From your first piggy bank to your last dollar, saving money at any age is difficult.
But never is it more challenging than at the beginning of your career.
There’s school debt, credit cards, and single life tugging at your new paycheck and often the last thing on your mind today is saving for tomorrow.
As you begin your career as a surgeon or doctor, putting money aside for a rainy day might not have the same gratification as takeout food at midnight, but it is worth it in the long run and it is important.
So here are four simple ways to begin saving now. Think of this as your “savings waterfall.”
- Set up an emergency fund. As you carefully build a budget, it is important to have three months of expenses set aside in a savings account. This is the account you should tap into when you suddenly have a medical procedure to pay for, or you chip a tooth, or maybe the refrigerator or your car needs to be repaired.
- Match that 403(b). It is critical to find the “free money.” Your employer’s retirement plan will likely have a “matching” component. If so, make sure you contribute enough to reach that match. This money is usually pulled from your check pre-tax.
- Set up a Roth IRA. Coming out of school, you are in a lower tax bracket because your income isn’t high (yet). Now is the time to set up (and begin accumulating assets) in a tax-free bucket. Growing these assets long term is incredibly valuable.
- Create a taxable brokerage account. This is both your mid-term savings fund and your long-term emergency fund. This is how we are going to save for things like a down payment for a house, an engagement ring, and your wedding, but also have enough for a down payment for a car. I recommend tagging this account with “House Fund” or “Engagement Ring” so you will be less likely to dip into it when it isn’t an emergency.
It is critical that you don’t’ treat your retirement savings like a piggy bank. There are hefty tax penalties if you withdraw money from your 403(b) because you needed a new television or furniture for your apartment.
We are all human. It is important to be disciplined at a time in your life when it is easy to be undisciplined. When I graduated college, I can remember buying my friends more than a few rounds of drinks, but when I checked my balance at the end of the month I realized I spent $500 just “grabbing a beer with friends.”
Everything adds up and I’m certainly not saying that you shouldn’t enjoy this time, but it’s the little expenses that will get you.
Small spending snowballs.
Having a credit card is terrific because of the points and rewards you can earn. For example, I was able to pay for my honeymoon with points. But it is critical to pay off your credit card each month or the interest will accumulate.
Remember: Getting yourself in a good savings habit will pay off. Consider direct depositing funds into different accounts so that saving money isn’t a choice, it is just part of your routine.