Lots of people have large outstanding debt balances, little retirement savings and very little short term savings. Providing a solution around an individual’s debts issues, savings habits and retirement design implementation should always be tailored to fit specific needs but there are basic rules that can be implemented and followed.

Let’s start by looking at some of the decisions that many nurses face in regards to their finances and especially their short term debt and short term savings decisions?

  1. How much should I save into my company sponsored retirement plan?
    1. Understand if your employer matches your contribution and learn if you have options regarding pre tax deferral and after tax deferral and start saving for retirement.
  2. Should I accelerate the payments on my student loans, credit cards and other debts?
    1. Understand the interest rate that you are paying on each debt account and begin a life towards being debt free.
  3. Where and how much emergency savings should I have in place
    1. Create a budget and understand what your monthly fixed expenses are. Then find out what your variable expenses are. Create an account that is for unexpected expenses and available for an emergency. Make sure you aim for at least 6 months of emergency savings

So the question is which of these steps should be done first and how do we begin.

Whenever a financial plan is set up the first action step should be to take care of things that could impact your life today. That means making sure you have liquid short term savings set up.  Following that means to start building up your saving while simultaneously paying off your debt. Make sure that any credit card debt or high interest rate personal loans gets consolidated into a longer term lower interest rate loan. By doing this you will create breathing room for yourself and you will start being able to build your emergency fund faster and then being able to save for retirement.  If your company offers matching on their retirement plan a more detailed analysis should be made to see if retirement contributions should continue before short term savings are built up.

In summary the correct order should be to first protect against unforeseen events that could impact your life today (create at least 6 months of short term savings), consolidate your high interest credit cards into loans that are more affordable and then look at retirement savings.  All of these decisions are really made simultaneously and cash flow could be going towards all 3 areas at the same time but it always makes sense to take care of your today before planning for the future.

There are other immediate actions that should be addressed up front (protection portfolio) but that will be for another article

Happy savings