When I graduated from medical school and started working as a physician, my goal was to spend less, save more, and live below my means. I knew that in order for me to actually accomplish this goal I needed to take certain action steps. Here are 5 life hacks I used to help me spend less and save more.
1. Set up Automatic Savings As someone who doesn’t always have the most self-control, I knew that if I was really going to start saving more money, I had to do it when I first got payed. If I waited until the end of the month or pay period to save, there wouldn’t be anything left. Thus, I had to do it at the start. I went to the payroll section of my work website and put in parameters to send a percentage of each check to an entirely separate account that I would use to save money and build up my emergency fund. The rest of the money went to my primary checking account at another bank that I used to pay bills and spend as I saw fit. By setting up automatic savings in an entirely separate account, I was able to reach my savings goals, learn to live below my means, and spend left over money in my primary checking account without feeling guilty. For me, it was a win-win. It is likely to be one for you as well.
2. Decrease the Temptation to Spend. As someone who feels the need to “treat myself” more often than I should I had to decrease the temptation to do so. It wasn’t enough for me to say I wouldn’t spend as much. I literally had to remove temptation for me to spend. That meant deleting the text messages from clothing stores about new sales and unsubscribing from department store emails or sending those emails to an account I barely check. It meant avoiding trips to the malls or outlets and trying to pay attention during zoom meetings instead of online shopping during periods of boredom. What things can you do to decrease the temptation you have to spend money?
3. Minimize how much you eat out. If there’s one thing about me, it’s that I love to eat. I appreciate good food and like to enjoy it when I can. Although I cook a good deal at home, there is something about eating a nice meal from a restaurant that really makes my heart smile. If I wanted to save more money, I knew I had to curve this habit. Not eliminate it entirely, but at least minimize how often I ate out, because although it was enjoyable it was costing me a lot of money. I try to minimize brunches and have small gathering with my friends at one of our homes instead. Minimizing how often I eat out has saved me a great deal of money. If you also have a habit of eating out often, perhaps you should consider decreasing the frequency to save more money.
4. Wait before you buy. One of the things that has helped me save a lot of money was minimizing impulse buying. Impulse buying is when you purchase something spare-of-the-moment that you may not need and likely would not have gotten otherwise. In order to decrease this occurrence, I started implementing a new rule of “waiting before I buy.” If I see something I want to purchase that isn’t a necessity, I make myself wait a few days before I purchase it. If I still want the item after a few days, then I purchase it, but I’ve found that oftentimes I don’t need or want the item as much as I thought. Consider implementing a wait-before-you-buy rule to decrease your spending as well.
5. Invest what you spend. This is another life hack I’m planning to implement this year. It’s the art of investing the same amount you spend. For example, if you want to purchase something for $100, then you must also commit to investing $100 or putting $100 in a savings account. Thus, anything you want costs you twice as much. Doing this prevents you from buying things you may not need and also ensures that you build up your savings/investment accounts simultaneously. If you are truly committed to spending less, saving more, and living below your means, this is a life hack worth trying.
What To Do With Your Second Stimulus Check
With the passage of the newest coronavirus relief package, many people may have just gotten another stimulus check. Although there is ongoing debate on whether the amount should be increased to $2000, many people have already seen a direct deposit of $600 into their bank accounts. If you’re a resident physician like me, or a young professional in an entirely different career, you may be wondering what to do with this extra money. Here are some ideas:
Put it in your emergency fund. Many of us were fortunate enough to keep our jobs during the pandemic. We might have also been able to work from home part of the time, which saved us time and money from not having to commute. However, life may not always be this way. None of us can predict the future and although things may look promising, we still need to be prepared in case things take a turn for the worse. Since many of us may still be able to pay our current bills without any financial strain, why not use the $600 to protect ourselves in case things change? General advice is to keep 2-3 months of expenses in an emergency fund for a “rainy day.” For many young professionals, saving $1000 is usually the starting point or first goal. If you don’t yet have this much money in your savings account, then perhaps you should consider using this second stimulus check to beef up your emergency fund.
Pay down one of your debts. It’s January, which means the holiday season has just passed. If you’re like many Americans, you many have spent a little more than you anticipated over the last month. Perhaps you purchased things on your credit card and have been shocked at the pending balance you now have to pay off. Rather than letting interest accrue on the card, which will cost you even more money in the long run, consider using this stimulus check to pay down your debt by paying off one of your credit cards. If you don’t have any credit card debt, consider paying down your car loan or student loans. Either way, if you have debt, using this stimulus check to pay off part of it, is something you should strongly consider.
Invest it using a brokerage account. In case it wasn’t clear, I too got a stimulus check. If you’re wondering how a doctor like me qualifies, it is because the stimulus check income limit applies to the 2019 year and I was a medical student for half of that year. The other reason, is because even now, I am a resident physician who gets paid much lower than attending physicians (because technically speaking, I’m still in training). I explain this because as a young professional with a decent salary, I still have my job and I also have a decent amount in a savings account. I’m already paying down debt and have a financial plan in place. Since many of my basics are already taken care of, one of the things I wanted to do with the stimulus check is invest it. My goal is to use this money to make even more money. Thus, I opened up an investment account to purchase index mutual funds (which is a fund that buys most if not all of the top stocks). Although there are different types of investment accounts I chose to prioritize a Roth IRA to allow the money I make to grow tax free. So instead of picking one stock like apple or google to purchase, I now own a small portion of them all. Some of my colleagues who already max out their retirement accounts have chosen to invest the money into a taxable brokerage account using apps like Robinhood, Stash, or Acorns. Regardless of which brokerage account you choose, investing the stimulus check gives you the opportunity to see your money make even more money in a way that increases your net worth.
Use it to support local businesses. One group of people who may have been negatively impacted by this pandemic is small business owners. Some of them may not have had access to the limited loans given out by the government or perhaps they received that assistance but it has now run out. Due to the nature of the virus, many people are less likely to eat inside of a restaurant and may be tempted to purchase things online from retail giants like Amazon and Target instead of purchasing things in person. Because of these changes, business owners may be experiencing a decline in revenue. One of the things you should consider doing with your stimulus check is trying to support those people. Perhaps you can buy lunch from a local food shop or go visit the bakery nearby?
Give part of it away. One of the things you should consider doing with a small portion of your stimulus check, is buying something for someone else. Perhaps there is a charity you can donate to? Maybe your college is accepting donations for a new scholarship fund? Perhaps one of your close friends is struggling and you can do something nice for him/her? Regardless of which route you choose, why not use a portion of this money, to help someone else? It could be as simple as buying a coffee for the next person in line at Starbucks, or giving a little extra money in your church’s collection plate. Over the next month, I challenge you to do at least 1 nice thing for someone else with your stimulus check. You might be surprised by how good you feel afterwards.
5 Money Lessons from 2020
1. No job is guaranteed. The coronavirus pandemic has impacted our lives in numerous ways, especially economically. Many people suffered job losses they never imagined, pay cuts from a job they once felt was secure, and changes to work that required them to quickly adapt to video calls and zoom conferences. While some people were able to recover quite well, others were not as fortunate. Regardless of which group you identify with, one thing became abundantly clear: No job is guaranteed. With this realization comes the need to plan ahead and be financially prepared for whatever my come our way.
2. Emergency funds are essential. Since no job is guaranteed, the income we rely on each month isn’t guaranteed either. As young professionals with bills and other financial responsibilities, we need to have money set aside in an emergency fund for times like these. Although the exact amount needed may vary based on one’s living expenses, general advice is to make an initial goal of saving $1000 in a savings account. Once you have the amount, then then keep saving until you have enough money to cover 2-3 months of expenses. Ideally, your emergency fund should be in a savings account or money market account that you can easily access.
3. Too much debt can make us vulnerable to catastrophe. One of the best things we can do with our money, besides saving and investing, is using some of it to pay down debt. Whether it’s car loans, credit cards, a home mortgage, or student loans, many young professionals have some type of debt. Since our income may change in unpredictable ways, the more bills and debt payments we are obligated to pay each month, the more we are vulnerable to financial catastrophe if our income decreases. Plus, most people have to pay interest on the debt they owe. This means the longer you wait to pay it off, the more the balance accumulates and grows – costing you even more money. My point? Try to avoid accumulating unnecessary debt and pay off the debt you have sooner.
4. Having insurance is vital. As young professionals, the majority of us are fairly healthy with very few, if any, medical conditions. Thus, we may not feel health insurance is that critical. Or, perhaps you have medical insurance through your job but don’t any other types of protection like disability insurance or life insurance. Rethink this plan. 2020 has shown us that life can be unpredictable, and we never know what may happen. One of the best things we can do is protect our income in case we cannot work for a long period of time (via disability insurance) and leave money for our spouse or children in case we happen to pass away younger than expected (via term life insurance).
5. Multiple streams of income provide added security. Many people had job changes or job losses this year. Even for the few people who didn’t have changes to their income, many of us know other people who were not so fortunate. Having multiple revenue streams makes us less reliant on our main jobs. It also serves as a cushion of financial security that can help protect us in case we experience a change at our main job or a decrease in salary. 2020 has highlighted how important this is. Start thinking about hobbies and other activities you enjoy or are good at, is there a way for you to leverage these things and use them in a way that will make you money? Perhaps you can create another stream of income in 2021.
Financial Planning for the Holidays
1. Get a baseline for where you are financially. Most of us spend a lot more money during the winter holidays than we do during any other season of the year. We may have increased travel costs and higher grocery bills along with more costs related to decorations and gifts. However, unlike previous years, 2020 had been quite different.
The coronavirus pandemic has changed our lives in numerous ways and may have drastically changed our financial outlook. While some young professionals have saved lots of money from decreased entertainment costs or travel expenses, other young professionals might have experienced a salary decrease that may have put a huge strain on their finances. Regardless of which experience you may have had, it’s critical to get a baseline for where you are financially so you know how much money you can afford to spend during this holiday season.
2. Have spending limits for different costs. After examining your income and budget for the remainder of the year, it’s important to make a plan for how much you can afford to spend during the holiday season. Many of us have desires to bless those we love with elaborate gifts this holiday season, but before we overspend, it might be wise to make a spending plan.
When I make my spending plan, I have categories of expenses and an estimate of how much I plan to spend on each thing. I set a certain amount for travel, decorations, gifts, food, etc. That way, when I’m shopping or thinking of gifts to purchase, I have a set limit in mind of how much I can spend. It’s one of the most effective ways I attempt to keep my spending in check.
3. Set expectations with yourself and others. Once you see where you are financially and come up with spending limits, it’s important to set expectations with yourself and others. If you know that money is tight and you don’t plan to decorate your home as much as you have in years past, then be sure to let your family know so that everyone is on the same page.
If you can’t spend quite as much money on gifts for your loved ones, then let them know in advance and think of other ways show them how much you care. If the pandemic has precluded you from traveling to see your family like you normally would, then be sure to find other ways to show your appreciation.
In the Midst of the Coronavirus: Buy Disability Insurance!
As COVID 19 continues to spread throughout the country and leave lasting impacts on our economy, many of us are trying our best to cope with the changes. While this can take a huge toll on our mental health and leave us unsure of our next move, there’s one thing we need to do in the midst of the chaos: BUY LONG-TERM DISABILITY INSURANCE. Here are 6 things you need to know about disability insurance during this COVID 19 crisis:
Disability insurance helps to protect your income. The purpose of long-term disability insurance is to protect your income in case you become disabled or unable to work due to a physical or mental illness. This means if you get sick (i.e. with coronavirus, depression from the virus, or some other ailment) and are unable to work at your full capacity or generate your normal revenue, disability insurance will kick-in and help supplement your income until you recover and get back on your feet.
2. Many doctors are rushing to get it. As healthcare workers, we take care of patients who may have the virus and have come into contact with many others who have been exposed. With the nationwide shortage of personal protective equipment, we may be even more vulnerable to contracting the virus, or being an asymptomatic carrier of the virus than we realize. Due to our increased risk of exposure, many doctors, especially those who work in the Emergency Department or the Intensive Care Unit (ICU) have been rushing to get disability insurance. They want to make sure that their income is protected in the unfortunate possibility that they contract the virus or acquire a mental health disorder from treating others with the virus that could impact their income.
3. Pricing hasn’t changed & there are discounts available. Despite the risk of Coronavirus infection, the price of disability insurance hasn’t increased. In fact, many insurance companies are still offering a 10-20% discount to newer doctors who are still in residency training programs or fellowships. Plus, female attending physicians and a few resident physicians can still get unisex policies that will prevent them from paying more for disability insurance than their male counterparts. Although these unique features may only be available in certain areas from a select group of carriers, they can save so much money that they are worth seeking out. Remember, the cost of disability insurance varies by state as companies have realized that your risk of becoming disabled is increased or decreased if you live in certain areas. A policy in Georgia is much cheaper than a policy in California.
4. Companies are still accepting new applications. I called my insurance agent, Pradeep Audho from PKA Insurance Group, to follow up on some paperwork for my own on disability insurance policy. During our conversation, he mentioned something I found surprising: although more doctors were trying to secure disability insurance, the application process had not changed. There was no hold on claims or freeze on new applications even with Coronavirus spreading. The process itself is similar, if not easier than before. To get started, you just reach out to an insurance agent who can help you determine your desired policy amount and any added protections (or riders) you may need, such as extra payments to cover student loans, partial disability coverage, and a cost-of-living adjuster, etc.
5. The process of approval is easier than before. Despite the chaos, it’s easier to get approved now than it used to be. Once you figure out the payout and features of your desired policy, the insurance company will then assess your risk of getting disabled so they can determine the specific price to charge you for the policy. One way they assess your risk is by inquiring about your medical history. Many companies used to require a detailed medical exam for any policy with a payout greater than $6000 a month. Nowadays, things are much easier. Most people can skip the detailed medical exam and get approved by filling out an online or telephone medical questionnaire for any policy that pays you up to $120,000 a year. While the process could change in the future, as of 3/30/2020 the process is the same as before, if not easier.
6. You can still get coverage, so get it now! The Coronavirus pandemic has been a sobering reminder that our health is not guaranteed. Although we may feel fine today, all workers need some form of long-term disability insurance to supplement their income in case they fall ill for an extended period of time and aren’t able to work at the capacity they used to. Companies are still accepting applications, many agents are offering discounts, and the process is easier than before.. If you’re unsure of where to look you can start with PKA Insurance Group or browse the list of trusted agents on the White Coat Investor page. You can also view prior articles on Disability Insurance and skim the 9 things I learned when I bought my own policy. Although we have lot on our plate, take a few minutes to apply for it now.
***Bonus: You may want to consider term-life insurance as well. As a single person with no children or family members who rely on my income, I don’t yet have an individual term-life insurance policy. However, I recognize that I’m in the minority. Many doctors have children and spouses who’s yearly expenses and savings goals are largely dependent on their doctor income. If this is the case for you, consider term-life insurance as well. Just like disability insurance, you can seek help from an insurance agent who will give you some price quotes. Plus, many policies with a payout under $5 million no longer require a detailed medical exam. The only change in the life insurance process is that insurance companies are taking a little longer before they confirm your policy. As of March 30, 2020, insurance companies may be hesitant to approve your policy if you have traveled internationally within the last 60 days and may require a 30-day waiting period if you have recently been exposed to the virus. Although there are a few more hold ups with term-life insurance than there are with long-term disability insurance, they are both worth looking into. In the midst of this crisis, be sure you’re protecting yourself, and your [future] income.