By Don Sadler
Financial planning is a task that some nurses neglect — to the detriment of their personal financial health. Nurse.com spoke with author and financial adviser Judith McNiff, CFP, of Wells Fargo Advisors LLC, and Michael McNulty, executive vice president, financial services, for OnCourse Learning, to get financial planning advice especially for nurses.
What is your main piece of personal financial planning advice for nurses?
A: For some people, financial decisions are based on emotions. To take emotions out of the equation, put a financial plan in place so you have a guide to follow. Be sure to pay yourself first by setting aside money for an emergency savings fund or for retirement. Finally, write down what you’re spending — make a budget. Running your household should be like running a business.
What are a few ways nurses can increase their savings?
A: It starts with setting savings goals and financial priorities — this makes it much easier to get started. For example, your goal could be to start out by saving 5% of your before-tax wages early in your career and then gradually increase this as your earnings increase over time. By the time you’re in your 30s or 40s, your goal could be to save 10% of your before-tax wages.
Next, set up automatic transfers of money from your checking account into your savings or retirement account. This way, you’re less likely to spend money you want to allocate to savings. Check your savings progress every month and watch your balances grow. Also, your employer might match your contributions to retirment accounts, which is free money. Even if you don’t receive an employer match, you should still make regular contributions to your employer’s retirement plan.
How can nurses become more confident when it comes to personal financial planning?
A: A lack of confidence in financial matters may lead to poor investment choices and performance, and thus failure to meet your financial goals. Working with a financial adviser is one way to increase confidence and results. But don’t wait until you’re ready to retire to talk to a financial adviser. That’s like saying, “My house is on fire — I better go get some homeowner’s insurance!” Instead, meet with an adviser early in your career to create a long-term plan that will help you meet your retirement savings goals.
Why is it important for nurses to build an emergency savings fund?
A: You need to be ready when life happens. A sound financial practice is to save up three to six months’ worth of living expenses in an easily accessible account in case of a financial emergency — for example, a job loss or major home or car repair. Then you won’t have to rely on credit or dip into your retirement account.
Avoiding money potholes
McNulty offers suggestions for addressing what he views as the top three financial planning concerns for nurses today:
• Outliving your savings — Many Americans are living much longer today, but most retirement plans are not built to sustain this longevity. When you consider the rising cost of healthcare and the combination of inflation and decreasing Social Security benefits, a significant percentage of baby boomers are not prepared for the entirety of their retirement.
• Not starting retirement saving early enough — The average 60-year-old American has saved just under $200,000 for retirement. However, normal withdrawal practices applied to this nest egg would supply only $7,000 per year of living expenses — this is simply not enough. By taking early advantage of the compounding nature of tax deferral and the benefits of dollar cost averaging, nurses can significantly increase their retirement savings.
• Not understanding your investments — The general public, including nurses, has been wary to jump back into investments since the dot-com bubble burst. However, there are myriad investment products that offer safeguards and benefits in both up and down markets. Work with a financial adviser you trust and invest for the long term.
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Don Sadler is a freelance writer.
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