Financial Planning Checklist for Dental & Medical Professionals
I can’t believe I’m saying this but, a new year is fast approaching! I don’t know about you but this time of year usually means getting my financial ducks in a row (it’s always a great time to do this). As 2022 approaches, let’s start to think about ways we can improve and be better for our future selves. One way to do this is to re-assess to finances. Here’s a quick checklist to follow:
Create and Stick to a Budget
Develop good financial habits early by setting a budget. There are several guidelines out there as to how an ideal budget should be set up. I personally follow the 50-30-20 rule (with some variation). Essentially this means, 50 percent of your money each month should go to essentials like bills and housing, 20 percent should go towards your financial goals like savings, investments, saving for retirement and paying off debt/student loans, and 30 percent should go towards wants like vacation, entertainment, etc. If you want to, you can switch the 30-20 around if that makes more sense for you. Of course, your budget sometimes need a little wiggle room but for the most part try to stick to this plan. Automate it so that you don't have to think about it.
Build an Emergency Fund
Make sure you have at least three (3) to twelve (12) months of funds saved up for a rainy day. Personally, I think 12 months is a good buffer. This is where part of the 20 percent savings portion of your budget should go, and it's there in case you lose your job, become ill, or encounter an unexpected expense. Keep this money in a separate savings account at a separate bank from your checking account and forego a debit card for that account. Also, automate your contributions. Ask your employer to direct debit a portion of your salary into your emergency fund account or you can do this yourself. You can also consider placing the funds into an account with high yield interest. Another smart thing to do is put this money in a short term investment vehicle where you can access it immediately if needed.
Create a Plan For Student Loan Repayment
The pandemic gave us a nice break from the pressures of repaying student loans every month. Hopefully we were smart about taking advantage of the 0% interest period as the end of that is fast approaching (after Jan. 31, 2022). Explore all the options for student loan repayment that is available to you and choose the best one for your situation. Look into options like public service loan forgiveness (PLSF), the different repayment options available through the federal government and/or take advantage of the benefits of student loan refinancing or consolidation. If you are still not clear about the best option for you, seek a professional help. I have personally used Travis Hornsby, The Student Loan planner and he was able to help me figure out a repayment option that fits my goals all while saving me money in the long run.
Pay Down Debt and Build Good Credit
All debt are not created equal. There is what we call good debt and there's bad debt. Things like credit card debt are considered bad debt because it grows pretty quickly and doesn't help you in the long term. Interest rates are usually higher and can take much longer to pay off. On the contrary, student loans are considered good debt because it's an investment into your future earning power. Put as much money as you can towards credit card bills first starting with the with the one with the highest interest. Once that's paid off, prioritize the next highest interest debt, and so forth. Also consider automating the contribution to your debt payment so that you never have to worry about a missed or late payment.
Protect Your Paycheck
An injury or illness could limit your ability to practice. Ensure you have enough disability insurance coverage to cover you in case of sickness or injury. Supplemental insurance options are available specifically for health/medical professionals, but be sure you understand how the policy defines total and partial disability. Finally, remember to update this coverage as you grow in your career and into your practice.
Put Additional Protections In Place
As your career grows, explore the various life circumstances and get the right insurance to protect against potential impacts to your budget:
Malpractice Insurance
Life Insurance
Renters/homeowners Insurance
Auto insurance
Umbrella Insurance
Save and Invest For Retirement
It is really important that you get on this early! It is vital that you prioritize creating and contributing to a retirement fund and take advantage of compounding interest. Compounding interest will do a lot of the hard work for you if you start early. Try to maximize your contributions and take advantage of any match system your job has to offer. If your job does not offer retirement options, you can do this on your own. Speak with your financial advisor and your accountant about the tax benefits.
Explore Attorney Assistance
Utilize attorney expertise to review employment contracts, help protect your assets from malpractice, maximize tax planning and discuss estate planning.
Start a College Savings Plan
You certainly know the value of a good education - and the cost of getting one. If you have a child or children and their education is a priority, start saving now. A 529 plan is a great place to start.
Talk To a Professional
Financial planning can feel overwhelming, but it doesn’t have to be. A financial representative can help you design a plan and implement strategies to meet your specific goals with confidence.
Getting your finances together means stability, security and dear I say it, freedom. It’s okay if you don’t have all this together just yet. The important thing is that you start, now. I will have the 2022 planner, budget and financial tracker ready in a few days so be on the look out for that. Let’s make 2022 the year we get our lives together. Our future selves will thank us for it.
