Adulting is hard, nobody said it would be easy. Personal finances can be difficult to manage.
Optometry school presented itself with a unique set of challenges but being successful in the real world is an entirely different beast. While many individuals choose to spend blindly in hopes that their heads stay above water, this mindset lacks ambition and can ultimately lead to financial hardship down the road.
Ownership of your finances in a few small but crucial ways can provide a solid vector to lead you to both your personal and professional goals.
1) Eyes on the Prize – Set a Goal
Firstly, having a goal is key to being financially successful.
While it is a well-known fact that money won’t buy you happiness, it can be a powerful tool to help you achieve your goals. Before you can make a plan it is necessary to do a little soul-searching. What is important to you and what are your lifetime goals? Set goals for your one, five, and ten year self and write them down. Research shows that people become 42% more likely to achieve their goals and dreams simply by writing them down on a regular basis.
Personally, I choose to write goals by the SMARTER method ensuring they are specific, measurable, attainable, realistic, time specific, enjoyable & ethical, reviewed and rewarding. Planning, writing down, and reviewing goals will provide a solid foundation to help you better plan a sound financial future.
Keep in mind, the benefit of goal setting is not to achieve but it is what you do and the person you become in order to achieve that is the real benefit.
Step 2: Establishing Wants vs. Needs
After you have determined the goal that you want to achieve, you will need a comprehensive document tracking both income and expenses.
Personally, I prefer to track my expenses and see what I can decrease rather than giving myself an “allowance.”
Credit cards are an easy way to track expenditures but it is also smart to hold onto receipts- especially cash transactions for budgeting purposes. At the end of every month print your statements or gather your receipts from the past month’s spending.
Categorize your spending into groups such as:
- Savings (retirement, emergency fund)
- Housing (mortgage, rent, utilities, groceries)
- Commuting (gas, maintenance, rail cards)
- Debt Repayment (car note, student loans, credit cards)
- Entertainment (theatre, sporting events, physical activities)
- Travel (airline tickets, rental car, spending money)
There is not one way to compile your expenses, you can use templates on sites such as Mint (personal favorite), Microsoft Excel, or you can go old school and just use a pen and paper.
After you have done so, you will be able to see exactly where your income is going every month. For starters, choose one category or subcategory where you can reduce your spending. For example, if you eat out for lunch every day or purchase coffee, you can start packing lunches or waking up earlier to make coffee at home.
Personally, I tend to eat healthier when I bring my own lunch to work because I keep myself accountable for what I make. In the end this is a win-win.
Step 3: How low can you go?
Once you choose one area to reduce your spending, live in this way for just one month.
Is it realistic?
Can you reduce spending in other areas and still live a comfortable life? Remember to constantly be asking yourself what is important to you. Will that new pair of designer shoes make you happy two to three months down the road or will they be used and forgotten? Remember to constantly think long-term goals.
While reducing your spending in small ways can make an impact in the long term, taking a hard look at your fixed, recurring expenses can make a much more noticeable difference.
Did you know that according to Money Magazine, “the typical American consumer will fork over an average of 279,002 in interest payments during the course of their lifetime.”
If this seems as erroneous to you as it does to me, it is time to take a look at your debts and your fixed spending. This allows you to save money while not at all sacrificing quality of life.
Some of my favorite ways to reduce spending are listed below, starting with fixed and followed by other common expenditures:
- Student Loans: since graduating in 2016 I have refinanced my student loans twice and have paid off 70K in twelve months. It will, and has saved me thousands of dollars in interest throughout the life of my loan.
- Taxes: find yourself a great accountant and most importantly, educate yourself on simple tax law. If you are employed 1099 you could benefit greatly from deductions, including equipment and optometry related purchases. I found this to be most helpful in paying down my student loans in my first year out.
- Banks: If you have money in a savings account, benefit from keeping your money in a high yield interest account.
- Cable TV- call your company to discuss your plan and reduce monthly payments. Cut ties if you find yourself only watching only 1-2 shows consistently. Same goes with Netflix /Hulu / HBO Go.
- Cellular: re-negotiate your plan or jump onto a family plan if possible. Use wifi wherever possible and be careful not to go over data usage.
- Travel: If traveling is important to you, (as it is to me) then take advantage of credit cards with frequent flyer perks. My favorites include Southwest (see SW Companion Pass), Hyatt, and Chase Sapphire Preferred. Priceline, Hotels Tonight, and AirBnB also help you book lodging at a fraction of the price you may pay directly.
Most importantly, remember to allocate time and money for those things that you enjoy in life.
Although budgets may seem to be restricting, I have found that they provide me much more freedom to do the things I enjoy within reason. I have everything that I need (and probably more) and could not be happier. I am financially stable, investing in my future, and well on my way to increasing my net worth every day.
Money tracking skills can provide you vision for achieving financial goals and will create the road map to get you there.
Compare student loan refinancing rates 💰
Did you know that 22.5% of physical therapists have $100,000-$150,000 of student debt?! Paying off that debt requires smart budgeting and a lot of discipline. Many of the therapists in our community have also chosen to refinance their loans to lower the interest rates and/or reduce monthly payments. If you're looking to refinance, we heartily recommend that you check out Credible. In a nutshell, Credible is a free service that lets you compare prequalified student loan refinancing rates from up to 10 lenders without affecting your credit score. Click here to compare rates