7 Steps to Getting Your Finances in Order

Personal finance is definitely not the most exciting thing to learn about, however, once understood, is very rewarding and affects us all. Nurses have the opportunity to make great money, especially travel nurses. Healthcare is a steady field (unfortunately, there are always sick people) combined with licensed work (RN; not everyone is qualified) makes for a situation where salaries are very favorable. However, the problem is that not all of us have a business or finance background, and personal finance is not something that is taught in high school (although it should). Furthermore, we are left to learn on the fly and/or hopefully have had parents/family/mentors who have modeled good behaviors around money.

It is actually not unrealistic to make well over six figures when traveling, but the key is to be efficient with this money and keep the money you make. After all, no one wants to be making $100,000 a year and living paycheck to paycheck.

My fascination with personal finance stems from my seemingly crippling debt upon nursing school graduation. I HATE to feel like I owe anyone anything, so the fact that I could be indebted to Sallie Mae for years and years had me very anxious, to say the least. I also wanted to set myself on a good track for retirement because I definitely don’t want to work forever. Below are some of the first steps you should take to get your finances in order. Resources will be provided at the bottom for further reading.

1. Stop, Assess, Make a Budget

Essentially, there are only two ways to have more money. They are very simple.

  1. Make more money
  2. Spend less money

To a point, you can’t make any more money due to the limitations set out in front of you (e.g. wage cap, no overtime, not enough hours in the day). In nursing, we mostly work with hourly rates, meaning we trade hours for dollars. Sometimes, I use this analogy to see if it’s worth it to pick up that extra shift when I know that all I’ll be doing is catching up on some TV series.

When it comes to spending less money, it can be difficult but will have a much larger impact. It always seems like we can spend money much faster than we can make it, so by this logic it only makes sense to focus on this aspect more. You don’t have to totally cut out the frills (e.g. eating out, entertainment) nor does it have to be immediate. It may feel less of a struggle if this process is done gradually. A tactful way to do this is with a budget.

There are some great tools out there that help with this. The one that I’m most familiar with and have been using for about five years is Mint.com. Mint is free, has the ability to create and tweak budgets, and allows the synchronizing of all of your accounts so that you have a better picture of your overall financial situation and don’t need to input any transactions. Other options include YouNeedaBudget.com (YNAB) or Personal Capital.

Once you have a good idea of where your money is coming and going, you have the ability set goals and will have a better financial foundation.

While we’re in the mode of getting our finances in order, it might be wise to also check an estimate of your FICO credit score: Discover Credit Scorecard, Mint, Credit Karma, etc.

2. Start an Emergency Fund

Travel nursing can be rewarding and exciting. However, it also has the potential to be nervewracking and unstable, especially when you’re coming down to the last minute to secure a new assignment. A way to combat these feelings of anxiety and promote strong financial health, it’s important to build an emergency fund so that you are secure in the worst case scenarios.

Emergency funds usually consist of anywhere between three to six months required expenses. This is why budgeting is an important first step (so that we know how much money we need to live). If you have high-interest debt like those from credit cards, it’s beneficial to save only one month of expenses and pay off those debts first, then proceed to save for the three-to-six-month fund. It’s also important to avoid carrying a balance on your credit cards. This fund will act as your “get out of jail free card” if you run into unplanned expenses because you won’t have to put any expenses that you can’t afford on your credit card. A credit card is NOT an emergency fund.  Just to clarify: you can use credit cards, just don’t carry a balance past your due date because the interest can really be crippling.

When creating your fund, it’s important to have it available (i.e. cash). In order to have it accessible and separate from your other finances, it might be beneficial to start another account. A good option is Ally Bank, an online bank that has favorable interest rates on savings accounts. You can also set up recurring account transfers so that you can continue to fund your account automatically.

3. Enroll in Your Company’s Retirement Plan

There are many advantages to enrolling in your company’s retirement plan. The first being that it reduces your tax liability by siphoning money from your paychecks before taxes. Of course, there are specific rules to each product, but the general guidelines are that you should keep this money in the plan until retirement age. The longer your money has to grow in the market the better. If you withdraw funds early, you are bound to pay penalties and interest on the borrowed amounts.

Another perk that may be available to you is an employer matched contribution. This is essentially free money. Basically, your employer says has the opportunity to contribute to your retirement as well. For example, the 401(k) plan may be structured in a way that your employer offers 50% matching of the first 6% of your contributions meaning that you automatically have a 50% return right from the start! Sometimes there are vesting periods which basically refer to the length of time necessary to be with an employer in order to keep the contributions made by the employer. The contributions made by you are always yours though!

A great deal of power with retirement plans comes directly from the employer match. Make sure you are saving the required percentage to receive the maximum match amount by checking your plan information. If there’s no employer match with your plan, it might still be wise to use a small percentage (2-4%) any way to allow the compounded interest and the market work for you. If you change companies between assignments, there’s always the opportunity to “roll over” your old retirement plan into your new one as well.

4. Pay Down Your Debts

The debts we are most concerned about here are those greater than 4%. Obviously, the higher the interest rate is the greater the concern and more immediate the response. The goal is to use the remaining portion of your income as allocated in your budget to make the minimum payments on all of your loans and dump the remaining amount into the loan with the highest interest rate. When that loan is paid off, then you will use the money that you had budgeted to pay that loan and dump it into the loan with the next highest interest rate and so on. This is called the “avalanche method.” Another method exists where you attack the smallest loan amount in order to reduce the numbers of loans, called the “snowball method.” However, this method is will end up costing you more in the long run. A good website to help you formulate a plan/schedule is unbury.us.

In order to relieve the burden of interest, it would probably be a good idea to see if you can refinance your loans with a different servicer in order to reduce your interest rate and possibly consolidate your loans. When refinancing my school loans, I was able to refinance from an average weighted interest of nearly 8.5% down to 5.49%. 

5. Contribute to an Individual Retirement Account (IRA)

After we’ve got a handle on our debts (which may take a while), the next step is to contribute to an IRA for the current tax year. You can also contribute for the previous tax year if it’s between January 1st and April 15th. Our goal here is to save up to 15% of your gross income until reaching the annual limit of $5,500.

There are two types of IRAs: Traditional and Roth. The main difference between these is when you pay the taxes on the money. Traditional IRAs have you pay the taxes when you start withdrawing the money during retirement. Meanwhile, Roth IRAs have you pay the taxes up front but do not require that you pay taxes on the money during retirement. You may need to do a little bit more research to see which product best fits your specific situation.

6. Save More for Retirement

When it comes to retirement, we want to save somewhere in the ballpark of 15-20% of our gross income before moving on to other goals. As much as I love nursing, I know my body won’t be able to do it forever so it’s important for me to know that my financial ducks are in a row when it’s time for me to throw in the towel.

After we’ve funded an IRA, we can circle back and increase our 401(k) contributions to exceed only that of our employer match and up to the limit ($18,500 in 2018) as our budget allows. Remember that this must be done from payroll deductions and cannot be funded with outside money.

7. Save for Other Goals

Think about what’s important to you and save for it. Vacations? A downpayment on a house? Early retirement? Take a few months off during the year? A new car? Whatever it is, it basically comes down to two options that we can pursue here: 1) early retirement or 2) more immediate goals.

The way that you save will depend on these goals. If it’s more short-term or under a five-year time frame, you’ll need to have the money accessible (i.e. savings accounts, CDs, or I Bonds). If your goal is further out than five years, then you can accept a bit more risk and can use a balanced index fund or a fund that uses a balance of stocks and bonds (percentage of stocks is usually 100 – [your age]).

Conclusion

This will obviously not all happen overnight and will take some time to get rolling. The important part is that you have a plan and have taken steps to improve your financial situation. Keep pushing forward and take time every once in a while to revisit your progress and make adjustments as time goes on. As you progress, also make sure you watch out for “lifestyle inflation” and use your money wisely as to not waste your hard-earned dollars.

For more information on the topic, the following may help:

Rich Dad Poor Dad by Robert Kiyosaki

Set For Life by Scott Trench

 

The above guidelines have been adapted from a number of sources including reddit.com/r/personalfinance

How Does Pay Work?

One of the main questions people have in regards to travel nursing is how compensation works, and rightfully so. It makes sense to want to know how you will be paid for your efforts in the hospital and for the potential inconvenience of being away from home. This can be a little complicated, so don’t get intimidated before we start. I will do my best to simplify the process as much as possible without sacrificing the integrity of the information presented. Please also remember that this is very much from the point of view of a traveling nurse. There are many many traveling nurses with countless staffing agencies so it would be nearly impossible to depict every situation as it applies to individuals and the agencies they work under. That said, I will try to explain how compensation works in a way that can be applied to the majority of agencies that I’ve come across. The best way to visualize how compensation works is to think of your compensation as going into a pot. Keep this “pot” in mind as you continue to read.

As I begin to write this, I empathize with math textbook writers. You may notice that there are more images and spreadsheets to explain as it may be better than trying to explain with words.

Bill Rate

You are earning the agency you work for money by working at the hospital during your shifts.  Your company technically bills the hospital for your services per hour. This amount of money that is paid to your company per hour worked is called a bill rate. The hospital and the company have already agreed upon a bill rate at this point for which to pay. This was conducted in the contract between the hospital and your company. Some hospitals pay for contracts upfront, and others pay it like they would an invoice or credit card statement. I imagine that it differs based on relationships and agreements already in place. However, none of this concerns us. The bottom-line is that you work, your company bills the hospital at a predetermined rate for your hours worked, and then that money gets placed in your pot.

bill rate

Company Cut

The money from the hospital gets paid to your company and gets placed in your pot. From your pot, your company takes a portion for services provided. The way in which companies do so differ. Some companies take a percentage where others charge a flat fee. It’s important when interviewing companies and recruiters that you ask how they go through this process. Depending on how you feel, you may be more inclined to work with one model over the other. However, you may not at all feel this way which is okay too. Just know that the incentives for each model are different. With the flat rate model, they may offer you as much as they can right away because they work more towards acquiring higher volumes of contracts. Whereas the percentage model may be more inclined to offer in order to submit bigger price-tag contracts to make a juicer pay-out. Neither way is wrong as long as you look out for your well-being, analyze the packages, and research the areas. Following this process, the remaining amount is yours and reflects what many companies will refer to as your gross pay (or pre-tax pay).

gross pay

Keep in mind that the contract your company and the hospital have is different than the contract that you and your company have so the payout is different. Remember there are services that your company provides. It is not common practice for companies to share what they are charging the hospital. They typically will not mention bill rate, and only focus on gross pay when quoting pay packages. In order to keep a working relationship, it’s important to know what you’re worth and what the area pays. Again, what’s fair is fair.

Stipends

Remember that I am not a tax professional and that you should seek the assistance of a professional if you have any questions. My aim here is to summarize as best I can. For this explanation, I am assuming that you qualify for tax-free stipends because you are working away from home and duplicating your expenses, thus maintaining your tax-home. For more in-depth information, please see TravelTax.

This next part is tricky and can trip people up. All that remains in the pot is yours (and Uncle Sam’s in the form of taxes). However, there are certain ways that the money can be divvied up which is unique to travelers in order to maximize the take-home amount on our paychecks. There is the possibility for many travelers to qualify for tax-free stipends or per diems. These stipends can be etched into your gross pay to shrink your taxable income all while keeping your gross pay the same. The result is a lower taxable income amount, lower taxed amount withheld, and a chunk of tax-free money in the form of stipends or reimbursements.

taxable income

You might ask, “Why don’t I just have my pay situated in such a way that the whole part is in the form of these tax-free reimbursements?” Well, you’re not foolish for asking. The reason is that the taxed part of the income is reported W2 income, whereas the tax-free reimbursements/stipends are not. You will most definitely get audited and owe A LOT of money if your pay is structured this way. The general rule of thumb which I’ve seen is that your taxable hourly rate should never be less than $20/hr for the sake of increasing your stipend amounts.

But, wait! How do I know what the stipend amounts are for the area I’m traveling to? Well, the government has defined them here. Basically, you look up the area in which you are traveling – by city and state or zip code – and the site will populate the per diem rates (or a number of money employers are allowed to offer as reimbursements per day for employees who travel). The categories listed are 1) lodging and 2) meals & incidental expenses. Some companies will clump these together while others may list them separately.

 

When considering a contract, it is important to have a basic understanding of algebra and be able to shift focus and reverse engineer from gross pay to hourly pay rate and vice versa. Doing this will help you to ensure you are meeting that $20 minimum rule of thumb. It’s also important to note that we cannot exceed the amount of per diem guidelines in most situations. (For the exceptions, please see the resources listed above). Let’s create a quick example to hopefully illustrate this process a little better.

Say you wanted to work at Yale-New Haven Hospital in New Haven, Connecticut – one of the best health systems in the North East – starting in September 2017. After discussing with your recruiter, they determined that they have a contract there and your company is willing to pay you $1800 gross per week for 36 hours worked.

$1800 gross ÷ 36 hours worked = $50 per hour worked (before taxes)

Now that we have our pay rate, we need to see how the stipends can be maximized, so we look up Per Diem Rates for New Haven, Connecticut on the GSA Per Diem Rates Look-Up.

new haven per diem

Above we see that highlighted in the lodging rate for September and the meals and incidental expenses rate per day for the city of New Haven.

In this example, the monthly lodging rates are the same throughout the time span shown. However, some counties and cities, especially those that are more seasonal, may have varying lodging rates each month for which you have to take into account.

Also, remember that you are living away from home 7 days a week, but are working 3-5 days per week. Make sure to take that into account when trying to understand the math here.

Start with the $20/hr rule:

$50 – $20 = 30

(Hourly Rate) – (Rule of Thumb Taxable Hourly Rate) = (Stipend Potential Per Hour)

___

$30 × 36 = $1080

(Stipend Potential Rate Per Hour) × (Hours Worked) = (Stipend Potential Total)

___

($104 + $64) × 7 = $1176

[(Lodging Per Diem) + (Meals & Incidental Expenses Per Diem)] × (Days in a Week) = (Maximum Combined Stipend Amount Per Week)

___

$1080 < $1176

(Potential Stipend Total) < (Maximum Combined Stipend Amount Per Week)

Therefore, the stipend amounts we estimated using the $20 rule of thumb work because we did not go over the maximum limit as outlined by the government. However, if the estimates we made were more than the maximum limits, we would need to increase our taxable rate and do some tweaks.

The good news is, most companies do all of this math for you. I just feel that it’s important that you know how it is produced so that you can be more educated when negotiating rates and effectively bring home the most money possible by maximizing your tax-free stipends in your pack package.

Pay Periods

Pay periods differ from agency to agency as well as their pay frequency. Although, I find that it’s common for agencies to use a Sunday to Saturday pay period with payday each week on either a Thursday or Friday.

Other Benefits

Other benefits may include travel reimbursements to and/or from assignments, sign-on and completion bonuses, medical/dental/vision, and 401K plans. Some contracts or companies may offer all these benefits whereas others may not offer any. This allows for flexibility and creativity when forming a contract and relationship with a company. It all depends on the situation and the individual’s needs. It is important to remember that this all comes from your pot, so in reality, these are all just routes to receive the compensation you have worked towards.

Key Points

  • The money you earn working each hour is placed in your “pot” with various ways of being divided up before it reaches your bank account
  • Bill rate is the amount your company charges the hospital for your services
  • Pay rate is the taxable amount you receive from your company per hour
  • Stipends/Per Diems/Reimbursements are tax-free amounts for those who qualify
    • These provide a way to shelter your income from taxes and are typically paid out in weekly checks alongside your wage
  • “Blended rate” is what some recruiters will call the sum of hourly pay rate and stipends per hour amount
  • Pay periods and frequency are unique to each company
  • Benefits offer flexibility and creativity