Many travel nurses have outstanding debt balances, underfunded retirement account and short- term savings in place, but yet often have solid regular income. Unfortunately, lifestyle and poor financial decisions often get in the way of building wealth.
Creating clarification around student loan options, understanding credit card payoff strategies, and simultaneously understanding how savings habits and retirement design implementation all are interconnected is very important.
Let’s look at some of the top questions that many travel nurses face in regards to their finances that will affect retirement and short term savings. These are all very important questions and addressing all 3 are of them should be done simultaneously but there are some natural steps and a specific order of addressing the importance of each.
How much should I save into my company sponsored retirement plan?
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 but in general, you should have money saved up outside of a retirement plan first so that emergencies and liquidity is taken care of. Once you have short term savings you have to make sure you put away enough so that you get the matching that the employer is providing within the retirement plan.
Should I accelerate the payments on my student loans, credit cards and other debts?
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. So do not accelerate your loan payment until you have liquid short term savings in place.
Where and how much emergency savings should I have in place?
Whenever a financial plan is set up the first action step should be to take care of things that could impact your life today. Build at least 6 months of living expenses in a liquid safe “portfolio”.
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 topic will be saved for another article
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