Many of your patients will make resolutions in the new year to improve their health. Some may quit smoking. Others will change their diet, commit to exercise, or minimize stress.
Maybe these apply to you. Whether they do or not, a new year is a great time to review your finances and set goals for the future. Even if you’re confident in your financial wellness, there’s always room for improvement.
Here are five smart, simple resolutions to consider making for 2020.
1. Cover your assets
If you're a seasoned pro, this probably doesn't apply to you. (Although you you need to extend your coverage or switch carriers.) But if you're a medical resident in training, it's time to start thinking about your insurance options.
True own-occupation disability insurance
Many medical professionals rely on group disability insurance policies. But this is not the best way to protect yourself from injuries or illnesses that limit your ability to practice. In most cases, group plans do not provide the coverage that is comprehensive enough. They are also usually contingent on employment or group membership.
Make 2020 the year you protect your income with an individual disability insurance policy. Fortunately, there are handful of options for physicians who need a true own-occupation provision.
Term life insurance
Do you have family members who depend on your income? If so, an individual term life insurance policy is a must.
Like disability insurance, term life insurance is more affordable the younger you are. In fact, it may never be more affordable than it is today.
So even if you do not need it today, it's worth considering now if you plan to start a family down the road.
2. Save even more for retirement
Time is money. This old cliche is still very relevant when it comes to saving for retirement. The sooner you begin contributing and the more you set aside, the more you will potentially have for retirement.
If your employer offers a 401(k) plan, you should be contributing as much as possible. Take advantage of any matching funds your employer provides as well.
The money you contribute to a 401(k) is excluded from your taxable income. In 2020, you can contribute a maximum of $19,000 to a 401(k) if you are under the age of 50.
In addition, consider opening an IRA. If you switch jobs, this will allow you to roll your accumulated 401(k) assets into your own retirement plan. You can typically do this without any expenses or tax penalties.
3. Fine-tune your budget
If you do not have a strict budget that you currently follow, 2020 is the year to make it happen. It’s easy to spend every dollar we earn. It’s even easier to fall into this trap as a physician with a high income.
But no matter how much or how little you earn, you need to save money. Having money in savings helps you deal with emergencies and needs you simply cannot budget for. It also minimizes the need to borrow money and pay interest on credit cards.
Saving money is easier if you know where and how much you spend on household items, bills and other expenses. Creating a budget you can stick to --- no matter what tempts you to overspend --- is no small task.
4. Plan your estate.
Everyone has an estate --- whether you’re in school, residency or practice. It's crucial that you have a plan in place. But how you do so may vary depending on the size and complexity of your estate.
An estate plan provides written instructions for end-of-life care and how to transfer your estate following your death.
You may think you have years to create an estate plan. But as a doctor, you also know a life threatening accident or illness can happen to anyone at any time.
If you don’t have a detailed plan created, make this the year you cross it off your to-do list. And for those who do, review it with a trusted adviser to make sure it still represents your current situation.
5. Consult the pros.
Every new year brings change. You could earn a raise. Perhaps you will start your own practice. Maybe you will get married, have children or purchase your first home. (Perhaps all of the above.)
Then there are external changes that can affect you personally.
- Tax laws change.
- Interest rates move.
- Financial markets shift.
For these reasons, sitting down with professionals to review your finances should be an annual event.
Maybe you have several personal loans, medical bills, and credit card balances you want to consolidate. Maybe you're credit score is struggling and need to strategize how to improve it. Maybe you just need to develop better spending habits.
Whatever it may be, you do not need to tackle it alone.
Don't have a dedicated financial advisory team? Here are some tips to help you get started building yours.
Not all New Year's Resolutions involve money --- nor should they. But it's a common time to review your financial situation for a reason. If you choose do so, here are are five smart financial resolutions to consider:
- Cover your assets.
- Save more for retirement.
- Fine-tune your budget.
- Plan your estate.
- Consult the pros.
In doing so, you're setting yourself up for a financially healthy and happy year ahead.