Budget makeover: Saving your nurse’s salary

Perhaps the following scenario sounds familiar: You’ve graduated from nursing school and landed your first job as a nurse. The salary isn’t quite what you were hoping for, but with some extra shifts or overtime—or maybe by furthering your education—your financial future looks pretty good.

Or…

Let’s say you’ve just gotten a promotion and with seniority you have that nice salary increase to boot. You’re feeling pretty comfortable and heck…what with the nursing shortage you’ve got some job security, right?

It’s tempting to spend your money as you get it—after all, you’ve worked hard to get to where you are, and if you’re like many nurses, you probably scrimped and did without a lot of things while in nursing school and while working your way up the ladder. Plus, you may have student loans to pay off and your salary may not leave you with that much of a monthly cushion.

So why are financial advisers telling you that you should start paying yourself (i.e., saving) right away?

Why you should save

• Good habits die hard. We all know that bad habits are difficult to break, whether it’s chewing your nails or snapping gum. So the best way to avoid a bad habit is not to begin it at all. In fact, why not start good habits? Unlike bad habits, you won’t want to break these! Amy Buttell, coauthor of Personal Finance: The Missing Manual, explains that saving money for yourself and for your future is a way of taking care of yourself—something nurses do well for other people, but not always for themselves. “Saving money can help you feel psychologically secure, even feel more empowered,” she says. Knowing that you have money to fall back on can take a lot of stress out of your life.

• Rainy days will come. When you start putting money aside into an emergency savings account, you’re preparing for anything that may pop up, such as a car accident, where you may have to pay a $500 deductible. Having some savings means you don’t need to use your credit card or take out yet another loan. “Saving money is a bulwark against catastrophe,” says Buttell. “Something always happens. Spending every dime means you’re always on the financial edge when something bad happens.”

Once the emergency fund reaches a certain point, you’ll see that saving works, and because you’re now in the habit, you can continue saving for something fun, such as a vacation, a wedding or even a new home.

Three tips for saving

1. Save even when you don’t have much to spare.

Buttell says that it doesn’t matter how much money you start putting aside—it’s the act of putting something aside that helps you get into the savings habit. Whether you call it an emergency fund or just a savings account, the whole idea is to help you get used to setting aside $10 or $20 a week, if you can. If even that is too much, $20 or $30 a month is better than nothing.

2. Have the money automatically rerouted into a separate account.

Instead of physically moving the money into a savings account, Buttell suggests that you “set up a payroll savings account, if that’s possible, to have the money deducted from your paycheck. If that’s not possible, have your bank or credit union do it.” Just as we arrange to have bills automatically paid from an account, we can arrange for automatic savings withdrawals. “Sitting in the checking account, [the money is] going to be spent,” Buttell says. Also, she points out, if the money is automatically rerouted, “it gets a little rewarding when you check your [savings] account online or you check your bank statement and you can see, gradually, over time, that account accumulate into something.”

3. Don’t try too much too fast.

When starting a new phase in life, it’s easy to get overly enthusiastic and maybe try a bit too hard. Just like joining a gym and burning out because you go too often and do too much, trying to do too much with your money too quickly may get discouraging. “When people are on very tight budgets and try to do too much, they’re going to end up giving up and it’s not going to work,” Buttell explains. So, set a realistic goal of how much you will save. You can always increase the amount of money you set aside, but it’s harder to decrease it without being left with the feeling that you’ve gone backwards.

What about paying off loans?

Paying off your student loans and other debts is important, but there isn’t a lot that is satisfying about paying off loans while you’re doing it. By setting up a small savings account on the side, you can see what you’re saving, and this can be very satisfying. If you save $100 a month for two years, that’s almost $2,500. Not too shabby for money you’re not touching.

Bite-size tips for saving money

• When you’ve saved enough to open a certificate of deposit (CD), get one. The money stays yours, but you can’t spend it on the spur of the moment. It also gains a bit of interest while it’s in the CD.

• Consider using an online bank, like ING, for your savings. When your money goes into an online bank, it takes a few days to get it back into your brick-and-mortar bank. Therefore, you may think twice before withdrawing the money.

• If you’re using your regular bank for the savings, don’t allow the staff to connect that account with your bank card or allow checking privileges. You need to make the money as inaccessible as possible.

• Set goals. If you’ve already built an emergency fund, set goals for your money. When your bank account gets to your first goal, treat yourself to something as a reward.

• Play mind games with yourself. I know of one nurse who would take an extra $20 from the ATM whenever she withdrew money. That extra cash would go into an envelope in her filing cabinet, and by December, she had plenty of money to do her Christmas shopping and pay for everything in cash.

Do you have any special saving tricks?