and get the money you need when you need it. Opening up a taxable “brokerage account” isn’t the most tax-efficient account since you will pay taxes on the profits you make but it gives you easier access to your money when you need it.

4) Invest in real estate. One of the main ways many American’s build wealth is through Real estate. Not only can it help you get higher returns on your investments which increase your profits, but it also allows you to do so in a way that’s tax-efficient and even tax-free. If you already have a decent chunk of money in your work retirement plans invested in index mutual funds perhaps you may want to diversify your invests a little and get started in real estate. You could start buying rental properties to increase your monthly cash flow and become an active investor who can write off taxes from your day job, you could start investing in crowdfunding deals or real estate syndications with other investors who focus on making money from apartment deals as a more passive investor, or you could simply start buying smaller properties and renting them out over time, or even just invest in some Real Estate Investment Trusts (REITS) which are like index mutual funds for real estate deals. There are many options available.

My point? The correct option may differ for each person. If you are young, haven’t maxed out your retirement accounts, and don’t need the extra cash on hand, perhaps putting the money into a Roth IRA or extra money in your job’s 401K may be the best option. If you’ve already maxed out your retirement accounts or think you might need this money before you turn 55, then perhaps opening up a brokerage account may be the best move. Although you pay a little more in taxes it may provide the flexibility you need to take the money out if an emergency arises. If you already have a good chunk invested in the stock market perhaps you should consider other investment vehicles like real estate. Contrary to popular belief, you don’t have to be rich to invest in real estate and there are many different options that may suit your lifestyle and risk tolerance best. Right now, I’m putting extra money into retirement accounts, but I plan to invest a lot more into real estate once I finish my residency training. Look into the different types of investment options and choose the one that may be best for you, keeping in mind that it may vary based on your life circumstances and net worth.

5 reasons I’m still investing in the stock market during the Coronavirus

With the Coronavirus pandemic, many cities across the country have shut down. While some people are working from home, many others have been furloughed or lost their jobs altogether. With this rapid decrease in economic activity, the stock market has taken a huge hit. Many people who had a big chunk of their network in stocks, have seen a sharp decline in the overall value of their investments. In the midst of all of this change, I’m staying the course. Here are 5 reasons I’m still planning to invest in the stock market:

1. I’m in it for the long-haul. Despite the low valuations of stocks at the current moment, the market will eventually recover. While the value of stocks may not bunce back in a couple months, over time the market will normalize. Since I haven’t sold any stocks, I haven’t actually lost any money. Unlike people who are close to retirement, I’m young and have just started my career. I have lots of working years left and don’t need the money I put into retirement accounts any time soon. By the time I retire, 20-30 years from now, stocks will be worth a lot more than they are right now. Thus continuing to invest in the stock market will increase my net worth over time.

2. It’s difficult to time to the market. Some investors my argue that since the market hasn’t recovered yet, people should temporarily stop investing money and wait until things recover to resume investing. I disagree. While that strategy sounds plausible on the surface, it’s difficult to implement in practice. Despite our best knowledge, it’s hard to “time the market.” No one really knows when the stock market will hit its lowest point and when it will be on the upswing. If you mistime it, which is highly likely since we don’t have a crystal ball telling us the exact date things will improve, you run the risk of buying stocks for much higher than you otherwise would when you start investing again and end up “losing money.” Since most of us don’t need money from our retirement accounts right now, we should keep investing as we wait for the stock market to rebound.

3. The price of stocks is cheap right now. With this economic downturn, many companies are not operating at full capacity or bringing in as much revenue as they once were. As a result, the economic value of these companies has decreased. Since the valuation is lower, the price of their stocks is lower. This is great news for me because it means it’s cheaper to buy stocks. Although I don’t invest in individual stocks, I can still get more bang for my buck through index mutual funds. Before the coronavirus, a few hundred bucks a month might have only allowed me to get a small percentage of stock in each of the major publicly traded companies. Nowadays, those dollars go much further. It’s as if I’m buying a lucrative investment at a discount. When the market finally does bounce back, the value of my investment will have increased exponentially. Since I can’t time the market to figure out exactly when the stocks will be at their lowest price (or available for purchase for the biggest discount), I “dollar-cost-average” and invest money each month into an index fund so that on average I will have gotten these stocks at a decent price.

4. It lowers my taxable income and student loan payment. Regardless of what the market does over time, continuing to invest in stocks through my employer benefits me in the short term. Since I mainly invest in index mutual funds (a portfolio of all of the stocks on the market) through my employer’s retirement fund, doing so lowers my taxable income. This means I don’t pay taxes on the money I invest towards retirement and thus less money is deducted from my paycheck for taxes each month. Since I pay less in taxes I will have more cash to spend after each check. Plus, lowering my taxable income by continuing to invest in my job’s 403b/401K also lowers my monthly student loan payment since my payment amount is a percentage of my taxable income. As someone who’s loans will be forgiven in 10 years, paying less each month for student loans means I pay less on my loans overall before they get forgiven entirely. This is a win-win.

5. I can write off the losses. There is no doubt that we are in the midst of a recession. As we continue to practice social distancing, companies are unable to operate at full capacity and their stocks may continue to decrease. This means that those near retirement may need to sell part of their stock portfolio to continue to fund their retirement, and thus may end up selling it for less than it was previously worth. While this may sound disheartening, there are certain things that can be done to minimize the burn. One of them is the fact that we can write off the losses against our taxable income. If you happen to sell some stocks at a loss, you can deduct that loss from your taxable income next year, if you itemize your taxes. Meaning a loss in value doesn’t really become a true loss. You get to recoup some of that money next year when you file your taxes.

My point? Despite the market downturn, I’m still planning to invest in the stock market. Doing so allows me to buy valuable stocks at a discount, lower my taxable income, increase my net worth over time and lower my student loan payments. I’m investing for long-haul and these benefits motivate me to stay the course.

What should we do with money from our side gig?

Many of us have side gigs or extra income outside of our day jobs. While the extra money is nice, is there something “smart” we should be doing with it? Here are 4 options:  

Choice 1: Pay off Debt  

Whether it’s student loans, a car loan, or credit cards, one of the first things you should consider doing with any extra income, is paying down any debt or loans you have. As someone who is going for public service loan forgiveness (PSLF), paying off my student loans is not a priority for me, right now. With PSLF, my payments are currently capped at 10% of my discretionary income. After 10 years of these low payments, the government will “forgive” any debt I still have left, tax-free. This is a pretty sweet deal, so I have little incentive to pay more money towards this debt than I have to.  If you aren’t going for PSLF, then your strategy may be vastly different. Perhaps you’d want to consider refinancing your student loans at a lower interest rate and paying them off as quickly as possible. If that’s the case, then using money from your side gig to pay off your student loans faster might be a good option.

For those who don’t have any student loan debt or have already paid theirs off, you could use the money from your side gig to pay off any other debts, especially anything with an interest rate higher than 8%. For example, if you have credit card debt or a car loan, using the money from your side gig to get rid of these debts quicker may not only save you money in interest over time but it will also leave more money in your pocket each month as you begin to get rid of that debt and no longer have those payments as one of your monthly bills.

Choice 2: Save It.

As a first-year physician, saving money is a major priority for me. Unlike many other graduate school programs, it was virtually impossible to work a job in medical school. The inability to work, precluded me from making money which meant I couldn’t save money. As a result, my emergency fund was non-existent and I didn’t have all the funds I needed to move to a new city, make necessary travel plans for various events, or even schedule the celebratory vacation I needed before starting one of the most demanding jobs in the country. After going through that experience, I never want to be in that position again.

If you haven’t been able to save a good chunk of money from your main job, perhaps you should use the extra money from your side gig. You should not only consider saving money for emergencies but also factor in saving money for future vacations, Christmas gifts, car maintenance or any other large purchases. They key is save the money in a high-yield savings account or money market account which will allow you gain a interest on your money in a way that is risk-free while still giving you the freedom to pull money out of the account easily whenever you need it.

Choice 3: Spend It

As a resident physician who can sometimes work up to 80 hours a week without any extra over-time pay, work can be a bit exhausting. Sometimes being able to purchase something I really want, have monthly self-care days that include a massage and trip to the spa, or going on an international vacation to one of the places on my bucket list can be just the refresher I need. While I’m all about financial independence and having enough money to create a life you don’t need to vacation from, career longevity is vitally important, at least at this stage in my life. Sometimes the best thing we can do to maintain career longevity is to take necessary breaks and occasionally treat ourselves to some of the things we really love and enjoy. We all need balance in our lives, especially in terms of work vs play or work and relaxation.

Choice 4: Invest It

As I’ve stacked up a decent emergency fund and paid off all of my credit card debt, one of the things I’ve been contemplating more and more is how to invest the money from my side gig. While I don’t like the risk associated with buying individual stocks, I’m a huge fan of index mutual funds and have always liked real estate, so when it comes to investing side income I  have a few options:

-Put the money into a retirement account (such as Roth IRA or increase the percentage I contribute to the 401K I have at my job)

-Open a taxable brokerage account (so I can make different types of investments in a way that isn’t tied to my retirement so that I can more easily pull the money out if I need it)

-Invest in real estate (either through rental properties, apartment syndications with other investors, or a variety of other options).

My point? I’ve listed many options of things you can do with income from your side gig. However, the right choice may be different for each person. If you don’t have a decent emergency fund, perhaps you should start by saving your side income. If you have some high-interest debt from credit cards or a car loan, eliminating that might be your second option. If you’re nearly debt-free and already have money saved for emergencies and other large expenses, consider investing your side gig money into retirement accounts, taxable accounts, or real estate.

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? 

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?