Congratulations! You’re the owner of a newly minted degree giving you access to a great career in speech and hearing sciences. Now what? The transition from college to a full-time career is exciting, a bit liberating and often overwhelming. Let’s talk about two financial areas where you should focus your attention as you job hunt this summer.
Put thought into your benefits enrollment! Sure, you can just breeze through the signup, but properly maximized employee benefits often offer a head start on a good financial foundation.
One underused tool is the Health Savings Account (HSA) option for health insurance. Not every employer offers an HSA, nor does it fit with everyone’s lifestyle. Using an HSA can provide big advantages, however. Prepare for a higher deductible and more expensive doctor visits than with traditional plans, but inexpensive to non-existent premiums can save you a bundle. The idea involves applying all or part of your monthly premium savings to the HSA account. An HSA offers more control over your personal medical expenses, because you can use the money in the account anytime over your lifetime. Many employers even contribute to the account for you, similar to a 401k. Also, if your balance grows large enough, it’s possible to invest the money. Additionally, it offers some great tax benefits. If you’re younger and healthy it’s worth full consideration.
Seriously consider taking advantage of long-term disability options as well. Statistically, you’re more likely to have disabling event than to die. This is an especially important consideration for audiologists and speech-language pathologists, as you rely on your senses—touch, sight and hearing—to diagnose and treat patients. Loss of these could make doing your job quite difficult.
Life insurance options, on the other hand, I often suggest skipping. If you’ve yet to start a family and don’t have any dependents, you might not need it. If your situation does call for life insurance, however, and if you’re in good health—with personal underwriting—it’s often cheaper to get coverage privately outside of the employer plan.
And, of course, make sure to participate in any retirement program where the employer contributes with you.
The fastest way to jump-start savings now that you receive a real income? Keep living like you’re still in college!
OK, you might not need to be that drastic, but one of the biggest barriers to growing your savings—for emergencies, vacations, major purchases like a house or car—is lifestyle creep: the phenomenon of our lifestyle and spending habits increasing as our income goes up. This is why we hear so many stories of millionaire athletes or celebrities going bankrupt. Or even regular people earning well over $100,000 per year, but saving little or nothing at all.
Coming out of college, you’re probably used to a pretty moderate lifestyle, so try to maintain your modest spending habits. Instead of buying a new car and upgrading apartments right away, for example, work backward from savings to spending. Jot down some savings targets you want to reach. How much do you want in your emergency fund by the end of the year? What should you save toward retirement? Do you have a future wedding or house down payment in mind? Add those numbers together, then subtract the total from your expected monthly take-home—this amount is what you get to spend. Then automate your savings so you don’t succumb to temptation or even have to think about putting money aside!
Consider using different accounts for different goals and schedule automatic transfers each month. Chances are you’ll still enjoy a nice increase to what you’re used to spending.
If not, you have some prioritizing to do. If that’s your case, it can help to talk it out with someone. A good financial planner or just a trusted friend can provide a sounding board and help pose the right questions.
Jacob W. Parish, a certified financial planner™ professional, focuses on helping audiologists, SLPs and other young healthcare professionals navigate financial planning issues. Visit his website, Schooner NextGen or email at firstname.lastname@example.org. Securities and advisory services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC.