GUIDE
July 1, 2022
The Complete Guide to Personal Finances for Nurses

Nursing may be a calling, but that doesn’t mean that getting there is easy. The profession requires a significant investment of time and money, and once you’ve been licensed, you’re faced with a whole new set of challenges. 

Knowing how to effectively manage your personal finances – including paying off debts, growing savings, and being ready for emergencies – is important for everybody, but it’s especially essential for nurses, whose budget plans can be complicated by forces beyond their control.

In this article, we’ll take you through the basics of personal finance that every nurse needs to be familiar with. Making the right moves now can lead to eliminating debt, building a nest egg, being prepared for emergencies, and even buying your own home. The more you know, the better your financial decisions will be.

Part One Why Nurses Need to Pay Attention to Their Finances

Nurses face some unique challenges when it comes to savings. Here's why nurses, in particular, can't afford to not be financially savvy. 

1. Nursing School is Expensive

As nursing school tuition continues to rise, more nurses are faced with borrowing money to achieve their career goals, and many are carrying high student loan debt.

2. Nurses Aren’t Taught Financial Literacy in School

Unlike some other professions where you may take accounting or finance classes, nurses aren’t taught about their finances, at least not in school. And this can lead to mistakes like overdrawing their checking accounts or running up credit card debt. Or bigger issues like choosing a student loan with incredibly high interest rates or not saving for retirement until it's too late.

3. Shift Work Can Cause Additional Financial Headaches

Unusual shifts and irregular hours make schedules unpredictable and stressful and leave little time for financial planning. One of the more challenging aspects of shift work and pay per hour is the mindset it creates. 

  • Want to go on vacation? Work an extra shift.
  • Want to buy a new car? Get a per diem job.
  • Have to pay for your childs braces? Work that OT and prime time. 

This mentality, unfortunately, can also create problems. Nurses tend to rely on the ability to pick up extra shifts or landing a per diem gig. In reality, these shifts and jobs might not always be there. It’s important to not get into the habit of thinking, “Oh, I’ll just work more to pay for that.” This might be a short term money solution but it is not feasible  or sustainable in the long term.

4. Paying for Your Own Work Essentials

Nurses are often asked to pay for some of their own work supplies, including uniforms and stethoscopes. They may have to pay for their own parking, and many find themselves so short on time that they grab expensive meals where they work, or pick up food on the way home.

 It’s no surprise that they rarely have enough money to set aside for savings. But it’s still possible – even with unexpected expenses, debts, and bills, to set up an emergency fund, pay down your debt, and grow your savings.

5. Retirement 

Most full and part time nursing jobs will offer employees 401K and 403B retirement options. However, this isn’t always the case for per diem employees. Now, there are a handful of healthcare systems that will offer them, but this is not the norm.

 Nurses who ONLY work per diem jobs will need to figure out their own plans for saving for retirement!

Per diem nurses will want to open a seperate retirement account that might be a Traditional Roth IRA. Even if you do not want to open an IRA or a fund specifically for retirement, open a separate savings account. Use this savings account for retirement only. Do not use it as a “rainy day fund” or “for emergencies”.  

Because most per diem nurses will not have retirement accounts from their hospital they will also lose out on the matching aspect. While it might only be anywhere from 1 percent to 6 percent per paycheck and this might not seem like alot. It is free money from your employer and could be thousands of dollars every year.  

6. Travel Nursing

Travel nurses are also in a unique position when it comes to retirement. Most travel nurse agencies do offer retirement options with company matching but only while on assignment. 

Like per diem nurses, travel nurses only get paid when they work. So if you are planning on taking time off in between assignments to travel, remember, you won’t be getting paid. For that reason it is very important to budget and save appropriately.

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Part Two Budgeting for Nurses

Setting aside money for the future is important, and so is paying off debt and having an emergency fund. It’s hard to know where to start, but your first step is always to create a budget that identifies how much money you have coming in and what your expenses are. 

Budgeting is essential because there will not always be overtime or extra shifts available and you do not want to factor that into your monthly income.

Also, if you hold a per diem or travel nurse position - you will only get paid if you work. If you are cancelled from your per diem shift, or traveling in between assignments, you will not be earning a paycheck. 

How to Set a Budget as a Nurse

Budgeting can be overwhelming, especially if you have never done it before. It’s important to keep track of all of your egular necessary expenses, including:

  • Rent or mortgage
  • Groceries
  • Transportation
  • Utility bills
  • Subscriptions 

What’s most important about creating a budget is that it gives you a clear sense of how much money you have left over – if any – after you subtract your expenses from your income. 

If you are spending more than you’re making then you either need to cut down on your expenses or find a way to earn more. Many people find creating a budget eye-opening. It’s a valuable exercise in understanding exactly where your money goes.

Prioritizing Your Money

Once you’ve created a budget, you can set your priorities. That may be contributing every week to a savings account with a separate amount set aside for emergencies, or you may find it makes more sense to start by dedicating excess income to paying off your debts.  

Top Budgeting Tips for Nurses

  • Know your weekly income
  • Don’t have the mindset of “working an extra shift to pay for vacation”
  • Track your expenses
  • Rank what is most important for your “fun” money (ie. shopping, eating out, experiences)
  • SAVE!
  • Spend less than you make
  • Plan for emergencies

Part Three Should Nurses Focus on Savings or Debt Payoff?

Savings is important, but so is being smart about your financial decisions. Many nurses find that it makes sense to winnow down their debt before they work to save significant amounts of money. 

Each situation is different, so the question that you have to ask yourself is how much being in debt is costing you:

  • If you are carrying credit card debt, there’s a good chance that you are paying 15-20% interest for any amount that you’re carrying from month to month, plus fees if you’re not paying the monthly minimum.
  • Your first goal should be to pay off high-interest debt, and perhaps set aside a small amount at the same time into your emergency fund. Even setting aside $25 a month can add up quickly over a few months, and may save you from turning to your credit card again. 

Once you’ve addressed those two goals you can start dedicating excess cash to savings.

Part Four Do Nurses Need an Emergency Fund? 

An emergency fund is money that you set aside to help when the unexpected happens. There are some unanticipated events that are minor, one-time things like an appliance or automobile repair. 

Emergency funds are more important than ever because most employers are no longer covering time off for certain medical conditions, including covid. 

What exactly does this mean? At the beginning of the pandemic if a nurse got covid, you were given the appropriate time off and paid for your shifts. Now, as the pandemic lingeries on and covid is becoming the norm in terms of contagious dieases, healthcare systems are no longer offering this time off pay. 

Emergency funds are also needed if you are a travel nurse and want to take time off in between assignments. If you are planning on going back to school for an advanced nursing degree and need to cut back on your bedside hours or a per diem only employee.

What Should Be in Your Emergency Fund?

Traditionally, experts have suggested having a cushion that represents three-to-six months worth of living expenses set aside to cover this type of situation, but today’s economists believe that this is such an unrealistic goal that it actually keeps people from even trying. 

Instead, look at the budget you created for yourself and try to set aside the amount represented in your monthly expenses. Having this amount set aside will provide you with enough cushion to cover most unexpected fees, and will at least give you some breathing room if your emergency expenses are significantly higher.

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Part Five Retirement Planning for Nurses

As we touched on earlier, retirement planning is even more important for nurses, particularly if you’re a per-diem nurse who’s not getting a traditional retirement package.

Though it may feel like they’re one and the same, there’s a big difference between putting money in savings and putting money away for your retirement. A retirement account is specifically for you to rely upon once you’re no longer earning an income. 

Depending on your age, retirement may feel like it’s a million years away, or right around the corner. Whether you fall into one of those two categories or somewhere in-between, it’s essential to have a plan for your retirement. 

Types of Retirement Plans

401K

401(k) accounts are employer-sponsored tax-advantaged retirement accounts that allow employees to make automatic contributions into funds directly from their paycheck. 

Nurses will find that most hospitals and other employers offer 401(k) accounts to their full-time staff. 

The tax advantage offered depends upon the exact type of fund that your employer offers, but is either realized by being deposited before being taxed — thus lowering your taxable income — or when it is withdrawn in retirement. 

Many employers will match employee contributions up to a certain point, allowing your retirement account to grow substantially faster. 

The government limits how much an individual employee can contribute to a 401(k) account each year. For 2022 the annual contribution limit is $20,500, or $27,00 for those who are age 50 or older.

Traditional IRA

IRA accounts, or Individual Retirement Accounts, are available to anyone, though there are restrictions on contribution levels based on annual earnings. Even if your employer offers 401(k) plans, you can still open additional IRA accounts. 

Traditional IRAs allow you to deposit money and then deduct the amount you contribute from your taxable income as long as you make less than $62,000 if you are single, and less than $99,000 if you’re married. The money is not taxed until you withdraw it. People who earn less than $31,000 per year are also entitled to additional tax credits if they make deposits into a traditional IRA. 

The funds that you deposit cannot be withdrawn until you turn 59 ½ without having to pay a penalty, and you are limited to just $5,500 per year in contributions, though those over the age of 50 can deposit an additional $1,000. This number changes each year with inflation.

Roth IRA

Roth IRA accounts also offer tax advantages, but they do so in a different way. 

The money that you deposit into a Roth IRA has already been taxed. Though that eliminates the benefit of reducing your taxable income in the year that you deposit the funds, the earnings grow tax-free: you can withdraw  anytime after you turn 59 ½ without penalty, as long as the account has been open for five years.

Roth IRAs have maximum annual contributions of $6,000 for single, head of household or married filing separately/living apart, or $7,000 if you are 50 or older. 

Maximum contributions are lower for those who earn more than $129,000 and are not permitted for those who earn $144,000 or more. The maximum contribution for married filing jointly taxpayers is also $6,000/$7,000 for 50 or older, with no contributions allowed for those earning $204,000 or more, and contributions lowered for those earning over $204,000.

Part Six Investing for Nurses

Investing is an entirely different activity from saving. Though both financial activities are important, they have different goals and are appropriate at different times. 

Should Nurses Invest?

While saving puts money away into accounts that are both safe and quickly accessible, when you invest you are purchasing something that you hope and believe will increase in value – but there is no guarantee that it will. 

Though you choose to invest in assets that are considered conservative, there is always a level of risk involved in investing. 

You can make an enormous amount of money by selecting investments that gain significant value, but those same selections have the potential to decrease in value, leaving you with less money than what you started with.

Investing is a long-term activity that should come after paying down your debts and meeting both your emergency and nest egg savings goals. You should only invest money that you will not need within five years.

Investment Options

401(k)

A 401(k) is both a retirement account and an investment vehicle. They are a particularly good choice for nurses whose employers are offering a matching program, as your contributions are immediately increased. 

Financial experts encourage anybody whose employer offers a matching contribution to contribute at least enough to take advantage of this free money.

Stocks

Purchasing stock represents buying shares of ownership in a public company.  You can purchase stock on your own, but it is usually a good idea to open a brokerage account with an online broker who will make recommendations based on your investment goals and your level of risk.

Bonds

Bonds are fixed-income instruments that are issued by governments and companies to raise money by borrowing from investors, usually for specific projects. 

When an investor purchases a bond, they receive a promise that their money will be paid back in a certain amount of time, with interest.

NFTs

Officially known as non-fungible tokens, they represent lines of blockchain code that represent a one-of-a-kind object. 

NFTs are a relatively new investment asset that few people truly understand, and as a result, they are viewed as both potentially valuable and potentially risky.  

Cryptocurrency

Cryptocurrency is another new asset class that is viewed as highly speculative, carrying significant potential as well as risk. It is a type of digital currency that is not linked to a central bank or controlled by any central government or authority. Most are based on public blockchain technology

Part Seven Buying a Home as a Nurse 

Buying a home is a nearly universal goal. Whether you’re looking for a condominium, a townhouse, or a single-family home, it takes plenty of planning, to save enough, to qualify for a mortgage with optimal terms, and carry the costs of moving. 

Purchasing a home as a nurse can be complicated. If you are a straightforward full time or part time employee, it is easier because you will be earning a set paycheck every two weeks. 

Travel nurses and per diem employees will find this more difficult. Because of the irregularity of shifts and paycheck, mortgage lenders might want to see paychecks from the past year, tax returns, or even a letter from your employer. The best option is to discuss your situation with a mortgage specialist. 

Nurses may also be eligible for first-time home buyer assistance programs and specialized programs specific to your profession. You can read more about these options on Nurses.org, in our article 4 Tips To Get The Best Mortgage As A Nurse (or Travel Nurse).

Part Eight Taxes for Nurses

Your nursing wages are taxable, and so too are some retirement benefits or pension payments, unemployment benefits, sick pay, and fringe benefits. 

You also have to pay tax on unearned income from interest, dividends, royalties, virtual currencies, and profits from the sale of assets. But they will be handled differently depending on whether you work for an employer like a hospital or whether you're self-employed:

Traditionally Employed Nurses

If you are an employee, your employer will deduct the taxes that you owe based on your wages and the personal information that you provide to them from each of your paychecks and submit to the government on your behalf.

Self-Employed Nurses

If you are self-employed then you are expected to calculate the amount that you owe and pay it quarterly.

Deductions for Nurses

Smart tax planning and knowledge of the deductions and write-offs that you are entitled to personally and professionally as a nurse can make a significant difference in how much you owe the government (and in how much you can get back). Here are some of the top deductions you can make as a nurse!

  • Uniforms, including scrubs, medical shoes, and scrub coats
  • Equipment, such as your stethoscope, pen lights, scissors, etc.
  • Licensing fees, i.e. anything you pay to keep your nursing license, or any state registrations
  • Continuing education costs, including the fees, meals, and travel to conferences or CE courses
  • Expenses related to staying educated in your profession, such as journal access fees, subscriptions to publications in your field, and professional organization membership dues

For more information on optimizing your taxes, find more information in our Best Tax Tips for Nurses article.

Part Nine Being Financially Healthy

As a nurse, you know how important it is to maintain sound physical, mental, and emotional health. Your financial health is equally important for a successful future. 

The more you know, the more effectively you will be able to budget, manage your debt, and achieve your savings, investing, and retirement goals.

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