This plan was originally prepared for a single, twenty year old, brand new graduate from nursing school.
About 9 years ago I was training a new nurse and 2 days into her orientation I made her pull up her retirement account. I insisted that she put 6% (our employee match) into her retirement 403b. (I had recently read, David Bach, Smart Women Finish Rich.) She resisted and said she couldn’t because she just bought a new car. I said she had no choice and she was foolish to throw away free money. At this point several nurses had gathered around the nurse’s station. I told her to try it out for 1-2 months to see if it made that much of a difference in her paycheck. She agreed, I think pure peer pressure made her do it. I also set her up for automatic annual increase of 1%. I told her I did it, but I was pretty confident she had no idea what I was talking about. I did this with EVERY single new nurse I was assigned to. (Even the older ones!)
Fast forward 9 years. I ran into this nurse in the hallway, she was recently married and her husband and her were reviewing their retirement plan. She was shocked to see that she was putting in 15% to her 403b and she had accumulated nearly $100,000. She thanked me profusely and called me a hero (she didn’t actually say hero, but she should have) and now she is well on her way.
Here’s how to get started.
I believe in a combo approach to accumulating wealth. I like to combine the Dave Ramsey approach, David Bach’s Finish Rich approach and a little travel hacking. As a nurse you have a huge opportunity for overtime to jump start your plan.
The focus of this plan is for the brand new nursing graduate.
Step 1: Set up your pre-tax retirement account. Set up a percentile that covers your employee match! Set up an automatic rate increase annually. You can start at 1% this is incredibly important if you start to loose momentum. This way the system will be working in your favor without you messing it up.
Step 2: Develop a budget! This isn’t hard, what’s hard is having to putting groceries on a credit card you can’t pay off. Start small: prepare a budget with recurring expenses only. This includes rent, mortgage, insurance, cell phone, etc. This lets you know how much you have left for food, gas, clothes, travel, etc. After you’ve identified your monthly budget, go to Mr Money Mustache and put in your baseline needs for one year. This does not include your savings only your recurring expenses and variable expenses (food, clothes, gas, travel). This number is your big picture goal.
Step 3: Save $1,000, this is EMERGENCY money only! This is not emergency Outlet Mall shopping with your friends. This is your car broke down and you can’t get to work money.
Step 4: Hopefully, your new hospital has school loan forgiveness. If not, it’s time to gather up all of your debt, Dave Ramsey style! The debt snowball is one of the most powerful tools I’ve seen my friends use. Every single extra shift goes to the lowest balance. If you are more analytical and less emotionally driven, calculate how much money you are paying in interest every month. If this doesn’t motivate you, I don’t know what will.
Step 5: Debt paid off, even your car, it’s time to move into the wealth building phase. Go back to your pre-tax retirement account and MAX IT OUT! The 2019 maximum is $19,000.
Step 6: Max out your health savings account (HSA) if you have one available, $7,000.
Step 7: I recommend MAXING out your Roth IRA. Max for 2019 is $6,000. I love hearing when new nurses tell me that they started with $20 per month just get the ball rolling. Then they plan on increasing it with pay raises or dumping in a little extra with every overtime shift.
That’s it, easy peasy! The hardest part of the program is Step 2. Often times people are paralyzed with fear of finding out how much they are spending.