Eight Resolutions to Improve Your Finances in the New Year

Financial planning is a process that can help you reach your goals by evaluating the whole financial picture, then outlining strategies that are tailored to your individual needs and available resources.

Why Is Financial Planning Important?

The term financial planning can be used to illustrate many things. It can be a comprehensive plan, focusing on several needs or goals simultaneously, or limited to specific areas such as establishing a budget, saving for a home, a child’s education, or retirement. A comprehensive financial plan serves as a framework for organizing your financial life. One of the main benefits of a financial plan is that it can help you balance competing financial priorities by clearly showing you how your financial goals are related, and how decisions made in one area subsequently affect the others.

What Does 2014 Have in Store for You?

Who knows how financially friendly this year will be? For that reason, here are some prudent steps you can take to keep personal finances heading in the right direction:

1 Reset your retirement savings. Most people find it easier to maximize their retirement plans by depositing a fixed dollar amount each month or a percentage of their salary. Instruct your employer to withhold enough each month for your 401(k) or 403(b) plan to ensure reaching the maximum contribution of $17,500 in 2014. Are you self-employed? If so, you can contribute up to $52,000 annually into a Simplified Employee Pension (SEP), Keogh, or Solo 401(k) plan for 2014. In addition, if you are aged 50 years or older by December 31, the maximum contribution increases to $23,000 for 401(k) and 403(b) salary deferrals, and $57,500 for Solo 401(k)s.

2 Refinance your home. There are still a variety of low-rate mortgages currently available for physicians looking to purchase a new home or refinance an existing mortgage. As you are probably aware, physicians, especially early in their careers, have rapidly expanding income levels and need specialized home loan products that allow for principal reduction and reamortization of their mortgage payments. Fortunately, in most cases, there are several programs that allow physicians to make big principal reductions, which trigger both lower mortgage interest rates and lower minimum monthly payments without refinancing. A good resource is Josh Mettle, a top- producing mortgage lender specializing in financing physicians, dentists, and other medical professionals in Salt Lake City, UT ( www.utahphysicianhomeloans.com).

3 Reduce your personal debt. Over time, some physicians seem to forget that any money borrowed needs to be repaid. Remember, leverage equals risk. It is best to pay your credit card balances in full each month to avoid paying any interest charges. However, if you must carry a balance, make sure your card has the lowest interest rate possible or apply for a low-rate credit card that allows you to transfer your current balance to it. If you own a home, consider using a home equity loan or home equity line of credit (HELOC) to pay some of your outstanding debt. The interest rate you pay on a home equity loan or line of credit will likely be lower than the rate you pay on credit cards and other unsecured consumer debt. In addition, the interest on home equity financing is generally income tax deductible (up to $100,000). Make 2014 a year to pay down some of your personal debt.

4 Revise your savings and debt reduction goals. Take a few minutes to set new savings goals. Ideally, physicians should also save 20% of their income toward retirement starting the day they graduate from residency or fellowship. While it is true that if you start early you can save less, saving 20% provides flexibility for years where you might not be able to save as much, to allow for poor investment returns, or for a personal or financial catastrophe such as divorce or disability. If all goes well and none of these scenarios materialize, then you will be left with a wonderful choice: retire earlier or retire wealthier.

5 Rebalance your investment portfolio. Warren Buffett said it best by stating, “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.” During 2013, the stock market posted substantial gains. By rebalancing your portfolio to its original or updated asset allocation, you lock in gains from the sectors that performed the best and move money into sectors that underperformed and soon enough should be poised to catch up.

6 Recalculate how much your retirement savings will be worth when you retire. With the Dow at all-time highs, now is a great time to take a look at how much buying power you can expect to have at retirement. Be sure to download the online retirement calculator (www.mdtaxes.com) to find out what your savings will really be worth when you retire.

7 Revisit your disability and life insurance needs. Throughout your career and life, disability and life insurance needs change. Give some thought to how much of these insurances you need versus how much you currently receive through your employer, and how much individual coverage you have already purchased.

As a physician, the ability to earn an income is your most valuable asset. Because any company will only insure you for $15,000 to $17,000 per month, by combining at least 2 companies you can potentially reach a total monthly benefit of $20,000 to $30,000, depending on earned income, state of residence, and other disability insurance in force. Look for a policy with a multilife or association discount. Although this can provide male physicians with savings of 10% to 15% off of their policies, female physicians can save as much as 60% off of the normal female rates if a gender neutral or unisex rate is available.

Term life insurance is for the most part a commodity, so the pricing is very competitive and comparison shopping is easy. Websites such as www.term4sale.com can compare the premium rates of several insurance companies and various death benefit amounts and guarantee periods. You should employ the services of an experienced insurance agent who represents several companies to help you get the best rates, especially if your health is less than perfect. The agent will know which carriers are likely to provide a better underwriting classification based on your height and weight, immediate family history, and/or other medical issues to allow you to secure a lower premium rate. For example, if you are being treated for hypertension, certain companies will allow you to qualify for their best underwriting classification while others will not.

8 Resolve errors on your credit report. Each year, you are entitled to 3 free credit reports, so there is no excuse to not look at this important financial report annually, especially since errors are common. If you find information that is outdated, incorrect, or misleading upon review, you should contact the credit reporting agency as soon as possible. If the disputed data are found to be incorrect, the lender or information provider must notify all credit reporting agencies nationwide to correct the information in your file. If the negative information proves to be correct, you still have the right to insert a brief commentary (100 words) about the entry on your credit report. Order your free report at www.annualcreditreport.com.


The New Year is a good time to review your financial goals and make sure that your plan is up to date. It is also possible that you will need to modify your plan due to changes in your personal circumstances or the economy. These 8 steps are a great place to start.

About the Authors
Andrew D. Schwartz, CPA, is a partner in the Boston CPA firm Schwartz & Schwartz, P.C. and is also the founder of the MDTAXES Network (www.mdtaxes.com), a national network of CPAs who specialize in tax and accounting services for healthcare professionals and their practices. He can be reached for questions or comments at 800-471-0045 or by e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it..

Lawrence B. Keller, CFP®, CLU®, ChFC®, RHU®, LUTCF, is the founder of Physician Financial Services, a New York–based firm specializing in income protection and wealth accumulation strategies for physicians. He can be reached at 800-481-6447 or by e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it. with comments or questions.

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