If You Do Nothing Else

Blog looked long, couldn’t read. I get it. You work too hard to worry about the details, and you know that you’ll be okay financially. You don’t have time for life hacks or tweaks and you’re okay not being financially independent in your thirties-but if you have ten minutes, do three of these four things. They are the fastest, lowest-input, hassle-free moves that will put you ahead of 95% of us (I made that number up, but it’s close.) It’s hard to put an exact value on this advice, but if I had to, it would be $1.4 million. Not bad for ten minutes. Read below for why.

Track your net worth while watching your loans, accounts, and investments in one place. I chose to use Personal Capital to do all of these things and monitor the progress towards positive net worth. You can alternatively use Mint. I’ve tried both and have found that Personal Capital is less day-to-day hassle from an email and troubleshooting perspective, but go with your gut. Both Personal Capital and Mint are free. You can use these for budgeting or just to gauge how much you really spend on specific things.

If you’re making money (residency, fellowship, side jobs): open a Roth IRA and set up an automatic withdrawal for $458 a month. Use it to buy an index fund like Vanguard’s VTSAX, VIMAX, or VTI, or Fidelity’s FSTVX or FSCKX. This will max your contribution out each year before you have a chance to spend this money. It’ll also give you the quickest, easiest investment choice that historically beats almost every individual stock picker, to the tune of 7-10% annually. At retirement age (assuming thirty years from now), that single month’s contribution will be worth around $4,239.71. If you do this starting in residency at 26 and keep it up until 65, it’ll add up to over $1.3 million. You can (should) tinker with how this is allocated down the road. Unless you’ve finished training, or love personal finance, now is not that time.

If you’re in school and can’t afford to set aside $458 a month: open a Roth IRA anyway. File a tax return where you report at least $510 in income, which can be from babysitting your nephew or selling your bike or donating your plasma one time. Claim the earned income tax credit ($510 for single filers), and invest all of it as above. That’s free money well invested. If you do this each year, this free money from four years of professional school will be worth around $43,585 when you hit 65.

Calculate the value of your time, and use it to make purchasing decisions: If you’re a resident, I’ve done the math for you. As an intern I made roughly $7.20 an hour (after taxes and insurance withdrawals). Keep that number in mind when you try to decide if you want to spend two hour’s wages on lunch or 11 hour’s work on a sweater.

If you’re a student, the calculation is different, because you’re probably not making much (even though I think you can and should). Instead, use the cost of a dollar after it’s been paid off at current student interest rates. If it takes you 20 years to pay off your loans and they’re at 6.8% like mine, every dollar will eventually cost $4.70 (4 years interest + compounding for 20 years). You’ll actually need to make more than that to pay that off after taxes, but since you’ll also refinance and hopefully pay it off faster, we’ll call it a draw. That means lattes cost $18.80 and taking care of a dog for a year (average $1,000) costs $4,700. My advice: live well by being dollar smart and penny stupid. Buy a bunch of lattes but no dogs, and only the sweaters that you need.