10 Financial Baby Steps for White Coat Investors and How They’ll Help You Reach Financial Freedom More Easily

By Dr. Joshua J. White, Guest Writer

Well-known financial author Dave Ramsey suggested seven baby steps to help people reach financial freedom. Baby steps are important when you are just getting started. Small steps should reinforce confidence in your ability to make real progress, which helps to create real momentum. Ramsey’s baby steps get some things right, but significant adjustments should be made to more fully apply to The White Coat Investor community.

Financial Baby Steps Are to Help You Make Financial Behavior Easy

I love the idea of baby steps for finances: simple, feasible, and achievable metrics to reach financial goals. James Clear, author of the book Atomic Habits, said, “Whenever you want to change your behavior, you can simply ask yourself: how can I make it obvious? How can I make it attractive? How can I make it easy? How can I make it satisfying?”

Financial baby steps make it easier to focus on financial behavior and make progress through simple changes. Consistent, simple behavior is the key to making real and lasting changes. However, the baby steps that were suggested by Ramsey don’t address the unique circumstances of high income professionals, and they leave a lot of important early financial actions unaddressed.

Dave Ramsey’s Suggested Baby Steps:

Step 1: Save $1,000 for your starter emergency fund.
Step 2: Pay off all debt (except the house) using the debt snowball.
Step 3: Save 3-6 months of expenses in a fully funded emergency fund.
Step 4: Invest 15% of your household income in retirement.
Step 5: Save for your children’s college fund.
Step 6: Pay off your home early.
Step 7: Build wealth and give.

While saving $1,000 is a good first step, there are more important things to do first. Paying off all debt is hardly a baby step for those with significant student loans (like a large portion of white coat investors). To address the unique needs of The White Coat Investor community of high-income professionals, I have created what I think is a more suitable list of “baby steps.”

However, I invite all of us to break up these steps into even smaller personal baby steps to make it even more feasible. I also invite us to celebrate the smallest of successes along the way. It makes a difference! It reinforces our ability to change and increases our hope and confidence. This has been a game-changer in my life. Maybe it’s an extra $1,000 toward my student loans or scheduling a meeting with an accountant, but when I’ve celebrated my baby steps, my financial behavior has become more consistent. Yours will, too.

Here is my suggested starting list for White Coat Investor Baby Steps:

#1 Create a Written Financial Plan

A shocking 46% of white coat investors surveyed in 2024 did not have a written financial plan. If you have a plan written down, you have a much greater chance of following it and becoming financially free. If it is easy to do, and it can increase your ability to meet your goals, so why not do it? If you are reading this and do not have one, let’s change this right now. The best way to do this is to make it easy and simple. Take a piece of paper and write down topics of education, emergency fund, debt, insurance, giving, and retirement. Your first plan might not be all-inclusive, and that is OK. This plan should change over time. Even taking just a few minutes and discussing this with your significant other would be a huge step in the right direction. Answering these questions will help you write a simple financial plan:

• What do you want to do to increase your financial education?
• Do you have an emergency fund, and how much of one do you need?
• Do you have the insurance you need—term life, own occupation disability, umbrella? If not, what is your plan to get it?
• What debt do you have, and how aggressive do you want to be in paying it off?
• When do you want to retire? How much do you want to have saved up? How do you want to invest and what percentage of income do you want to be investing?

Need to get your financial plan in place? Check out the Fire Your Financial Advisor course! It’s a step-by-step guide to creating your own path to financial freedom. Even better, we now have separate tracks for attendings, residents, and medical students. Try it risk-free today!

#2 Regularly Give to Charity

This baby step might seem out of order, but giving to others has been shown to make us happier and, yes, even wealthier. If it truly makes us happier, it doesn’t make sense to wait until we have money to give.

Well-known author and Harvard business professor Arthur C. Brooks commented on why giving matters to our happiness. He said,

“It turns out that the data on happiness and charitable giving are beyond dispute. People who give to charity are 43% more likely than people who don’t give to say they’re very happy people. People who give blood are twice as likely to say they’re very happy people as people who don’t give blood. People who volunteer are happier. The list goes on. You simply can’t find any kind of service that won’t make you happier.”

He continued and cited his research on how giving affects people financially:

“If you have two families that are exactly identical—in other words, same religion, same race, same number of kids, same town, same level of education, and everything’s the same—except that one family gives $100 more to charity than the second family, then the giving family will earn on average $375 more in income than the nongiving family. And that’s statistically attributable to the gift.

I ran the numbers again, and I looked at volunteering. I found the same thing: People who volunteer do better financially. I ran the numbers on blood contributions and blood donations. Think about that—giving blood. You’re not going to get richer if you give blood, are you? Well, yes, you are.”

Maybe you decide to give blood one time per year, volunteer at your local food bank monthly, or give 10% of your income to charity. Whatever you decide, it seems clear that giving your time and money pays off in more ways than one.

#3 Start Increasing Your Financial Education on a Regular Basis

In my job in the emergency department, I need to be in the practice of improving my education regularly so I can be most prepared when difficult cases come through the door. Likewise, to be successful, it is essential that all of us have regular habits of financial education. This might include financial books, blogs, podcasts, or whatever you use regularly. Through The White Coat Investor website, there are many resources to help.

My personal education plan started with a goal of two financial books a year. My current financial education regimen includes:

• Reading or skimming the WCI daily blog post
• Listening to the WCI podcast weekly
• Reading 2-3 financial books per year on topics that I think I need the most.

It isn’t always easy to find time for more financial education, especially if it feels like another chore. The easiest part for me is to listen to the podcast. I listen to it at 2x the speed, and this usually takes me 20-30 minutes. I also listen while I am at the gym or driving to work so I don’t need to carve out extra time.

If you feel you don’t have the time or you don’t enjoy learning more about finance, I recommend starting with a tiny goal. Find the easiest and most enjoyable way to increase your financial education, and you will be surprised how it can affect you. Simple decisions like listening to a podcast increase the time that I think about my finances. And in turn, this increases my motivation to make changes that improve my financial future.

I have found that when I increase my financial education, my financial plan changes and my financial habits get better and better.

More information here:

I Was a Doctor for 13 Years with an Eye Toward Luxury Before (Finally) Starting My Financial Education

What We Learned Financially from Our Parents and How We’re Passing It on to the Next Generation

#4 Get the Insurance You Need  

This is an essential financial baby step that should be done expeditiously. After going through long and labor-intensive training to get where you are, it is imperative to protect your future income. Every white coat investor should consider their own insurance needs as a high financial priority.

Own Occupation Disability Insurance

Everyone just out of school who is not financially independent should have a robust disability insurance policy. Many of our professions are high-stress, high-intensity fields. The probability is higher than many think that, at some point in your career, you will become disabled. Like WCI founder Dr. Jim Dahle often says, getting a disability policy to protect our future income is a “no-brainer.” Learn more about how much disability insurance you should get here.

Term Life Insurance

If you have dependents, you should have this. It’s not a bad idea to get it even if you don’t, especially considering that the younger you are, the cheaper the insurance you can get. For many term insurance carriers, it can be around $30 per month for a $1 million policy.

Umbrella Insurance

Deciding whether to get an umbrella policy can be more complicated, but I think it is worth it to have a policy to protect you from more liability. Learn more about umbrella insurance here.

Are there other things you can do to protect yourself better—auto insurance, home insurance, domestic asset protection?

#5 Have an Emergency Fund to Cover 3-6 Months of Expenses

This is identical to Baby Step #3 from Ramsey. As Jim says, the more financially stable your life is, the less you need an emergency fund. It is important to have this fund as cash and that it’s easily accessible in times of need. How much should you have saved up? How much do you need? It is a personal decision, but you can start by analyzing your expenses and predicting what could go wrong in your life where having cash would mitigate some of the risks.

• Are you prepared to lose your job?
• Get injured and still be able to pay expenses until disability kicks in (usually at least three months)
• Loss of income
• Car repair
• Appliance replacement

It’s amazing how often emergencies happen to us. I recently saw a patient in the emergency department who had twisted her ankle while helping her toddler down the stairs and happened to break it in several places. Obviously, that was very inconvenient, but inconvenience and emergencies are the rule, not the exception. How can you create a fund that will help you sleep better at night?

#6 Create a Debt Management Plan with Credit Card or High-Interest Debt Being Paid Off First

I remember having a conversation with Jim once while I was in medical school after one of his lectures at a medical conference. Like him, I wanted to go into emergency medicine, and I asked, do you think it’s reasonable to set a goal to pay off $400,000 of student loans in four years? He said, “I bet you could do it in two years.” This answer inspired me. Paying off student loans in the first five years is totally feasible, and some have done it much sooner.

Obviously, if you have high interest debt, such as credit card debt, this should be prioritized before lower interest such as student loans. Should you use the snowball method? The idea behind the snowball method is to create momentum starting with the smallest amount and increasing confidence as you pay off this debt. Whatever your strategy is, I suggest creating small milestones that you can cross off to build up momentum.

Ideally, create a plan and get on track to pay off consumer debt and student loans within 2-5 years of finishing training. Maybe you are planning on applying for student loan forgiveness, so this might not apply as much—but the baby step is having a plan and getting on track to meet your goal.

#7 Invest 20%-25 % of Your Income Toward Retirement

With a long training time, our careers get a later start compared to the general public. While Ramsey suggests saving 15% of your gross income, I suggest that high income professionals save 20%-25%.

How much did you save last year? What percentage of your gross income did you save and invest? It’s so easy to increase spending, but what can you do to increase your saving? How can you make saving and investing easier? Is there an expense you can cut or a way you can make it automatic?

I’m not quite at my goal for saving and investing, so I’ve made plans to increase what I invest in 2024 and 2025. This is difficult to do. I expect to make partner in the next few months, and I have already planned to use that to max out and invest in tax-advantaged accounts. If that wasn’t an option, I would unwind some of my lifestyle creep and invest that extra money instead. This might include canceling subscriptions, decreasing the amount of eating out, or cutting down on an expensive hobby. Another way to make it easier to invest enough is to make it as automatic as possible.

For my investing, I find it easier to start by maxing out my HSA, Backdoor Roth IRA, and 401(k) accounts. Once this is completed, I invest the rest in taxable accounts.

More information here:

How I Failed and Then Mastered the Backdoor Roth IRA

How to FIX Backdoor Roth IRA Screw-ups

#8 Save for Your Family’s Future

Everyone has a different family situation, so preparing for your family’s future might not look the same as others. Do your parents have life insurance, a will, and sufficient retirement income? What needs to be done to prepare for your children’s educational or life expectancy expenses?

For your parents, I suggest that you sit down and discuss what they have in place for the future. Do they have advanced directives? A will or a trust? Sufficient medical insurance? Sufficient income to live off of in retirement? What can you do to help them?

For your children, figure out how you want to help them in the future. How do you want to prepare? Some save for college through 529s or save in a fund for when they might need it, like in their 20s.

Once you have the previous baby steps accomplished, it’s crucial to prepare to help your family. You decide how you want to help.

9. Regularly Review Your Financial Plan and Make Adjustments as Needed

Your financial plan is only good if you follow it and regularly review and update it. How often should you review your financial plan? I think it’s good to review your plan and make course corrections at least once a year. I have a goal to review it every six months. If you are married, I suggest making this fun and special. Pick a day once or twice per year that is easy to remember. Put it on the calendar in advance, and do what you can to set aside time where you both can be together with fewer distractions. Get a babysitter and go out to breakfast where you can talk things over for a few hours. Reward yourself by adding an activity you both like for afterward.

According to marriage researcher John Gottman, “Couples who talk about their hopes and dreams with one another openly are more likely to prioritize time and resources, including finances, and are more likely to create a sense of purpose as a couple and find happiness.”

I really enjoyed the blog post earlier this year that talked about how to maximize our resources of health, wealth, and time. If your financial baby steps are off to a good start, evaluate how you are doing with your health and time. It’s easy to work too much in pursuit of financial goals and to neglect even more important things. Even though I am still paying off my student loans, I realized I want to cut back on work hours to have more time. I also have seen great benefits from making simple changes to my life to maximize my time even if it costs more money (hiring a personal trainer, buying meals already prepped, and occasionally hiring someone to clean my house). I’d invite you to experiment in small ways like this and see if there’s a benefit.

More information here:

What We Can Learn About Work-Life Balance and Retirement from the French

It’s a Lifestyle, Not a Vacation

#10 Progressively Accomplish Financial Milestones

The first nine baby steps are more simple and are key to maintaining the most important parts of your financial life. Step 10 is the predicted product of all nine steps in action. With time and effort, each of us should be progressively checking off financial milestones. That can be 1) back to broke, 2) student loans paid off, 3) debt free, 4) paid-off house, and 5) eventually financial independence

Wherever you are on the path to financial freedom, you can do this! Wherever you are in the baby steps, keep up the good work! We each have different circumstances, but progress is the goal. Celebrating progress in our financial lives incentivizes more progress. Breaking these financial principles into small baby steps has given me hope and motivation, and I hope it will help you, too.

Are there other baby steps that would benefit WCI readers? What’s the order you would accomplish these tasks? Comment below!

[Dr. Joshua White is an emergency medicine physician who loves to play sports, sing, and teach. This article was submitted and approved according to our Guest Post Policy. We have no financial relationship.]