Start an Emergency Fund to Cover Financial Illnesses and Injuries
Physician Disability: An emergency fund is important for everyone, including physicians.
Regardless of where you are in your medical career, it is a good idea to have some liquid savings set aside to cover those little unexpected expenses that inevitably spring upon us all from time to time, such as unemployment and repair bills. Most financial experts recommend that clients maintain savings accounts with at least three to six months’ worth of income (or expenses, if they are substantially less) stored away. Of course, the real amount that you need to have set aside can vary substantially depending upon your circumstances.
The first step to having an emergency fund is establishing a place to put it. Most planners advise putting this money in something liquid, such as a bank savings account or money market fund. Of course, these accounts typically pay a very low rate of interest; those who seek higher yields may also want to explore some other low-risk alternatives. Internet-savvy savers can log on to internet banks such as Ing Direct or Everbank, who offer FDIC insured accounts that pay more than traditional brick and mortar institutions because of their lower overhead.
But the key to funding your emergency account is always to pay yourself first. Go through your budget and see where you can come up with at least $50 or $100 per month to put aside in your savings account. First, consider cutting some major items out of your budget, such as your cable TV subscription, cigarettes or other nonessential items. Eating out too much is also one of the biggest-and most common-villains in any budget. If you are in the habit of buying your lunch and coffee every day, then packing a lunch and making your own brew can free up a surprising number of dollars in your weekly budget, even if you still allow yourself to eat out once a week. Another option is to either reduce or stop your retirement savings program for a time in order to accomplish this. If you find that unacceptable, finding a second job to work for a few months may also be a viable method of funding this account; an extra 10 hours a week as a medical biller or coder for a season may be all you need to accomplish this. And if you have any items of value that you no longer need, this could be a good time to list them on eBay to see what you can get for them. Selling $500 worth of old junk will provide a nice addition to your emergency fund.
Of course, as you accumulate assets over time and get your debts paid off, your need for liquid emergency funds may shrink, and the cash portion of your investment portfolio may become large enough to cover financial hardships and unexpected expenses.