January is a good time to figure out finances for the rest of the year, and maybe the next decade or more. Tax documents arrive, and with them, opportunities to see what adjustments you wish you’d made last year and can make now. It’s also a good time to figure out what you want 2024 to look like. Vacations? Changing jobs? Taking on locum tenens work? Starting a new practice? Buying out a partner? Charity work? All of those things involve money.

Plus, the beginning of the year is a natural time for reflection on the previous year. What decisions or events of 2023 are you proudest of? Which ones do you wish you could do over? Taking time now to re-familiarize yourself with your finances and check in with a financial advisor can help you make sure your dollars go to the things that you value most.

Smart money management may potentially help you build wealth faster. Good financial planning may potentially provide you with options and freedom. However, physicians can feel trapped by large amounts of debt — whether from student loans, big mortgages or borrowing heavily to fund lifestyle purchases. These “golden handcuffs” can force them to keep earning to repay debt. 

Here’s a quick guide to three (mostly) financial tasks to take care of now.

1. Maximize retirement savings while minimizing taxes.

Seventy-four percent of physicians are now employed by hospitals, health systems or corporate entities. That normally means W-2s and access to a 401(k) or 403(b) plan and possibly an employer match. In 2024, you’ll be able to contribute up to a tax-deferred $23,000, and $7,500 more if you are 50 or older. There’s a limit of $69,000 for total retirement savings, including employer contributions. 

This may seem laughable to a first-year resident earning less than $65,000. If you are on a tight budget and also are repaying student loans, aim to contribute at  least enough to get the employer match — that’s part of your compensation. Physicians typically get a late start on wealth accumulation, which means savings have less time to grow. Getting started early and establishing the savings habit pays off.

In prime earning years (40-55), physicians earned an average of about $405,000, and that was in 2017. If you’re saving, say 20%, you’ll blow past contribution limits fairly quickly. (There’s a penalty if this happens, but most companies won’t let you overcontribute.) There is no set way companies do the matching or whether there is a vesting schedule. Some healthcare companies go well beyond standard corporate benefits, with some offering 457(b) plans and pensions, for example. 

Once you max out your employer-sponsored retirement plans, you can consider backdoor Roth IRAs and other vehicles for saving for retirement. An Earned advisor can provide guidance on which vehicles might be suitable for your investment goals.

2. Safeguard your family, your earning power, your earnings and your identity.

It’s a good idea to give your estate plan and insurance policies a once-over every year to make sure they are still appropriate. 

First, look at insurance — auto, life, home, umbrella, disability and malpractice — to make sure you are adequately protected. If there have been family changes, your coverages and beneficiaries may need to change as well. Check prices to make sure you are getting the best deal (and no, you don’t need to do this yourself). Do make certain you have enough disability and life insurance, particularly if others depend on your income.

Establishing your estate plan, including creating a will and a trust, is an important early-career move, with modifications later. According to the 2021 ACP Physicians’ Financial Preparedness Report, just 26% of early-career physicians (in practice up to 16 years) and 59% of mid-career physicians (17 to 30 years in practice) have an updated will. A good estate lawyer can help you with asset protection, set up trusts and offer advice on titling assets. Estate plans are not one-and-done. You don’t need to monitor them every single year, but you should take a look at least every five years, and when there is a change in family status.

Don’t let the potential complexity stop you; if you should die without a will, your state will decide how to distribute your assets.

Now, take a look at spending. Your budget need not dictate where every dime is going. The popular 50/30/20 budget allocates 50% of your income to necessities, like food, shelter and transportation, 30% to things you want (vacations, luxuries) and 20% to debt repayment and savings. Those are guidelines, not absolute rules. Check to be sure you are not paying for things you no longer use. Consider using an app, such as Earned's Client App, to help you track spending and cancel unwanted subscriptions. Plugging money leaks can help fill designated savings buckets — including the establishment and maintenance of automated investment plans

Finally, make sure you are doing what you can to prevent identity theft. Because of high incomes, doctors are targets. And because you are busy, it’s tempting to re-use passwords or to use easy-to-remember (and easy to guess) passwords. Don’t. Opt for 2-factor identification when it’s offered and use a password service to store unique passwords. Give false answers to security questions. (You could, for example, answer every question as if you were your childhood best friend.) Watch your snail mail, because it’s a source of data for criminals. Consider purchasing identity theft protection. You still have to do the setup, but it can spare you the monitoring.

While credit and/or identity theft protection can alert you when something may be amiss, so can alerts from credit card companies. If it makes sense, go ahead and automate bill payments. You can also automate savings for various goals.

3. Revise as needed.

Now go back to where we started — what you hope to do in 2024, and missteps you are determined to avoid. Is your financial plan serving all these interests? Does it support keeping you AND your bank balance healthy?

Wealth should buy freedom to take time to recharge regularly or to pivot when circumstances change. A good financial plan and advisor should be agile enough to work towards these goals.

Such a plan should be nimble, changing as you and your needs change, providing the path to create the life you want. 

The keys to that future lie in setting your priorities and putting those choices in motion. Earned can provide guidance on managing and investing your assets to aim for financial stability. Earned can also provide guidance on crafting a custom financial plan, evaluating tax planning and insurance options, and making the most of your work as an employee and independent contractor. Contact our team today to learn more.

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