Nurses and Financial Freedom

klone, MSN, RN · Apr 22, 2015

Should I put my savings on hold? Right now I put 50% of my weekly income into savings and then 50% into my loans (after the weekly payments are taken out and after taking $100 for myself). I'm like really trying to work this out because I want to be done by the end of this year. lol

If you're following the Dave Ramsey plan, he recommends immediately setting up an emergency fund of $1000 before you do anything else. If you want to be conservative (and if you're single, I would recommend it - a 2-income home can be a little more loose), then I would recommend first setting aside 3-6 months of bare bones expenses. Once you have that set up, then stop putting into savings altogether and focus 100% of your income into paying off your debt. For motivation, start with the smallest debt first (which flies in the face of typical recommendations of paying off highest-interest debt first). It's called the "debt snowball" which you can read more about in "Total Money Makeover"

Soliloquy, MSN, APRN, NP · Apr 22, 2015

If you're following the Dave Ramsey plan, he recommends immediately setting up an emergency fund of $1000 before you do anything else. If you want to be conservative (and if you're single, I would recommend it - a 2-income home can be a little more loose), then I would recommend first setting aside 3-6 months of bare bones expenses. Once you have that set up, then stop putting into savings altogether and focus 100% of your income into paying off your debt. For motivation, start with the smallest debt first (which flies in the face of typical recommendations of paying off highest-interest debt first). It's called the "debt snowball" which you can read more about in "Total Money Makeover"

Hmmmm....I'm thinking about this. I have more than 6 months of savings already not including my investments in stocks. But I wasn't sure. I guess I could do more. I'll try it this week.

dirtyhippiegirl, BSN, RN · Apr 22, 2015

Yes, my husband and I have financial freedom through sheer luck and a few good choices. No student loans since both of us had physician parents who paid for our schooling. (We also both scored high enough on the ACTs to get substantial scholarships.) We chose wisely with career decisions and now make low 6 figures combined afer taxes. We live in a low cost of living flyover state with no kids. Our house was bought with the idea that the mortgage plus basic bills could be afforded on one income. We have a little under a million dollars invested and another 100k in solid savings because both of our mothers died a few years ago and left six figure inheritances. (Helps to have rich parents!) I am 29, he is 30.

We do eat out a lot, have teh best cell/data plans and electronics, and my car was bought new. Right now we are both investing roughly 10% of our paychecks into 401ks.

Luck has afforded me the freedom to buy what I want, but not everything I want. Wise choices hopefully mean I won't be working the floor at 70.

Soliloquy, MSN, APRN, NP · Apr 22, 2015

Yes, my husband and I have financial freedom through sheer luck and a few good choices. No student loans since both of us had physician parents who paid for our schooling. (We also both scored high enough on the ACTs to get substantial scholarships.) We chose wisely with career decisions and now make low 6 figures combined afer taxes. We live in a low cost of living flyover state with no kids. Our house was bought with the idea that the mortgage plus basic bills could be afforded on one income. We have a little under a million dollars invested and another 100k in solid savings because both of our mothers died a few years ago and left six figure inheritances. (Helps to have rich parents!) I am 29, he is 30.
We do eat out a lot, have teh best cell/data plans and electronics, and my car was bought new. Right now we are both investing roughly 10% of our paychecks into 401ks.
Luck has afforded me the freedom to buy what I want, but not everything I want. Wise choices hopefully mean I won't be working the floor at 70.

You're very blessed dhg :)

Jules A, MSN · Apr 22, 2015

You're very blessed dhg :)

She is blessed but it sounds like they are appreciative and sensible also which is even more important.

meanmaryjean, DNP, RN · Apr 22, 2015

I'm impressed with the sensible advice you're getting here. Mr. MaryJean and I have (almost- two years to go!) put our four kids through college debt-free, paid cash for my BSN, MSN and now dnp programs, owe zero consumer debt and are four or five years away from paying off the mortgage.

Forgive me the following soapbox:

We've owned one new car in our 40 years of marriage, mostly we drive older, running junk type cars. We have taken three vacations out of town with the family in those years - total. Two to Disney and one to the East Coast. I've never had a manicure or pedicure, get my hair cut at Great Clips and brew my own coffee.

It breaks my heart to see some of my younger co-workers (yeah, I still work in PICU) with $60-70K in student loan debt, making minimum payments and driving unreliable cars, living in crappy apartments, yet coming in every morning with a $6 Starbucks drink in their freshly manicured hand. COMPLAINING about their debt- how they'll never finish paying it off, etc. I want to shake them! It's all the little things you spend money on that keep you poor.

Soliloquy, MSN, APRN, NP · Apr 22, 2015

Maryjean, I think it's those little things that I need to be more conscious of. The vast majority of my spending goes towards buying food and I recently read an article that said that Americans are losing a good chunk of money to eating out at restaurants. I am no exception so I recently created a plan/budget to try and reduce my. spending. I stocked my fridge with the foods I like to eat from the grocery store but now I have to commit to eating what's in there as opposed to taking myself to the drive thru or to getting one of those overpriced Starbucks passion tea lemonades. It can be done. You guys are proof :)

Wrench Party · Apr 22, 2015

For me, it was all about buying a house we could afford and putting enough of a down payment on it (20%), and having one car we bought cash for. We put money into our 401(k)s, I pay extra on the mortgage every month (a few hundred), and I'll have my student loans paid off in another few years paying a modest amount. We'll pay our mortgage off in about 15 years once I get my student loan debt knocked off the list. I try to put about 10% of my money away in savings per month.

Besides that, we live what I consider a very nice lifestyle- my husband and I have employer-sponsored health insurance, we go out to eat several days a week, I board a horse, I have a gym membership, a cleaning dude, and we're continuously doing projects around the house (setting up a garden, raising fruit trees, setting up a music studio). We could live and have lived much cheaper, but it's nice to have the income for hobbies.

allnurses Guide · Apr 22, 2015

Financial freedom to me is having no debt or financial obligations.

Well you will never have no financial obligations but the biggest mistake young people make is getting caught up in a lot of revolving high interest Debt from credit cards.

My husband and I make good money but live well below our means. We live in the house he grew up in and in California the taxes his parents paid when the house was purchased grandfathered over because it was a parent to child transfer. So we are paying taxes on the assessed value of the home from 1964. We have cars that are a bit older but well maintained and intend to drive them until the wheels fall off. We spend very little on entertainment. No Stabucks - I can make a Whole pot at home for the cost of a tall latte. We save like crazy. We have enough in the bank to survive on for two years should one or the both of us should become unemployed. We actually saved enough to pay for my BSN in full with no student loans.

You can do this and you don't have to live on Top Ramen either. Just shop mindfully and use adds and coupons.

Hppygr8ful

ThatBigGuy · Apr 22, 2015

So let's put some numbers to your situation. You have $26k to pay off. You're currently paying ~$800 a month, which is 50% of your discretionary spending after bills and your $100. The other 50% is going towards savings. You currently have at least 6 months of expenses saved up.

Dave Ramsey teaches that you start with a $1000 emergency fund, then start hammering at your debt. $1000 isn't very much, and will make you uncomfortable, but that discomfort is what's going to push you to keep paying on your debt. I would then take the rest of your 6 months of expenses (minus the $1000) and write one big check to your student loans. Maybe you have $8k to use? $6K? $12k?

Let's say you can write a check tomorrow for $6k. Now you're down to $20k. You stop saving and investing temporarily, and add that 50% to your loan payment, which doubles your monthly payment amount to $1600. That alone puts your payoff at a little over one year from now. Now, pick up one OT shift per pay period for the rest of the year, let's say 16 shifts at time and a half with a base pay of $30 an hour (for a total of $45 an hour). 12 hours times $45 an hour is $540 bucks per pay period, or an extra $1000 a month. When you factor that in, now you're looking at a monthly payment of $2600 a month.

Now we have a plan: write a check for $6k tomorrow, stop saving 50% temporarily and throw that at the debt, and work one OT shift per pay period. $2600 a month pays off $20k before Christmas. Say this out loud: "For Christmas, I will be debt free!"

Once you get through this, you'll have developed quite a strong sense of financial responsibility. If you just pay yourself that original $800 a month, you'll have $9600 a year that you can do whatever you'd like with. When you're wondering what to do with the extra $10,000 a year you have laying around, that's when you know you've found financial freedom.

Soliloquy, MSN, APRN, NP · Apr 22, 2015

So let's put some numbers to your situation. You have $26k to pay off. You're currently paying ~$800 a month, which is 50% of your discretionary spending after bills and your $100. The other 50% is going towards savings. You currently have at least 6 months of expenses saved up.
Dave Ramsey teaches that you start with a $1000 emergency fund, then start hammering at your debt. $1000 isn't very much, and will make you uncomfortable, but that discomfort is what's going to push you to keep paying on your debt. I would then take the rest of your 6 months of expenses (minus the $1000) and write one big check to your student loans. Maybe you have $8k to use? $6K? $12k?
Let's say you can write a check tomorrow for $6k. Now you're down to $20k. You stop saving and investing temporarily, and add that 50% to your loan payment, which doubles your monthly payment amount to $1600. That alone puts your payoff at a little over one year from now. Now, pick up one OT shift per pay period for the rest of the year, let's say 16 shifts at time and a half with a base pay of $30 an hour (for a total of $45 an hour). 12 hours times $45 an hour is $540 bucks per pay period, or an extra $1000 a month. When you factor that in, now you're looking at a monthly payment of $2600 a month.
Now we have a plan: write a check for $6k tomorrow, stop saving 50% temporarily and throw that at the debt, and work one OT shift per pay period. $2600 a month pays off $20k before Christmas. Say this out loud: "For Christmas, I will be debt free!"
Once you get through this, you'll have developed quite a strong sense of financial responsibility. If you just pay yourself that original $800 a month, you'll have $9600 a year that you can do whatever you'd like with. When you're wondering what to do with the extra $10,000 a year you have laying around, that's when you know you've found financial freedom.

That sounds amazing and is exactly what I was thinking about today. (p.s I started reading Total Money Makeover). Only $1k in my emergency fund makes me VERY nervous because: 1. I'm a travel nurse and just don't feel it's safe to do that now and 2. 1k is no money. lol So I'm thinking I'll keep 3k in savings and proceed from there. I'd feel a little more secure but still motivated to get it out the way.

Thank you!

joanna73, BSN, RN · Apr 23, 2015

Consider this: one Starbucks Coffee at 6 x 5 days per week is 30/ week or 120 per month.

Add that to the other take out foods.....it all adds up.

A book I found very interesting is called Early Retirement Extreme by Jacob Lund Fisker. Although some of his ideas are radical, the premise of saving and learning to live below your means is valid. He advocates for this lifestyle in order to quit the working grind and find other pursuits that are fulfilling. The more you spend, the longer you'll need to work.

I would also agree that you should put more money towards your debt to get rid of it. You are paying interest on that money. Halt the savings for now. When I was paying my loan, some months I put 2000 on it which hurt but this was financially worth it.