Have you taken time to plan how you are going to build wealth as a therapist? Today we are going to dive into that topic.
I feel passionate, regardless of profession, that everyone should have access to the tools that they need in order to feel empowered to build wealth.
Let’s Look At The Data
According to zip recruiter, the average therapist salary in the United States is approximately $76,000 a year.
If you look a little more closely at the data shown above, that number is getting skewed quite a bit by a few folks who are earning close to $150,000 annually. Realistically, most therapists are earning closer to $55,000 a year.
As reported by the US Census Bureau, the average salary in the United States in 2021, was $70,000. This is fairly comparable to the average therapist salary.
So when I hear data saying that the average American has $4,500 in their savings account, I can’t help but assume that this is similar to the reality for most therapists.
Who Are These Tips For?
I know that there are folks reading this article who have $0 to their name. You would just LOVE to have $4,500 in your savings account. I see you, I hear you.
I also am thinking about the therapists who have been working for years or decades and still only have $4,500 in their savings account.
One way or another, I imagine that the average person could benefit from some tips and tools to help them build their wealth. This would allow you to have a rainy day fund, a comfortable retirement, or let you feel like you can give back or make your services more accessible for clients.
**Disclaimer: The content of this article reflects my thoughts and opinions and does not reflect or replace the advice of a professional. Please do your own research and hire the support of a financial professional where needed.
7 Tips to Build Wealth As A Therapist
I’m going to start with action items that you can do right now, and then move onto tips you can implement over time.
1) Build Wealth Right Away
- Start today! No matter what your income looks like.
- Don’t wait until your salary is higher “someday”.
- This is important because, the more that you can save today, the more you’ll have later.
- So saving a little bit of money right at the beginning of your career has the potential to become even more money than if you wait a decade and save a lot of money.
2) Know Your Numbers
- Empower yourself with numbers.
- Calculate what is left over when you subtract taxes, benefits, and regular life expenses from your salary.
- Often folks focus on their gross income, and lose track of how much the rest of life actually costs. Then they are surprised to find that they’re strapped for cash.
- Don’t wait to be surprised by what taxes or fees you will have to pay.
- I get it. It can be painful to subtract the taxes and other expenses from your gross income because you are left with a much smaller income to work with.
- But, this can empower you to know exactly how much money you have monthly to spend and save.
3) Live Below Your Means
- Try to live WELL below your means while still maintaining a sense of joy, and leaning into your values.
- Many therapists think, “Someday I will have more income, and then I will save.”
- I have a hard truth to deliver: once our income goes up, most of us don’t save any more money than we were before. Unless we were already saving money. Then it becomes much more realistic to continue to live with that habit that we have developed.
4) Invest Right Away
- Invest money right away in something.
- A retirement fund is a good place to start. If you want to learn more about retirement funds, I have a video that goes into more detail.
- It is important to save right away, regardless of how much or little it is. The money you invest will grow over time in a significant way.
- As an example: A 25 year old who is able to scrape together $100 monthly to invest in a Roth IRA account, and continues to do so for 10 years, will then have a savings that is worth $17,000. If they continue until they are 65 in this same manner, they will then have a quarter of a million dollars!
- Comparatively, if a 35 starts saving money, they would have to save over $200 a month to end up with the same quarter of a million dollars by age 65.
- Even if you can only save the tiniest amount of money monthly now, it will start to snowball over time. This will help you build wealth as a therapist.
- Your future self will thank you!
If all you do is implement these first four tips, you will radically change the trajectory of your financial future.
5) Change Jobs OR Raise Rates
- We have data to suggest that an individual’s income will go up if they choose to change their job.
- “…according to a new Pew Research Center analysis, half of workers who changed jobs saw their pay increase nearly 10%. The median worker who stayed put saw an inflation-adjusted loss of almost 2%.” (Ethan Steinberg, Forbes.com)
- Changing jobs also helps you learn new skills, which helps you continue to build your resume.
- For those of us in private practice, don’t forget to raise your rates! I have an article about how to raise your rate and how to communicate that with your clients.
- If you leave your rate the same, you are essentially giving yourself a pay cut because you have to at least account for inflation as well as increased expenses over time.
6) Watch For Lifestyle Inflation
- Lifestyle inflation is: when someone’s income goes up, then their spending skyrockets.
- When you start making more, you are able to afford to spend money on things that are important to you. But, many folks inflate their lifestyle so much that they don’t end up saving any more money even though their income has increased.
- This doesn’t mean you can’t enjoy nice things, but it is just a caution to be mindful of where your money is going.
- Remember to calculate exactly how much your net income is, and to continue to live within your means even with your higher salary.
- A good rule of thumb, is to try to save at least the same percentage of your income that you were before your income bump.
7) Diversify Investments & Income
- Anything you can do to diversify your income is helpful, because it creates a more stable portfolio to lean on, both in the present and the future.
- Make sure you have your money invested in different places.
- If 100% of your income comes from a single salaried job, then you’re suddenly out of income if you lose your job.
- If you have a side hustle going, then if one job goes away the other income is still there to support you.
That’s Just The Beginning
Phew! Okay, I feel like that was a lot. And still, I’ve only touched the surface on how to build wealth as a therapist.
Even though my part of the internet isn’t explicitly focused on building wealth, I feel very passionately that everyone should feel empowered with tools to build their wealth – regardless of income.
And, I have to express my gratitude to my husband. He is the one, between the two of us, who is very much into learning about how to be financially healthy. If it weren’t for him, I wouldn’t know any of the stuff I just shared!
Other Tips To Help
Part of building wealth as a therapist is learning how to wisely spend your money on your business ventures. I have an article with some ways that you may be wasting money in your private practice.
And, if you want to hear more about how to earn six figures as a therapist, I have a video that lays out three ways to make that possible.
Until next time, from one therapist to another: I wish you well!