An Emergency Fund Is a Basic Financial Building Block

Anyone starting a career in medicine faces some early financial challenges, and saving money every month to build an emergency fund is an important step toward building a solid financial future.

An emergency fund is there to cover large, unexpected expenses like a major car repair, a medical bill not covered by insurance, an appliance repair,  or even an appliance replacement. Step one is to open a bank account designated just for your emergency fund if you don’t already have one. Even if you can only afford $50 a month, set up an automated draft each month to make sure you’re actively working towards having some financial cushion for emergencies. This way, when an emergency arises, you don’t need to rely on your credit card. You’re borrowing money from yourself and not a financial institution.

Most financial advisors recommend saving enough in an emergency fund to cover three to six months of household expenses. Those expenses include housing, car payments, food, entertainment, debt payments — enough so that your household continues to function if you lost your job. Keeping your emergency fund allows easy access to your money even though the interest rates are virtually non-existent.

Physicians still in residency or just starting their first contracts often ask whether it’s more important to pay down their student loan debt than to establish an emergency fund. Paying student loan debt obviously is important, but only make the required monthly payments. After considering your other expenses, commit to saving something in an emergency fund.

A few tips:

  • Save a regular amount each month or each pay period.
  • Use your tax refund and put it right into the emergency fund.
  • If there’s money left in the checking account after you’ve paid all the monthly bills, transfer some to the emergency fund.

It’s important to use emergency-fund money for emergencies only. Once you’ve got that fund where it should be, set up another savings account for “other than monthly” expenses. Those OTM expenses may include vacations, annual or semi-annual insurance premiums, gifts, and clothing. It doesn’t matter if your OTM account is a checking or savings account.

When facing a stack of pressing bills and loan repayments, an emergency fund may seem like a luxury. Emergencies happen to everyone, however, and building up that fund can prevent future financial struggles.

Spaugh Dameron Tenny can help you clarify your financial goals and determine your risk tolerance. Our advantage is that we have more than 50 years of experience, processes and specialization with physicians and dentists who have faced the same issues and challenges as you. So, whether you are well established in a practice, or just finishing your training, we invite you to explore our services.  We are conveniently located in the South Park area of Charlotte, on Congress Street.

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Bryce Miller, CFP®

Bryce Miller, CFP® Financial Advisor at Spaugh Dameron Tenny, LLC