1. No Emergency Fund. An emergency fund is critical for unexpected expenses, such as low census days, medical bills, or car repairs. Without an emergency fund, you may have to rely on credit cards or loans. And borrowing leads to more debt. A sound emergency fund has savings for at least 3 to 6 months of expenses in a separate account. Consider opening an account at another bank and make it difficult to withdraw the money. Start small and set aside a percentage of your monthly income with a goal to gradually increase the amount over time.
2. Credit Card Debt. Credit card debt is expensive, especially if you keep a large balance. And credit card debt can quickly spiral out of control. Aim to pay off your balance in full each month. One strategy is to pay use the snowball effect. You start by paying off the smallest balance first. Then take the amount you used to pay on the first credit card and apply it to the next lowest balance until it is paid off. Keep applying the earlier payments to all your credit cards and loans and soon you will be debt free! Also, avoid using credit cards for non-essential purchases. Another tip is to shop around for the lowest rate possible. Depending on your credit rating, you may be surprised you qualify for very low interest rates.
3. Not Saving for Retirement. Nursing is hard work. Add the stress of high patient ratios and working short too often and you may consider retiring every day! And even though retirement may seem far away and something you can think about later, it’s important to start saving early for many reasons. The most important reason is the potential for compound returns. Compounding means having your money work for you. Another reason to start saving early is because retirement may last up to 40 years or more, depending on the age you retire. Medical advances and healthy lifestyles create an opportunity for people to live longer. And that means living longer in retirement. Gone are the days of our parents who worked one job for 60 years and retired with a great pension. The opportunities for nurses are endless and it is common and possible to follow the money and change jobs often for better pay. To fix this, consider opening a retirement account such as a 401(k), 403 (b), or IRA. And take advantage of matching contributions from your employer, if available. Be sure to contribute enough to get the full benefit. Talk with your Human Resources department to learn about the retirement benefits available to you. And don’t worry about changing jobs. You can roll over the money into another retirement account within 60 days without penalties.
4. Not Understanding Your Benefits. Employers often offer nurses great benefits to stay competitive. When you are considering a new employer, take time to review the benefits package available to you. Talk with the Human Resources department about any benefit that needs clarifying. For example, the employer may have different levels of health insurance or a Health Savings Account. Always ask about the retirement plan and whether the employer offers matching contributions. Also, if the employer offers matching contributions, ask about the vesting schedule and when the matching begins. This varies among employers.
5. No Budget. A budget is like a nursing care plan. A budget keeps you focused and guides you towards your outcome, your financial goals. Without a budget, you can never be sure where your money is going. And while you may pay your bills on time, a budget helps track where your discretionary income is spent. When you use a budget, you will know the amount of money that is left over after your bills to put towards paying off debt and saving for retirement. Consider creating a simple budget. Write down all your expenses for the month by their due dates and total them. Then check your pay stubs for the month and total them. Subtract the lower amount from the higher amount. Hopefully your income is higher than your expenses and you can use the extra money to pay off debt or save. But if your expenses are higher than your income, don’t fret. Look for opportunities to reduce some nonessential expenses. For example, if you eat out every day, consider cutting back to every other day and bringing your lunch to work or cooking at home. Or look for ways to reduce credit card debt. Don’t eliminate discretionary spending all together. It is okay to reward yourself. But if you are an impulse spender, consider the 24-hour rule. Simply wait 24 hours before making the purchase. After 24 hours if you still need or want the item, buy it, if it is within your budget!
By avoiding these common mistakes and taking steps to improve your financial wellness, you can reduce stress. You can also achieve your financial goals. Financial wellness is a journey, and it’s important to be patient and consistent in your efforts. By following the recommendations to fix these 5 common mistakes, you will take control of your finances and start your journey towards the retirement lifestyle of your choice! Want to learn if you are ready for retirement? I encourage you to take the Retirement Readiness Assessment.
Georgene Collins, RICP®, RN, PhD, MBA is a registered nurse turned Financial Advisor at Airey Financial Group. Georgene helps other nurses take control of their finances and prepare for retirement. Georgene began her career with Airey Financial Group in 2017 after retiring from 30 years in healthcare.
Georgene holds the Retirement Income Certified Professional (RICP®) designation from The American College of Financial Services. She holds health and life insurance licenses and a long-term care certificate in Indiana and Illinois. Georgene is a Registered Representative and Investment Advisor Representative and has earned the FINRA Series 63 and 65 registrations.