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.
5 Truths Every Resident Needs To Know
July 1st is just around the corner and for those who are new to medicine or unfamiliar with residency life, July is the start of the new resident physician year. A resident physician is a doctor who graduated from medical school and is getting specialized training in his or her field of choice while still seeing patients. Residents are doctors who are still actively learning (like a student in school) while they are also working and earning money.
Besides experience, the main difference between a resident physician and a regular physician (like an attending physician who is done with his/her specialized training) is that resident physicians work a lot more and get paid a lot less. I’m still a resident myself, so as you can imagine, it’s a busy time in our lives. There are a lot of things we have to worry about, but finances shouldn’t be one of them. Here are 5 money-related truths every resident physician, and young professional with high earning potential, needs to know:
You are not guaranteed to be rich. Just because you are a doctor and will have a high salary, does NOT mean you don’t need a plan for your finances. Most people who make more money, get into more debt. Your time as a resident is not an excuse for poor money management and credit card accumulation. Many doctors’ net worth is not nearly as high as it should be considering how much they get paid. Make some financial goals for yourself now and try to avoid some common pitfalls. Learning a few finance basics as a resident can go a long way.
Spend less. Save more. Minimize debt. Things can be challenging during residency so try to live below your means or at least avoid living above your means. You don’t have to have a detailed budget but creating a basic spending plan to prevent yourself from accumulating [more] debt during training might be helpful. Save money in an emergency fund so that small, unexpected expenses like a car repair, urgent trip back home, or new cell phone doesn’t derail your budget or financial goals. Vacations can serve as a much-needed break from the stress of residency, but try to pay for them in cash by saving a couple hundred dollars from each paycheck. If you can, invest some money in index mutual funds via your work retirement plan or your own Roth IRA. The goal in residency is to keep your head above water financially and avoid getting into more debt.
Have a plan for your student loans. Choosing to “deal with it later” is NOT a plan. Read about the different student loan repayment options and choose one, likely an income-driven repayment plan, so that your payments are affordable in residency. Most residency programs qualify for public service loan forgiveness so take a couple minutes out of your day and sign up for this free program so that you have an option for your student loans to be forgiven after 10 years. When choosing a student loan plan recognize that the optimal student loan plan for you as resident may change when you become an attending. That’s okay. Just figure out the best federal repayment plan for you now, likely PAYE or Re-PAYE and consider hiring a company like Student Loan Advice or Student Loan Tax Experts once you finish training so they can run the numbers for you and help you determine the best repayment plan for you as an attending.
You need Insurance. As a resident physician, there’s a good chance you have health insurance from your employer that is either free or low cost, but health insurance isn’t all the insurance you need. Every resident physician needs long-term disability insurance. You may get a small amount through your residency program but that is unlikely to provide enough coverage. Most residents and attendings will need to purchase an additional individual long-term disability insurance policy. If you have a spouse, kids, or family members that you support financially, you may also need to purchase term life insurance. If you have a side business, you may also need extra liability insurance coverage. Figure out all of the insurances you need and make sure you get them.
Think twice before you buy a house. Owning a home can be a major milestone and lifelong dream, but it may not be wise to do so in residency. You cannot just compare the monthly mortgage price to the monthly rent price and make your decision. There are additional fees and costs associated with home ownership that can be challenging to deal with as a resident. Do what is best for your family, but make sure you consider all of the pros/cons of buying a home before you make the decision to rent vs buy.