From Resident to Retiree and Every Step in Between
Why Should You Have a HIGH Early Savings rate
It’s no secret that medical school is expensive and that many medical professionals graduate with staggering amounts of debt. However, the best financial roadmap for young doctors and medical workers is not just about paying off your debt (though that is important), it’s also about setting yourself up for the future you envisioned when you first decided to pursue your calling. One of the best ways you can do this is to make sure that you are building your nest egg even in the early stages of your career. By saving early and maximizing your contributions you can make a big difference in your freedom to pursue your goals down the line.
Savers Can be Choosers
Making saving a priority early on can have a huge impact on the choices you will be able to make later on. Say you want to retire early, change careers, or found a non-profit. If you start saving early, you have more freedom to choose whether to be aggressive or conservative in your investments. If you start too late, you may no longer have that option.
Avoid the Creep
Making more money often leads to higher spending, and lifestyle creep can negatively impact your ability to save effectively. It is much easier to avoid growing into your income that to cut back on your standard of living after the fact. Just because you spend more money does not mean you will be happier. In fact, studies have shown that once your income is within a reasonable living standard (about $75K+ per year in the US) little additional happiness can be derived from higher spending.
If you start off by setting aside a large portion of your income it will prevent you from falling victim to lifestyle creep and make it much easier to maintain a higher savings rate into the future.
Compound interest and time are an investor’s best friends. The earlier you begin, the more heavy lifting your portfolio can do for you, and the more time your savings will have to generate interest. Even if you are not planning to retire early or looking for financial independence you can greatly benefit from having a nest egg which over time begins to build itself rather than rely on forced saving.
Take Your Pick
It can be difficult to decide which type of accounts you should be using, or whether to save your money or to pay off your debts. If you make a point of saving a large amount from the beginning you don’t have to make so many difficult choices. You can pay your debts, save for a downpayment, and max out your retirement all at once.
It is never easy to save, but starting late can make reaching your financial goal finish line much more difficult. The sooner you begin the sooner you have to opportunity to acquire the knowledge you need to build a plan that works for you and the longer you will have to reap the benefits. To learn more about your options and how to create the right plan for you, contact us today.
About the Author
As co-founder and Chief Investment Officer, Mike brings real-time investment management experience to clients. Prior to forming FC Wealth Solutions, he spent 15 years working on Wall Street as a trader and portfolio manager for some of the industry’s most well-known firms. His previous experience at Morgan Stanley, Royal Bank of Canada and Hutchin Hill Capital gave his valuable experience in institutional money management. His focus on continual research helps him identify macro trends and strategic investments for client portfolios. His research has enabled him to develop many of the rule-based investment strategies the firm uses for managing client assets and monitoring the markets.