At Lume we believe that every nurse has the tools to build wealth and become financially independent. In part one of this series, we started with knowing about budgeting and credit cards because you can’t invest if you have no money. As someone just entering the nursing workforce you are uniquely positioned to make a few simple moves that will have you financially set for life.
You may have heard that the only way to build wealth is to further your education, but that’s not necessarily true. Even as a new grad nurse with a lower income than seasoned nurses, you still have many available options. Here are some tips that will set you up for financial success.
The Best Time is Now
Wealth building is all about time in the market, so start now! The longer your money is invested, the more it will grow thanks to compound interest. Some call this “interest on interest”, as it is the interest (money made) off of your original investment (savings) plus the interest you earn.
You’ll want to ensure that you are investing in low-fee index funds. Reach out to the customer service of your retirement plan or brokerage account, so they can help you find these funds!
When it comes to investing, there is a step by step process you’ll want to follow. Rather than starting everything all at once, you’ll prioritize your investments, similar to Maslow’s hierarchy of needs. Consider this your investment hierarchy:
1. Invest up to the max for 401k/403b
As a staff nurse, one benefit of the job is access to 401k/403b investments—even for new grad nurses. Many hospitals will provide a match. This is free money, where they literally match the amount you invest, up to a certain threshold. So, find out what your hospital or company offers and make it your first goal to invest up to the max amount of that match.
2. Max out a Roth IRA
Travel nurses- you’ll start here and after the match is met for staff nurses you’ll want to do this next! Individual Retirement Accounts (IRAs) are investment accounts designed for long-term savings that anyone can open as long as they have an income. You’ll want to invest in a Roth IRA, because this money can be withdrawn tax-free during retirement. Learn more about Roth IRA’s here. Max this out before moving on to the next step.
3. Max out a 401k/403b and 457 (if available to you)
The yearly contribution to these accounts is currently $19,500, but goes up to $20,500 in 2022. This will not only consistently save money for your retirement years, but also decrease your taxable income. This will drop your tax bracket and help you build wealth simultaneously.
4. Invest in brokerage accounts
These are accounts that allow you to buy and sell stocks, mutual funds, bonds, and exchange-traded funds (ETFs). Like an IRA, they are not tied to your employer and will follow you wherever you go.
If you have student loans, there are a few things you need to know:
- How much money do you owe?
- Are your loans private or federal?
- Is your loan on the right payment plan for you?
There are times when it’s in your best interest to pay down student loans quickly. Other times, it’s to your benefit to pay as little as possible, through income driven plans that offer forgiveness. There are a few kinds to choose from, but all share the attractive benefit of forgiving student loan balance after 20-25 years. In order to determine what the best plan is for you, you’ll need to find out more information about your student loans, answering the questions above.
Lume can assist you through this process by providing an interface that streamlines loans all on just one platform! You’ve got enough going on- let Lume simplify some things for you. But, this feature is only available to banking customers, so be sure to get on the waitlist!