We sat down with Financial Advisor Mark Cagnassola and asked him to share his top four money management tips for travel nurses.
- Six months cash reserve
- Credit balance less than 30 days
- Ensure adequate protection
- Pay yourself first
“A good financial decision gives you one step forward, but a bad one can mean two steps back,” said Mark who has assisted PPR travel nurses with their finances for the last 18 years.
Six months cash reserve
The first basic principle Mark recommends is to have at least six months of living expenses on reserve. If you know your expenses total $5,000 each month considering mortgage or rent, insurance, car and basic food and entertainment expenses, then you need to have $30,000 tucked away for those rainy days. This is your “cash stash” emergency fund and ensures you don’t have to go into debt if you find yourself needing a new air condition unit or even a car.
Credit balance less than 30 days
The second principle relates to any credit card balance and not buying anything that you cannot pay for that month. Mark suggests that the only debt a travel nurse should have is a home. And when it comes to a mortgage, opt into a 15-year versus a 30-year because you will be paying far less for your residence in the long term.
Ensure adequate protection
Travel nurses are one of many professions in which a sickness or disability can quickly result in the loss of the ability to earn a living.
“You went to school for a long timing to become a nurse, and the most valuable asset you have is the ability to earn an income,” said Mark. “Your protection, should the unfortunate happen, comes in the form of life and disability insurance.”
Life insurance is for those people you love should something happen to you. There are several factors that come into play when determining the appropriate insurance such as age, marital and dependent status. The younger you are, the less expensive it is.
When it comes to disability insurance, you’ll want to make sure you are covered for 100 percent of your take home income, which means you will likely have to supplement what your employer provides and be sure you are covered in between assignments.
Pay yourself first
The last guiding principle is to be sure you set up spickets and turn those on so money funnels every month back to yourself. This will give you the freedom to make that important purchase or take that bucket list trip, because you’ve paid yourself first. Now go enjoy life!
“An exercise I often share with new travel nurses is I ask them to back into their savings plan by considering their retirement goals,” said Mark. “If you save $125 per week, that translates to $6,500 each year, and if you do that for 25 years at an average 8 percent return, you’ll have $513,000 at the end of 25 years.”
Some possible retirement saving options include:
Roth IRAs have income limit rules that are impacted by marital status and the type of plan. A tax advisor will know what option is best for your particular situation.
Traditional 401k is an attractive option especially if your employer matches your contribution. PPR matches up to 3 percent, which is essentially free money and with PPR you don’t have to be vested, which makes it an even sweeter deal for travel nurses.
A Roth 401k does not have any income limit rules, and while you don’t get a tax break on the front end like a traditional 401k, the growth your account makes is tax free.
“Young people who are on a long-term time frame before they plan to use their retirement funds should not be afraid to be in a riskier investment,” said Mark. “We can reasonably expect the long-term market to go up. I’ve seen a lot of people throughout my career become independently wealthy just by following the basic principles.”
When it comes to the shorter term, there are other valuable money saving tips that travel nurses can consider. For a more in depth understanding, Mark’s top recommended reading is The Millionaire Next Door by Thomas J. Stanley.
Remember to consult with your financial planner and tax advisor before making a decision that can impact your financial future.