By Melissa Wirkus Hagstrom, contributor
Nurses know that routine medical visits and checkups are an important part of maintaining one’s physical health, but what about maintaining your financial health? According to a recent study conducted by Fidelity Investments, more than half of nurses lack confidence in making financial decisions, and 4 in 10 attribute this to the fact they don’t have enough time to focus on them.
Fortunately, a little education and financial planning can go a long way toward increasing your confidence and getting your money matters in top shape.
Guy Baker, CFP, MBA, MSFS, financial advisor with Wealth Teams and a contributor with NerdWallet.com, a website focused on financial education and empowerment, suggests three steps that nurses can take to prepare for retirement and improve their financial health:
1. Know your retirement number
Understanding just how much you will need for retirement and pinpointing “your number” is one of the most important steps you can take to improve your financial health. Once you’ve identified your retirement number, you can create monthly savings, investing and debt-payoff plans that will help you achieve your goal.
“A rule of thumb is that most people will retire around age 70, given the nature of longevity and not being able to save much during the early years,” Baker said. “We use 20 times whatever your expected retirement benefit is to calculate your number. So if you want to retire on $50,000, you need $1 million. But you can subtract off of that the present value of your Social Security benefits.”
2. Save, save, save
Once you’ve identified your retirement number, the second step to financial health is knowing how much you need to save and then putting aside the appropriate amount each month. The Fidelity study, which surveyed 365 nurses in October 2014, found that 84 percent of nurses are proactively saving for the future. This is great news, said Baker, adding that it’s important to be saving the right amount in order to meet your financial goals.
Although each situation is different--and the amount you need to save will depend on a variety of factors including your retirement number, age and income--a typical employed health care professional should be aiming to save approximately 12-18 percent of their income each month, according to Baker.
When it comes to the age-old question of whether you should pay off debt first or save for retirement, he chooses the latter: “I always think [a person’s’] highest priority needs to be putting as much away for retirement as they can, and then work on the debt with their surplus.”
3. Seek guidance to understand investments
“Once you’ve completed the first two steps, the question becomes where to put the money and how do you invest it,” Baker explained. This is where education and guidance come in, and nurses may want to look to their employer to start. Fidelity found that although two-thirds (67 percent) of nurses are making informed choices about investing their money and have an age-based asset allocation, 62 percent of nurses who have access to retirement guidance at work don't take advantage--with one-third of those nurses citing lack of time as the biggest obstacle.
This means that nurses have a lot to gain when it comes to financial education. In addition to your employer, there are many places to learn about financial planning, such as books, webinars and free information sites like NerdWallet, where you can search for information based on topics and submit questions for certified financial professionals to answer.
“There are three fundamental keys to understanding investments: one is that you need to understand the fees and expenses associated with your plan, you need to know how to diversify and you need to rebalance,” Baker said.
Making financial health a daily discipline
Of course, financial fitness isn’t just about retirement; on a day-to-day basis it’s also important to make good financial decisions about things like keeping to a budget, maintaining a good credit score (Baker likes the free website CreditKarma.com), and minimizing debt.
“If your credit score is above 720, there’s probably not a reason to worry about it,” he said. “But the things that affect it are capacity, utilization and timely payments. Nothing can hurt your credit score worse than being late with your payments. But your credit score is a function of your credit capacity and your utilization. So if you are using more than 30 percent of your credit capacity, then you are going to hurt your score.”
Pictured: Guy Baker, CFP, MBA, MSFS, a financial advisor with Wealth Teams, based in Orange County, California.
Looking for a new job with greater professional and personal rewards? Search our NursingJobs.com database for thousands of current opportunities in travel nursing, per diem or permanent staff positions.
© 2015. AMN Healthcare, Inc. All Rights Reserved.
Page 'Breadcrumb' Navigation:
Site 'Main' Navigation: