Smart Ways to Use Your Sign-On Bonus as a Doctor: A Strategic Guide to Build Wealth, Stability, and Peace of Mind

Every year when schools and residency programs graduate a cohort of doctors, without fail I get some questions - one of which is, “what do I do with my sign on bonus?”

Here’s how doctors, dentists, and healthcare professionals can wisely use their sign-on bonus to set a strong financial foundation and avoid common pitfalls.

When doctors, dentists, and healthcare professionals begin new positions (especially in hospitals, corporate dental chains, or large medical organizations) it’s common to receive a sign-on bonus. These bonuses are enticing, often ranging from a few thousand dollars to well into five figures.

But, what you do with your sign-on bonus can either set you up for long-term success or trap you in a cycle of financial instability and lifestyle inflation.

So let’s talk strategy. Before the bonus hits your account (or burns a hole in your pocket), here’s how to be intentional about using it.

1. Understand the Tax Implications First

Before you even start allocating, it’s important to understand that your sign-on bonus is taxed as income. This means the number you’re quoted is not the number you’ll actually receive.

Quick tip:
Set aside 25–35% for taxes, especially if the bonus bumps you into a higher tax bracket. If your employer doesn’t withhold enough, you could face an unpleasant surprise come tax season.

2. Pay Down High-Interest Debt

If you have any high-interest credit card debt, personal loans, or lingering consumer debt, this should be your first target.

Why?
Eliminating 18–25% interest rates is the equivalent of getting that same return on your investment—risk-free.

Student loans?
If they’re federal with low interest and currently on income-driven repayment, they may not be your top priority, but you can still consider making a lump sum payment if your bonus is substantial.

3. Start or Build an Emergency Fund

One of the biggest stress relievers in any career—especially healthcare—is knowing that you’re covered if something unexpected happens.

Aim for:
3–6 months of expenses in a high-yield savings account.

Why it matters:
Emergency funds protect you from unexpected job changes, illness, relocation costs, or surprise expenses without going into debt.

4. Max Out or Jumpstart Retirement Accounts

Use your bonus to contribute to your:

• Roth IRA (if eligible)

• Traditional IRA

• 401(k) or 403(b) (if your plan allows after-tax contributions or catch-ups)

Even if your employer already contributes to a retirement plan, your own contributions are what move the needle on long-term wealth.

5. Invest in Yourself and Your Career

Are there certifications, coaching, courses, or licenses that will help you command a higher salary or grow in your specialty?

Examples include:

• Board certification prep courses

• Dental CE (continuing education)

• Medical or business coaching

• Public speaking or leadership programs

• MBA or MHA programs if you’re pursuing admin or ownership paths

This is the kind of investment that has a long-term return—especially if you’re planning for ownership, private practice, or leadership.

6. Use It as Seed Money for a Side Hustle or Business

If you’ve been considering building a personal brand, starting a blog or podcast, launching a product, or even opening a practice or wellness brand—your sign-on bonus can be your startup capital.

Examples include:

• Paying for a website or brand designer

• Purchasing inventory for a small product line

• Hiring a business coach

• Registering your LLC or trademark

This is especially powerful for healthcare professionals seeking multiple income streams or exit strategies.

7. Put a Portion Toward a Big Goal

Once the essentials are covered, you can give yourself permission to enjoy a portion of your bonus guilt-free.

Ideas:

• Save for a home down payment

• Fund fertility treatments

• Plan a bucket list vacation

• Help family or give to charity

• Start a 529 plan for your child

Even allocating 10–20% for something meaningful can make your bonus feel impactful and intentional.

8. Avoid the Trap of Lifestyle Inflation

It’s tempting to immediately upgrade your car, move into a luxury apartment, or finance expensive gadgets. But that’s how many doctors and dentists end up living paycheck to paycheck—despite a high income.

Instead, let your bonus be the buffer between you and stress. The goal isn’t just to enjoy today, but to create peace of mind for years to come.

9. Bonus Tip: Read the Fine Print

Some bonuses come with strings attached. For example, if you leave before a certain time (often 12–36 months), you may need to pay part or all of it back.

Be sure you understand:

• The vesting period

• Whether it’s a loan disguised as a bonus

• What happens if you’re terminated or resign early

This is important especially if you're considering switching to private practice or entrepreneurship soon.

A sign-on bonus is a gift, but also a responsibility. With intentionality, it can help you:

• Build a financial foundation

• Relieve pressure

• Start investing

• Create multiple income streams

• Buy back time and peace of mind

You worked hard for your degree, your license, and your position. Now it’s time to make your money work hard for you.

Recommended Reading:

1. "The White Coat Investor: A Doctor’s Guide to Personal Finance and Investing" by Dr. Jim Dahle

This book is a foundational read for any physician looking to gain control over their finances, especially early in their career. It covers student loans, budgeting, insurance, and investing.

📚 Buy on Amazon

2. "The Physician Philosopher’s Guide to Personal Finance" by Dr. James D. Turner

Another great resource that dives deep into wealth-building strategies for new attendings, residents, and fellows.

Buy on Amazon

3. The White Coat Investor Blog & Podcast

Their site is full of in-depth blog posts and free tools that break down topics like what to do with windfalls, bonuses, and how to manage debt efficiently.

Visit Blog

Listen to Podcast

4. Physician on FIRE Blog

A financial independence blog created by an anesthesiologist, offering advice on smart spending, investing, and early retirement planning.

Visit Blog

6. Bogleheads Wiki: Windfall Management

A concise, objective breakdown of what to do when you receive a large sum of money — including bonuses.

Managing a Windfall

Financial Foundation: Get Good With Money

In my book club so far this year we’ve read two books on money and they were very different. The first one, Die With Zero tells us to spend our money, throw caution to the wind and live! while the second book, The Psychology of Money tells us a different story - that one should prepare for life’s lemons, save, invest then save some more as life will inevitably through us curveballs. Both books offered great insight and are the inspiration behind this blog post.

While both books are different in their messaging, there still lies fundamental basics that both authors agree on: You must get good with money.

In my opinion, we cannot begin to even get good with money if we don’t have the basics down. This might be a refresher to some and a reminder to others. After this post, grab your daily budgeting sheets (or grab them here), pull up your online banking platform and get to work.

Here are 5 things to get started on the right path:

1. Have a PLAN

Create a roadmap for your finances. What are your financial goals and what will you do to achieve them? Perhaps you would like to earn more money this year? Realistically, how much would that be? How would you go about achieving this? Break your goals down into bite-sized action steps and work diligently to reach them. Put a timeline on each goal to keep yourself accountable. Make a plan for all the things that will require money. Consider hiring a financial planner/advisor that can give you personalized recommendations and keep you on a timeline. 

2. Create and Commit to a Budget

I know I know, we don’t really like budgeting, It’s boring but it must be done. This will take some discipline. Consider adopting and applying the the 50-30-20 rule. Essentially this means, 50 percent of your money each month should go to essentials like bills and housing, 20 percent should go towards your financial goals like savings, saving for retirement and paying off debt/student loans, and 30 percent should go towards wants like vacation, entertainment, etc. Personally I dedicate 30% to financial goals and 20% for miscellaneous things like vacation and entertainment. Of course your budget sometimes need a little wiggle room and things do change so adjust along the way but for the most part try to stick to this plan. Automate it so that you don't have to think about it.

3. Start/Fund Your Retirement Account

It is really important that you get on this early! It is vital that you prioritize creating and contributing to a retirement fund and take advantage of compounding interest. Compounding interest will do a lot of the hard work for you if you start early. Here are the contribution limits or 2023. Try to maximize your contributions and take advantage of any match system your job has to offer. Speak with your accountant about the tax benefits of each type of account.

4. Keep an Emergency Fund

Make sure you have at least three (3) to nine (9) months of funds saved up for a rainy day.  If 2020 taught us anything, it’s that we need to be prepared for anything and that life will inevitably through us curveballs. Your emergency fund is where part of the 20 percent savings portion of your budget should go, and it's there in case you lose your job, become ill, or encounter an unexpected expense. Keep this money in a separate savings account at a separate bank from your checking account and forego a debit card for that account. Also, automate your contributions.  Ask your employer to direct debit a portion of your salary into your emergency fund account. You can also consider placing the funds into an account with high yield interest. Personally I use Ally and have been for years, but there are quite a bit of online banks with high yield interest accounts like Synchrony Bank, Marcus by Goldman Sachs, UFB etc.

5. Tackle your debt.

All debt are not created equal. It is unreasonable to tell anyone to get rid of all debt, especially if you live in the US where the financial system runs on you having debt. However, there are some debt that’s considered “bad debt” like credit card debt because it grows pretty quickly and doesn't help you in the long term. Interest rates are usually high and can take a very long to pay off. Unless of course, you stay on top of it and pay the full balance each month. On the contrary, some may argue that student loans are a form of “good debt” because it's an investment into your future earning potential. Put as much money as you can towards credit card bills first starting with the ones with the highest interest. Once that's paid off, prioritize the next highest interest debt, and so forth. Also consider automating the contribution to your debt payment so that you never have to worry about a missed or late payment.

These are the very basics. As with anything, there must be a solid foundation. Once this foundation is built, you can now go on to build on your money making/diversifying prowess. Get these planner sheets to keep you organized to stay on top of your money goals and if you love books join my book club.

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How One Doc Paid Off $200,000 in Student Loans in 4 years

One of the hot topics on this blog and among young professionals has been student loan debt. If you attended professional school, chances are you accrued some debt along the way. However, it is a stark reality that this debt has to be repaid. A known debate for many of us is whether or not to pay down debt aggressively and get rid of it quickly or to pay the minimums as designated by your loan servicer and have the rest forgiven after 20-25 years. I personally have had this debate and have gone back and forth on the two options, which why I was really excited meet our guest, Dr. Rania Habib via Instagram and learned that she repaid her six-figure student loan debt in a short amount time and is now financially independent. I reached out to her to find out just how she did it and she was happy to answer all my questions. I am hoping this will inspire you as it has inspired me.

Q: Thank you for agreeing to answer some questions on your journey to financial independence. Please, tell us a bit about yourself 

A: Hi. My name is Rania A Habib and I am a board certified oral and maxillofacial surgeon (OMFS). I was born In Texas and raised in Minnesota. I obtained my BS in microbiology and completed dental school at the University of Minnesota. I then went on to complete a 6 year joint OMFS/MD program at University of Maryland in Baltimore. I worked in a busy private practice in the Maryland area while living in DC for two years. I then completed a one year fellowship in Pediatric Craniofacial Surgery at the University of Florida, Jacksonville. I love to teach and mentor students, so I found my calling in academic medicine 

Q: You are an Oral & Maxillofacial Surgeon with a specialty in Pediatric Cleft & Craniofacial Surgery. Please tell us what your specialty entails.

A: Oral & Maxillofacial Surgery is a unique surgical specialty that crosses the realm of both dentistry and medicine. We specialize in the treatment of all conditions in the oral cavity, face, head and neck. In addition to performing dentoalveoalar surgery and treating oral benign pathology, there are several fellowships that include cosmetic facial surgery, craniomaxillofacial trauma, pediatric cleft & craniofacial surgery, head and neck oncology, microvascular reconstruction, temporomandibular joint deformities, orthognathic surgery, dental anesthesia and implantology.  I am passionate about treating patients with congenital or acquired deformities in the craniofacial region with an emphasis on the pediatric population. 

Q: What made you interested in that field and how long did it take?

A: I loved surgery from the moment I was exposed to it as an American Heart Association scholar in my senior year of high school. I was initially a pre-medicine student, but decided that dentistry offered the unique ability to combine artistry, surgery and engineering. While in dental school, I fell in love with oral and maxillofacial surgery. I completed my undergraduate degree in three years, dental school in 4 years, combined OMFS/MD in 6 years and one year of fellowship. My training took a total of 15 years post high school. 

Q: Did you have student loans? And if you don’t mind, please tell us how much. Was this from undergrad as well as dental school?

A: I had student loans from my 4 years of dental school and my two years of medical school. For my undergraduate degree and first 2 years of dental school, I had in-state tuition that was offset by academic scholarships. My parents saved for my education, so I was fortunate that I did not have to take out loans for my undergraduate degree. I took out partial loans for my first 2 years of dental school and full loans my final two years of dental school and medical school to cover both tuition and board. My total debt was just under $200,000

 Q: Did you get paid in residency? 

A: Yes, 4/6 years. 

 Q: What was your strategy for tackling student loan debt?

A: For peace of mind, I wanted to eliminate my student loan debt as soon as possible. I opted to take a lucrative job in private practice to facilitate this goal prior to pursuing fellowship. After 10 years of straight post-high school training, I needed a break from the chaos of training. I hired a financial advisor to oversee my finances. He managed my malpractice insurance, disability insurance and helped me establish a budget based off of my salary and spending. We carefully documented my rent, utilities, car payments, car insurance, disability insurance, malpractice insurance, cell phone, groceries, gas, travel and fun. Based off that budget, I established an emergency savings fund to cover three months of living prior to aggressively paying off any student loans. When I first finished residency, I only paid my loans off according to the amount due until I was able to accumulate my emergency fund savings. Once I was done saving the emergency fund, I then began to aggressively pay off my student loans. 

I did not live ultraconservative, but I did not overspend my means. I lived in a nice apartment with good amenities. I did not upgrade my car. It was paid off during residency, so keeping that car saved me a ton of money. As a coffee lover, I invested in a Nespresso machine, so that I was not paying $4-6 for coffee every day. I limited eating out at restaurants to only once a week. I am a big advocate for meal prep, so I usually prepared my own breakfast, lunch and dinner. Eating out is extremely expensive, so learning to cook will save you a ton of money. I did not deprive myself of anything, but I was extremely practical about my spending. I still enjoyed my money, but I eliminated consistent extravagance. 

Q: Did you have other debt and what was your mindset towards those? 

A: I was lucky in that I did not have any other debt. I did not buy a home, nor did I upgrade my car. 

Q:  In a nutshell, how did you achieve financial independence?

A: I set my long-term financial goals, hired a financial advisor and lived according to a budget that we designed as a team. I did not overspend my means.

Q: What is your approach to spending and your psychology about money?

A: I am a strong believer that you should do what makes you happy. I enjoy experiences over extravagant items. I would rather pay for a beautiful trip around the world then regularly spend a $1000 on a pair of shoes. That being said, I still enjoy finer things. When my loans were paid off, I opted to finally lease a luxury car. Every once in a while, I will buy a nice pair of shoes, a tailored suit, an expensive purse or jewelry. I just do not find myself drawn to spending my liquid income on expensive, luxury items on a regular basis. I enjoy spending my extra income on family, charities and people in need. 

Q: What advice would you give to other health professionals/ health profession students on handling debt and student loans?

A: I would recommend that you invest in a financial advisor who has adequate experience with student debt from the medical/dental profession. These are different than the average financial advisor. They will understand how to incorporate your malpractice and disability insurance in addition to investing. It is not a bad idea to have a financial advisor to handle malpractice and disability and a second financial advisor to invest. Your financial advisor needs to devise a plan that includes a spending budget, an emergency fund, retirement, and your end goals. When you finish school/training, you will have the option to pay off your existing school loan interest as a lump sum. If you have the financial ability to pay that lump sum, then do it! If you do not, you will accumulate interest on that interest. Depending on your interest rate, you may be eligible to consolidate your loans and pay them off more aggressively in a shorter time frame by applying for an outside loan agency geared towards medical professionals. If paying off your loans is a financial goal, consider these companies to help you pay them off in a shorter time, at a lower interest rate. Always consider your own financial picture before making these decisions. If you have other sources of debt such as a home mortgage or car loan, you may not be able to pay off student loans as aggressively as I did. Utilize your financial advisor to help make these decisions based on your personal goals and what makes the most financial sense for your situation and lifestyle. 

Dr. Rania Habib attended the University of Minnesota for undergraduate and dental school and the University of Maryland for medical school, General Surgery internship and Oral & Maxillofacial Surgery (OMFS) residency. She worked in a busy OMFS private practice for 2 years, then completed a full scope Pediatric Cleft and Craniofacial Surgery Fellowship at University of Florida, Jacksonville. She became the first female attending surgeon in the Department of Oral & Maxillofacial Surgery at LSU, NOLA where she was appointed as an Assistant Professor with a primary focus in Pediatric Cleft and CranioMaxillofacial Surgery. Her main surgical interests include pediatric/adult OMFS, cleft, craniofacial, orthognathic, facial trauma, obstructive sleep apnea, benign head/neck pathology and facial reconstructive surgery. She is now full time faculty at University of Pennsylvania. She is an active volunteer with Smiles International and the Global Smile Foundation where she provides cleft and craniofacial surgical care internationally. In her spare time, Dr. Habib enjoys traveling, rock climbing, biking, cooking, attending live music/art events, volunteering, reading and spending time with her family and friends. She is a master level SCUBA diver who is also a fitness fanatic.

You can find Dr. Rania on Instagram @raniahabib.md.dds

6 Questions To Ask Before Investing

“If you treat Investing like a casino, it’s going to treat you like a gambler”

— Anon

I had a sit down chat with a financial advisor/ wealth manager from a popular brokerage firm to answer some burning questions about investing. He has chosen to be anonymous in this blog post as we did not have enough time to get these questions and answers approved by his firm. However, he has guaranteed that all answers are truthful and based on general knowledge that anyone can google. He has also given me permission to give his contact information (via email) to my readers who are interested in learning more about investing.

Whether you’re a first-time investor or have been investing for many years, there are some basic questions you should always ask before you commit your hard earned money to an investment.

Q: What would you recommend as a starting point for a new investor?

A: For someone just starting out I would recommend they get an understanding of money and how it works. They have to determine their goals and their risk tolerance to market volatility. For example, certain types of bond funds can counterbalance market volatility so a starting point could be with bonds. Next, they have to choose an advisor that will put together a program designed to accomplish those goals .

Q:    What is a recommended portfolio diversification for a beginner i.e percentage of stocks, bonds, mutual funds, etc?

A: This is a nuanced question and depends on the person’s time horizon. For example, if you’re a 25 year old planning to use the money as a down payment on a house in 5 years you may be better suited with a larger portfolio of bonds. The short answer is, if they are investing for the long term they are going to see more growth in blue chips and mutual funds that pay rising dividends over time. See JP Morgan’s Guide to The Markets - Time, Diversification and the Volatility of Returns.

What this shows is the 1, 5, 10 and 20 year return going all the way back to 1950 of a pure stock portfolio, a pure bond portfolio and a 50/50 mix. There isn’t a 5 year period in that 70 year history where there was a loss of money with a 50/50 mix. The worst that happened in any 20 year period is that you quadrupled your money. So, the suggestion would be if they’re investing for the long term invest in companies that provide basic necessities for our way of life and go with a 50/50 mix.

Q: What factors determine how you will invest someone’s money and do things like age and risk tolerance play a role? 

A: There are many factors that play a role when it comes to someone investing. Things like:

• How involved the person wants to be with their investments, i.e hands on versus hands off approach

• Time horizon, not so much age. For example, if they are 70 years old but they are investing for their grandchildren’s legacy then age doesn’t matter.

• Risk Tolerance

• Tax considerations

  • IRA account versus Taxable brokerage account

  • Tax efficiency

  • Tax harvesting strategies

Q: How do you manage investment accounts for taxes?

A: Generally , there are 3 ways to invest money for taxes:

1. Taxable (pay as you go)

2. Tax deferred (Traditional IRA, Annuities)

3. Tax free (Roth IRA, Insurance products)

Q: What is your approach to financial planning?

A: I approach it as a process and it should be the same no matter who the individual works with

• Get a feel for who they are, what they want to accomplish and why

• Determine where they are coming from, their psychology about money, their values and their belief system around money and investing.

• Ask them to quantify this as much as possible, in terms of their goals for the account, their psychology about risk

• Tax needs

• Risk tolerance

• Are goals realistic

• Am I a good fit for them and vice versa

Based on the above , I will then go through the courses of action and next steps. I will be transparent about:

• The cost structure of each option

• The degree of involvement each party needs to have for each option

• Fees for services

• I will then set up a periodic review for each account, i.e monthly, quarterly or annually.

Q:  What are some important questions a client should ask their financial advisor before investing?

A: This is probably one of the most important questions.

1. How is the plan in the client’s best interest

2. Explain cost structure

3. Discuss any potential tax considerations

4. The various risks associated with the investment. Every investment has risks. There’s no such thing as a risk free investment

5. Describe in full the process of beginning this journey

If the advisor is unable to answer any of the above to the client’s satisfaction, they should exercise caution before proceeding.

If you would like to learn more about Investing or begin your own Investing journey with this advisor, feel free send me an email below and I will forward his info: CONTACT ME

This is Part IV of The Investing Series. Click here for Part III, Part II, and Part I.

Our investing series will continue in our next article on the topic of Real Estate Investing. Sign up below to receive the Investing Series directly to your inbox:

This article is for educational and informational purposes only. Contact a financial advisor before making any financial decision.

This article may contain affiliate links.

How To Start Investing in The Stock Market

Many people know the importance of investing but never actually do it!

I must admit, there was a time when the topic of investing was very confusing and overwhelming for me. The learning curve with all the different financial terms and what they meant were steep. It took several talks with my financial advisor, my husband breaking things down in detail and me listening to some great podcasts to finally get a good understanding of it.

Like most people, my first experience with investing was through a retirement account that I have with Edward Jones. Once I read upon the subject of investing (the most helpful being JL Collins’ The Simple Path To Wealth), listened to podcasts on the topic and consulted with the experts, I graduated from being a rookie and started investing with Vanguard in their VTSAX (Admiral Shares). You can see some of my recommended books on investing here and learn more about Vanguard’s VTSAX here.

Investing requires a mindset shift, and you should look to start by investing in a retirement plan, followed perhaps by investing in the stock market. But how do you even get started investing in the stock market? I will give an overview of how to get started and for the sake of this article let’s get some definitions down:

Investing: Putting money into a vehicle with the goal of receiving a return down the line (growth). In most cases, you plan for little involvement on your part once you’ve invested the money.

Stocks - A stock is part ownership of a company. They are also called shares or equities and the more you own the bigger your ownership stake in the company is.

Bonds - A bond is when you loan money to a company or the government who in turn pay you back in full with interest.

Mutual Funds - A mutual fund is a pool or compilation of funds from a group of investors set up for the purpose of buying security like stocks, bonds, etc.

Index Funds - An index fund is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500).

Exchange Traded Funds (ETFs) - These are similar to index funds however, they can actively be traded throughout the day at the current market price (you'll pay commission fees as a result) unlike mutual funds and index funds that are traded at the end of the day, and at the market's closing price.

Brokerage Firm - A brokerage firm is a financial institution that manages or facilitates the buying and selling of securities (different kinds of investments e.g. stocks, bonds, etc) between buyers and sellers. They typically charge commission fees on trades and can provide you with up-to-date research, market analysis and pricing information on various securities. Examples of brokerage firms in the US include Vanguard, Fidelity, Charles Schwab, etc.

How To Start investing

Investing can change your financial future for the better. You don’t need a lot of money to start investing. In some cases, you only need a few dollars to get started. Of course, you might have a goal of increasing your investments long-term. But don’t let limited resources stop you from building your long-term wealth.

1. Try a Robo-Advisor

   A robo-advisor is the term often used to refer to digital platforms for investing and is essentially a virtual financial advisor. With the use of algorithms and technologies, it eliminates the need for a human financial advisor and is a more hands-off approach. Rabo-Advisors are marketed to millennial as a digital solution for the often intimidating process of investing. You’re asked some questions online and based on your answers it provides automated financial management services and tailor your investment recommendations based on your goals.

   The benefit of using a robo-advisor is that the fees are typically much lower, even though you are getting customized portfolio recommendations. Most robo-advisory firms offer low minimum investment requirements and take care of portfolio rebalancing automatically.

   If you are interested in trying a robo-advisor, some popular ones are Acorns, Robinhood or Betterment.

   • Micro-Investing

     • There’s an app for that! Just like robo-advisors, micro-investing apps offer a variety of tools and ways in which you can be investing. Micro-investing apps are marketed towards millennials and young, rookie investors and was built around the idea of helping people get into investing with as little as a few dollars. Some popular micro-investing apps include:

       • Acorns - It is simple and is perfect for the true beginner looking to get help building a well-diversified portfolio. You can choose from among five portfolios, all of which are invested in ETFs from well-known investment management companies like Vanguard. It costs as little as $1 per month for accounts under $1 million, or free for college students.

       • Robinhood - Typically attractive to those looking to do individual stock picking and even dabble in cryptocurrency and options trading. Trading is commission free, but there are fees charged by SEC and FINRA.

       • Stash - Great for beginners who want to be a bit more hands on about picking investments or has specific preferences on the types of companies they invest in. They offer access to more than one hundred investments, including ETFs and individual stocks. It costs $1 per month with no commission on accounts under $5000 for Stash Invest and $2 per month for Stash Retire.

2. Seek out a Brokerage Account

   There are many investment services available on the market today. Each offers different services and charges different fees. In some situations, you may want to buy and sell stocks on a regular basis. These transactions can add up quickly at some brokerage firms. In other situations, you might choose an index fund with fees built-in. Either way, you'll want to find a brokerage account that minimizes fees for your investment strategy.

• Decide What Kind of Account You Want To Open

  • The type of account you open will depend on the reason you’re investing in the first place. Most times when one is investing they are doing so for a medium-long term goal.

• Decide Which Brokerage Should You Use

  • You have many options when it comes to picking a brokerage firm. Consider a hands on versus a hands off approach (depending on how comfortable you currently are with investing).

  • Consider the minimums for opening an account. Many, but not all brokerage firms will have a minimum initial investment in order to open an account or invest in certain funds. These minimums vary, and therefore can have a huge impact on which institution you pick. For example, my very first investment was in Vanguards VTSAX with a minimum required investment of $10,000. If you are not in a position to invest that amount at the moment you have several options:

    • You can opt to choose a different brokerage firm

    • Search and see if another comparable fund at the same brokerage has a lower initial investment requirement

    • Invest at a different brokerage and transfer your funds after you’ve met the investment minimum at the brokerage you want

    • Keep saving until you hit the minimum

    • See if the exchange-traded fund (ETF) version is cheaper than the mutual fund version, sometimes it is.

  • Determine what the brokerage firm’s fees will be.

  • Determine whether you want to go with a Full Service Brokerage Firm versus Discount Brokerage Firms. The main difference is the the full service firm will have an advisor helping you build and manage your portfolio, but you will pay higher fees. You take a more DIY approach when going with a discount brokerage firm and therefore will save more in fees. Plus, Discount brokerage firms may have minimum initial investments, often between $1000 to $3000. Some popular discount brokerages include Vanguard, Fidelity, Charles Schwab, TD Ameritrade, Ally Invest, etc.

• Pick Your Investments

  • When picking your investments consider your goals, risk tolerance, time horizon and whether you want it to be actively or passively managed. Keep in mind that you will pay more in fees for an actively managed account. You will also need to diversify as you build your portfolio so as to not put all your eggs in one basket. For example, investing in mutual, index, or ETFs gives you exposure to a variety of sectors and companies, and is a good first step.

Investing can be a confusing topic but it doesn’t have to be once you understand a few basics. You can start with a robo-advisor or a micro-investing app to get your feet wet and level up to a brokerage firm when you feel you are more comfortable.

This is Part III of The Investing Series. Click here for Part II and Part I

Our investing series will continue in our next article and will feature an Interview with a Wealth Management expert from a popular Brokerage Firm. Sign up below to receive the Investing Series directly to your inbox:

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Retirement Planning for Young Professionals in 2020

2020 Retirement Contribution Limits

It is never too early to start saving towards retirement. A main focus for many of us this year will be our money management and long term goals i.e retirement planning. It is very important o have some knowledge of compounding interest to fully understand the benefits of starting early. In this post I will cover some basics of retirement planning and hopefully compel every young professional to start saving towards retirement (if you haven’t already).

I must remind you that retirement planning is a long term investment. In most cases you will not be able to access these funds until around age 59 1/2 without severe ramifications (taxes + penalties). So, if you are investing and need to access your funds sooner than this, you may have to think of other types of investments, which we will talk about in a subsequent post.

There are many different accounts and plans available and choosing the right one is very important as they each have different benefits and advantages, especially when it comes to tax planning. Here are a few to help you get started:

Simple IRA (Savings Incentive Match Plan for Employees)

For the year 2020, participants can make employee contributions of up to a maximum of $13,500 per year if you are under 50 years old and $16,500 if you are older than 50. This is a retirement plan that is usually available to self-employed individuals, however both employee and employer contribute to this account. Contributions are non tax deductible.

Traditional IRA

Anyone can open a traditional IRA account - but honestly, if you are a dentist or physician (like most of my colleagues are), then there really is no use for this type of account. During residency you have the option to open a Roth IRA (more on that below) because your lower salary allows you to stay within the income restrictions. Later as you start your career and your salary increases you will most likely surpass the income caps and will have the ability to deduct your traditional IRA contributions. However, it’s worth understanding as it forms the framework for all other types of retirement accounts. A Traditional IRA is set up by you (not an employer) and the maximum contribution to this type of account is $6,000 if you’re under 50 years old and $7,000 if you’re older. The contributions are tax deductible and grows tax-free.  If you withdraw the money prior to age 59 1/2, there will be ramifications of a 10% tax (penalty) as well as any income tax which would be owed on the money.  After age 59 1/2, you just have to pay the income tax based on your tax bracket at that time.  At age 70, you will be required to start withdrawing part of the money each year, the “Required Minimum Distribution (RMD).”  This is age based and starts out at about 3.6% and increases to about 8.8% at age 90.  

Roth IRA

I absolutely love a Roth IRA. However, there is a contribution income limit. If you make more than $124K (single) or $196K (married), you cannot contribute to a Roth IRA. However, there are ways to get around that with Roth IRA conversions, which we will discuss in a subsequent post. Anyone with earned income can open a Roth IRA and contribute up to $6000 per year.  If income is sufficient, one can also open a Spousal Roth IRA and contribute another $5000.  If you’re over 50, those limits are raised to $7000 per year.

The reason I love a Roth IRA is because you contribute with after-tax money, but it is never taxed again!  You don’t pay taxes on capital gains and dividends as the money grows, and it comes out tax-free in retirement.  You generally can’t access the money before age 59 1/2, but unlike a 401K or Traditional IRA there are no required minimum distributions beginning at age 70.

401K

If you are an employee of a company and your employer offers a 401K retirement plan, there’s absolutely no reason why you should not be participating. It is even more important that you participate if said company is offering a match. A match is basically free money! Do not leave free money laying on the table. The contribution maximum for the year 2019 is $19,500 and the great thing about a 401K is that you are investing pre-tax dollars. The not-so great thing is that when you go to retrieve your money (after age 59 1/2), you will be taxed on this (unlike with a Roth IRA).

If you're an Independent Contractor (not a W2 employee), you’re considered to be “running your own business.” In this case, you can also make an employer contribution of 20% of your net income up to $55,000.

SEP IRA (Simplified Employee Pension)

If you have your own practice, a SEP IRA may be a good option. This allows you to contribute 25% of your business profit or $57,000 per year, whichever is less. The contributions are tax deductible, and investments grow tax deferred until retirement.

This is not a comprehensive list of retirement vehicles but it’s a great place to start. Everyone, as early as possible, should start contributing to one of the above. Speak with your financial planner or accountant for more clarification about which plan is best for you. Hope this helps in getting started.

5 Holiday Money-Saving Hacks

The holidays can be such an expensive period! It all starts in October around Halloween and it seems like every week thereafter you’re faced with a reason to spend money. From Halloween to Thanksgiving, Black Friday, Cyber Monday and then Christmas - it seems like you’re shelling out money left and right and it can swiftly ruin your budget. Here are some hacks to help you save money—and stress—this holiday season:

1. Set a budget

Consider everything you will need to spend money on, and not just gifts. Think of airline/train/bus tickets, gas money if you’re driving to family’s house, groceries for thanksgiving and christmas dinners, office parties, stocking stuffers, and anything else you typically spend money on over the holidays. Set a budget for all those items and STICK TO IT.

2. Use Cash.
After you have set your budget, take out cash. Do not use a credit card - this is to ensure you don’t over-spend and blow your budget.

3. Time Your Shopping
For thanksgiving, try to do your grocery shopping early so you can beat the rush and not be tempted to just grab things off the shelf. Turkey goes on major sale after Thanksgiving, so If you typically have it as part of your Christmas dinner, after Thanksgiving is a great time to shop for it. Other seasonal foods (like pumpkin pies) usually goes on sale too, so that is the best time to stock up and you can save money.

4. Don’t Buy Hype.
This will take some discipline - On Black Friday and Cyber Monday up until Christmas, retailers will offer lots of deals, discounts and sales. This is good, everyone loves a good deal! I Just be sure to compare prices, stay away from impulse purchases and STAY WITHIN YOUR BUDGET.

5. Watch The Weight.
Not yours - your luggage. If you’re flying over the holidays, weigh your bags before you leave. Airline fees can be upwards of $100 for overweight luggage, and some airlines charge for every checked bag! Know the rules of the airline before booking flights.

It’s the most wonderful time of the year! Don’t let shopping or travel be the cause of stress for the New Year. Just a little planning and discipline is all it takes for you to have a joyous and stress free holiday season.

How I Saved Over $4000 by switching Cell Phone Carriers

One of the most challenging things when it comes to personal finance is finding and plugging money leaks. If you’ve seen my previous article on the topic you will find that it is quite easy to spend money without realizing. Money leaks are those small expenses that you forget about soon after spending the money. They can wreak havoc on your budget.

I did a complete financial overhaul about a year ago and discovered over $6000 of wasted money. A big chunk of that was in cell phones bills!

At the time, I was with one of the major cell phone providers carrying three lines of service. That is, three cell phones that weren’t fully paid for and three lines with unlimited talk, text and data. All this came at a cost of roughly $280/month. My fiancé had a similar situation where he was with another major cell phone provider carrying two lines of service. His monthly payments were around $240/month. Combined we were paying approximately $6240 in cell phone bills alone per year!

Nowadays, most cellphone plans don’t lock you into a contract. Gone are the days where you’re stuck with the same cellphone carrier for two years, unless you’re willing to pay hundreds of dollars in early termination fees. These days it’s easy to switch, and in many cases you can save yourself a lot of money by doing so.

We did some research and by switching providers we are currently saving roughly $4000/year! We combined my 3 lines with my fiancés 2 lines and went with a single carrier and currently pay $139/month for all 5 lines. That is roughly $1668 per year. This is saving us a whopping $4572 per year just on cell phone bills! Our services continued with the same great quality as before. I must mention however that in switching carriers, we had to purchase 3 new cell phones carrying an upfront cost of roughly $1600.

This was a simple adjustment which revealed an area that isn’t necessarily thought about when attempting to reduce expenses. If you are attempting to plug money leaks, definitely do not ignore this category as you might also find an opportunity for huge savings.

Also, If you’re hesitant to switch carriers because you get great coverage with your current carrier, there’s something you need to know. Smaller carriers such as Metro, Boost Mobile and Cricket, all run off of one of the major networks — AT&T, T-Mobile, Sprint or Verizon. So, if you’re with AT&T but sick of paying $120 per month for your plan, switch to Cricket Wireless and pay just $55 per month for unlimited data all on the same network. You’ll still get the same great coverage even though you’re no longer on an AT&T plan. You can find a list of carriers here.

*This is not a sponsored post, I do not get paid for the above views.

Plugging Money Leaks

One of the most challenging parts of getting a grip on your finances is finding money “leaks” and plugging them. I speak a lot on saving/investing for retirement and tackling student loans. However, I must address the topic of unknowingly wasting money aka money leaks. The faster we figure out where all our money is going the better we will be able to plan and have more money to put towards saving, investing, paying off debt, etc.

A money leak is simply any amount of money that you spend and are unable to identify what you spent that money on at the end of the month when you’re reviewing your bank and/or credit card statements. It can happen quite quickly and sometimes go unnoticed. For example, one week you may not have gotten a chance to prepare your meals and suddenly you’re eating out everyday for lunch, or you subscribed to a free trial of HBO to binge watch a season of one of you’re favorite shows and forget to cancel the membership. These seemingly tiny expenses add up and before you know it you’re wondering where all your money went.

I did a complete financial overhaul about a year ago and discovered over $6000 of wasted money. A big chunk of that was in cell phones bills - by switching providers I am currently saving roughly $4000/year! 

Here’s how to identify and begin plugging your money leaks:

Step 1: Print out your credit card and/or bank statements for the last 3 months and highlight all your set monthly automatic withdrawals, example: mortgage/rent, savings, Insurances, car note, utilities, etc. Now look at those highlighted items and see if there’s a possibility to cut or lower the cost of any of those items like a cell phone bill, cable bill, interest rate on a car note or even a credit card.

• Are your utility bills consistent? Cell phone and cable bills are terrible money leaks. Cable companies will sometimes increase monthly payments which can go unnoticed if you’re on automatic withdrawal. 

  • Do you need cable at all? Consider alternatives like Netflix or Hulu which are a fraction of the cost. 

  • Are you paying for more services than you need? Many of us no longer utilize a landline so why pay for it?

  • If your monthly data usage on your cell phone is, say 10mb or so then why pay for unlimited data?

  • Have you tried refinancing your auto loan? This would be a good thing to do especially if your credit score has increased since you initiated the loan.

  • Call your credit card companies and request a lower rate. If the answer is no, simply switch to another company that offers you a lower rate.

Step 2: Identify all the un-highlighted items and categorize them.

• Typically the miscellaneous expenses are date nights/eating out, emergencies, etc.

  • Save all your receipts and review them each week so that you can track your spending. By knowing that you have to review your receipts you may not be so apt to spend frivolously.

  • Use a budgeting app to help you stay on track. If you find it difficult to stay on top of your finances, consider tools like Mint or You Need a Budget.

  • Avoid leaky places and budget before you go. A simple night out with friends can turn into regret if you do not plan ahead. We all know how out of control things can get when we’re having fun, especially if drinks are involved. Have a ballpark figure in mind or a set amount that you want to spend on food and drinks and don’t go over that limit.

Needless to say, once you’ve found the leaks and plugged them you must decide what do you do with that “extra” money. Treat it like it’s a bonus from work or a gift from your generous grandma - no, do not spend it. Options for this money could be investing, saving towards your retirement, paying off credit card debt, or making extra payments on your student loan debt.  

Money leaks are poison to any kind of financial progress. If you have too many of them, it can make personal finance feel incredibly confusing and hopeless because it feels like all of your money is just evaporating. Take charge, use the above guidelines to get started and take control of your finances.

Best Money/Finance Podcasts for Young Professionals

On the path to becoming a professional regardless of the field you’re in, the focus has been getting to the place where we finally start our careers. We have been through many years of schooling - studying, passing classes, maintaining grades, matriculating, improving skills, applying for residencies and specialty programs. The remaining time was utilized to catch up on sleep, exercise and balance family and social life. Nobody taught us anything money or finance related. We lacked knowledge regarding taxes, refinancing/consolidating student loans, insurances, retirement, and investing.

I began listening to finance/money podcasts when I started my career as an Orthodontist. I went from having no income to a substantial salary that I wasn’t quite sure what to do with. I know I wanted to make smart financial decisions and improve my financial literacy but didn’t know what professionals to seek or even what types of questions to ask.

Undoubtedly my CPA and friends with experience have been invaluable but I wanted more. I wanted to learn all the financial terminology that I would often hear people speak of, words like index funds, mutual funds, compound interest, asset allocation, capital gains, amortization, differences between 401K, 403b, Roth and the list goes on. I wanted to learn more about financial independence, real estate investments, and passive income.

Books are usually my thing but podcasts have proven to be quite convenient and there have been a handful of podcasts that I listen to religiously and that have helped me tremendously over the last several months.

1. Afford Anything - This podcast is one of my favorites as Paula Pant is all about Financial Independence and is a big proponent to the FIRE movement. FIRE stands for Financial Independence Retire Early. She’s 34, retired, financially independent, has zero debt and makes a living through real estate investing, blogging and podcasting. She introduces listeners to different ways to build passive income and rid yourself of a 9-to-5 job.

2. Stacking Benjamins - I love this because the guys on this show drop so many financial gems but do so in a very lighthearted and fun way. Their humor and jokes may give the perception of lack of serious-mindedness but if you listen beyond that it is evident their focus is on helping their listeners build wealth.

3. Smart Passive Income - I’m all about passive income so naturally I gravitated towards this podcast. Pat Flynn is awesome! He frequently pulls in over $100, 000 per month in passive income. He gives his listeners different ways to go about setting up passive income streams and his podcasts are always inspiring.

4. The Side Hustle Show - I love this podcast because they offer great tips and business strategies for those looking for multiple income streams. If you want to perhaps keep your 9-5, supplement your income and have a few extra bucks here and there this podcast is certainly for you. It’s very informative and every time I listen I learn ways to improve my own side hustle(s).

5. Choose FI - The podcast is great! Here FI stands for financial Independence and the hosts discuss life optimization strategies that are possible when we decide to get off the hamster wheel.

6. Profit Boss with Hilary Henershott - I recently started listening to this podcast and it has been quite informative. It’s geared towards women who want to take charge and create success in their financial lives. It has been very motivating and inspiring.

So if you’re looking to improve your financial situation, gain financial independence, retire early, start a side business or have passive income then I definitely recommend the above podcasts. Listen to episodes during your commute, at the gym, while running, etc. The knowledge gained can enlighten your path and brighten your future. Feel free to give feedback on your experience.

Happy Listening!

Turning Your Hobby or Passion Into a Business

I love my profession and honestly cannot think of any other career that I would enjoy as much. My passion lies in creating beautiful smiles and I enjoy and love my patients dearly! However, there are other things that I love, enjoy and am passionate about.

I love scented candles! When I was in undergrad and dental school I remember spending quite a bit of money purchasing candles from bath and body works, Marshalls or TJ Maxx, and Yankee Candle Co. As a cash strapped student, money can get really tight and there isn't much room in the budget for such luxuries. That's when I decided to try my hand at making my own candles.

When I started making candles there was a period where I was only comfortable making them for myself. As time went on I became confident enough to give a few to my family who critiqued them and helped me to perfect it. Soon I was using my own candles in my home exclusively and so were some of my friends and family. Every few weeks I was getting requests for more and more candles. This is when I had an "aha moment" and decided to turn this creative hobby into a business. I found something that I not only loved doing but one that was also producing a profit.

If you are looking to turn your hobby or passion into a business, here are a few tips I figured out along the way that will help to get you started :

1. Do What You Love

When you're at work (or school), what are some of the things you wish you were doing instead? What things give you joy and make you happy? What activities do you enjoy? How about photography? Calligraphy? Painting? For me it was blogging and making candles. I've always had a blog. Writing is a hobby and truth be told, it is also therapeutic, so I've always had a corner on the world wide web. I also picked up the hobby of candle-making because of my love for scented candles. I've since turned them both into profitable ventures, writing for several papers, sites and blogs and founding UnOrthoDoc Candle Co.  Find something that you enjoy doing and think of how you can monetize it.

2. Do It For Free

When I started making candles, I gave them away to family and friends. If anyone was celebrating a special occasion they knew the gift that I would come bearing. I welcomed feedback and criticism and used it to improve my new found skill-set. Take baby steps in the beginning and perfect your craft before turning it into bucks.

3. Combine Your Passion with Your Other Skills

I am an Orthodontist and thus my passion lies in creating beautiful smiles. But, that's not all I'm passionate about. I love traveling, writing, and candle making also. I like to consider myself a bit unorthodox, hence the name UnOrthoDoc Candle Co.  On my site, I was able to combine my love for writing with my love for making candles. Figure out how to create your own success tool kit /secret sauce made up of all the different skills and experiences that only you have. This is what will make you stand out and keep your service unique.

4. Determine Your Ideal Client and Make Connections

Who’s going to pay you for the work you want to do? Who is your ideal client/customer. What’s their lifestyle like? And most importantly, based on who your ideal client is, what value can you bring to them? When that is known, your next step is to identify ways to connect with them. How can you draw attention to your work and provide a product or service worth purchasing? Once your audience is aware of your work and finds value in it, build your portfolio so you can show off your work.

5. Do It For Cheap

Once you've built some value, then you can start to charge a bit for it. When you reach out to paying clients, you’ll be able to present the free work that you did as a sample or a portfolio. Don't charge too much in the beginning until you're 100% happy with the quality of your product.

6. Fine Tuning

Pay attention to the details and fine tune things. Figure out things that you like and don't like, things that are working and things that aren't. I changed the name of my candle company twice before I settled on the current name. I've been through many vendors to source the best products and there are still things that I continue to fine tune today. The devil is in the details.

7. Follow a Pro

Take a look at people who are doing what you would like to be doing. What is their strategy? There’s no need to reinvent the wheel, and learning from those who found success before you doesn’t mean you can’t be original. Copy strategy, but make the rest yours.

8. BONUS: Don't quit your day job (yet)

All of this talk about following your passion could make you feel like you’re ready to put in your two weeks. Don't. You can still keep your day job and have your passion be your side hustle, or vice versa. Take this process slow and have your job fund your new venture (until you start making real money).

Spring Clean Your Finances

Spring is not only a great time to put away the winter clothes and deep clean the house. It is also a good time to check in on your finances. Remember those beginning of the year goals like saving more, meal prepping and going to the gym (which by now may have tapered off)? This time of year is great to spring clean your financial goals and set yourself up for success the rest of the year.

Here are a few things to help with the Process:

1. Debt

One of your goals this year may have been to tackle debt. Check in on how you're doing with that.  Are you meeting your repayment goals? If not, what do you need to do now to get back on track? Identifying why you have fallen off track on debt reduction can also point to other areas that you want to refresh in your financial picture.

2. Savings

Now is a good time to check to see if you have established your emergency fund. Your emergency fund should be three to six months living expenses. If you haven't done so yet, this should be moved to the top of the priority list. You should also check into your other savings goals for the year: Are you planning a vacation, saving for a downpayment on a home? Whatever your goals are ensure that they are being met.

3. Budgeting

How have your spending habits been progressing? Are your expenses lining up as planned, did you overindulge or have an emergency happen? If so you may want to revamp your budget or try a different budget methodology - whatever works for you.

4. Taxes and Financial Documents

Review your taxes and other important financial documents. It is wise to keep tax documents for at least seven years, so make sure to file those away safely. It may also be a good idea to digitize your bank and/ or credit card statements and keep them in a folder on your computer. Make sure to have a back-up of this somewhere. 

Review your credit reports thoroughly! Check for errors and any indication of identity theft. While you're at it check your credit score.

5. Become Financially Savvy

Financial literacy is key and there are many ways to up your game in this department. Talk to a friend that knows more about a particular financial topic than you do, follow a few finance experts on social media, read books, listen to podcasts, subscribe to the Wall Street Journal or Financial Times, attend seminars. There is no excuse for being uninformed in this department. Information is out there, you just have to find it.

These are only small steps but they are very important ones. Having a solid financial plan will help you avoid pitfalls. What kind of financial spring cleaning plans do you have?