Last week in my Monday post I shared a little bit about how family physicians earn money. Medicine is kind of odd in that doctors spend a long time in training, but enter the field at the same earning potential as every other doctor- whether you have 25 years of experience or it’s Day 1, the billing codes are the same. Medicine is also unique in that newly graduated physicians, who are in their late 20’s or older, have most often never had a long term job. This is a list of ten things I learned when I started my first real job and was catapulted from trainee to maximum earning potential, and really started thinking about how I spend and save.
1. Pay yourself first. I have said this before but if you are responsible for your own paycheque I think it’s especially important to put money aside for things like savings and necessary expenses before it can be gobbled up by other things. We use auto-deposits to our mortgage, retirement and savings accounts (via WealthSimple!), mostly because I know that if I have to log in every month to make those transactions, there are going to be times I would be tempted to spend instead of save.
2. Avoid “lifestyle inflation“. This is the idea that as have more money to spend, your lifestyle adapts to that. Things that start out feeling like luxuries can begin to feel normal, like ordering pizza every Friday night or buying a latte before work. Usually your budget also has to inflate to accommodate the new purchasing, and it can be hard to reverse the process.
3. Set up a system. Like I mentioned above, I don’t really want to trust myself to always make the best financial decisions. Using some tips from my Worry Free Money book, I’ve set up our banking so that I can’t access more than I planned. I’ll explain. Paycheques get deposited into an account that is not linked to our checking account. Every payday, I transfer a certain percentage (what % you choose will depend on how much you earn and what your obligations are) to our checking account – this is money we can spend. From checking, we have auto-deposits to our mortgage and savings etc. The other part of the initial payment sits in a high interest savings account, which is purely additional savings. Every few months, after I pay an income tax instalment (which should be a tip in itself- remember your income taxes!), we look at what is left and put it towards something else, which brings me to…
4. Accelerate debt payments. The more quickly you can pay off debt, the less interest you will accrue. My mind was blown the day I plugged our mortgage numbers into a calculator. Paying weekly (52 payments per year) versus monthly (12 payments per year) would save us thousands of dollars over the life of our mortgage, even with interest rates being pretty low these days. Same for pre-payment privileges, which allow you to put extra money in (if/when you have it) without penalty.
5. Plan (the next 5 years). I think that whether your are self-employed or not, it’s good to have a rough idea of what financial hurdles will happen in the next five years. I think we’ll need to get a vehicle at some point, though we’ve been resisting. I also plan for longer absences from work, like vacations and holidays, when I won’t earn money. This helps us figure out what our savings goals should look like.
5a. Try to think about the things you can’t plan for! Remember some things will come up. You will need dental work or glasses or a massage, so try to make sure that you are planning for that. Or, at the very least, that your emergency savings are robust enough to handle it, though personally I think that this is a bit inevitable (whereas emergency savings are for true emergencies).
6. Plan (the next 25+ years). While a rough idea of the next five years seems conceptually straightforward to me, I find retirement planning harder. When will that be? Where will we live? What will our lives look like? For now, I think it’s ok to have a rough idea of this, and plan for the top end. You can always slow down your saving later. I have looked at some online calculators for retirement in Canada, but this is where I think personal financial advice can really help. Either way, it’s good to have an actual number as a monthly or yearly savings goal, so that you can:
7. Be clear with yourself. One of the things that used to contribute to my vague anxiety around money was not knowing if I was doing a good job. Being in school for a long time primed me to seek validation in some ways- looking for my “gold star”. In reality though, no one (except me and J!) cares if I save a lot or a little. Constantly wondering if we were doing enough was keeping me awake at night, but clear numbers (setting goals for monthly savings and various spending categories) made me feel a lot better.
8. Research your costs. One of the best ways I’ve saved money in the last two years is by not going with the default insurance that’s suggested after graduation. I had an insurance broker look into various options and was able to save a boatload on life/critical illness/disability insurance (which you should think about if you are self employed!!). We have also saved money using a mortgage broker instead of traditional bank.
9. Leave time for “life admin”. Sometimes I forget that it takes a certain amount of administrative time to do all this (plus manage my other work admin, like emails/billing/scheduling/evaluating students/etc). When I first started I didn’t leave a lot of room in my schedule for it, but now there is a block of time (hello Monday afternoon!) that I have set aside specifically for it.
10. Give yourself space. This last tip is (I think) the most underrated. Whether you are also in your first few years of self employment or you have worked for the same company for 25 years, life can be stressful. It’s easy to fall into the trap of working a lot, but scheduling regular vacations or just time away is so helpful, especially with a job that is both mentally and emotionally difficult.
Reading back over these, I think (I hope!) I would have figured out most of the whether I was self-employed or not, but I hope they can be helpful for everyone. What would you add? xo