Eight resolutions for physician family finances in 2014

Physicians who use Andrew Schwartz for their taxes have already receive his monthly MD Taxes newsletter. In case you missed this month’s issue, I’m reposting the feature article here, with Andrew’s permission. Personal financial planning is an ongoing process.  The good news is that financially speaking, 2013 was a really good year. The stock markets are at all time highs.  Many real estate markets around the country rebounded nicely.  And interest rates remain near historic lows.

Hello 2014.  Who knows how financially friendly this year will be for physicians? For that reason, here are some prudent steps you can take to keep your personal finances moving on the right track:

  •  REset your retirement savings:  Most physicians find it easier to max out their retirement contributions by budgeting a set amount each month.  Instruct your employer to withhold $1,458.33 per month for your 401(k) or 403(b) plan to ensure that you hit the max of $17,500 in 2014.  Are you self-employed?  If so, you can sock away up to $52,000 next year into a SEP, Keogh or Solo 401(k), which equals $4,333.33 per month.  And if you'll be 50 or older by December 31st, the maximum 2013 contribution jumps to $23,000 for 401(k) and 403(b) salary deferrals and $57,500 for Solo 401(k)'s.
  • REfinance your home mortgage:  Back in 2012, my wife and I locked in a fifteen-year fixed-rate mortgage at 2.875% with no points.  While mortgage rates are no longer that low, according to our go to mortgage guy Bob Cahill of Leader Bank, there are still a variety of low-rate mortgage products currently available to physicians looking to purchase a new home or refinance an existing mortgage.
  • REduce your personal debt: Over time, physicians and businesses seem to have forgotten that any money borrowed needs to be repaid.  Remember, leverage equals risk.  Make 2014 a year to pay down some of your personal debt.  Perhaps you can delay the purchase of a new car, scale down your awesome vacation, or settle for a 42 inch flat screen TV.
  • REvise your savings and debt reduction goals: Take a few minutes to set new savings goals including how much you’d like to put away towards your retirement, a child’s education, and/or the down payment on a home, and also to reset how much you plan to pay down your student loans, personal debt, and home mortgage.  Ask for our free debt/savings calculator to help you crunch the numbers.
  • REbalance your investment portfolio:   Warren Buffet 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.
  • REcalculate how much your retirement savings will be worth when you retire: With the Dow at all time highs, now's a great time to take a look at how much buying power you can expect to have upon retiring by downloading our (Microsoft Excel) unique on-line retirement calculator.
  • REvisit your life and disability insurance needs: As physicians move through their careers, their disability insurance needs change. Give some thought to how much of these insurances you need versus how much you currently get through your employer’s benefit package and how much coverage you've already purchased for your personal policies.
  • REsolve errors on your credit report:  Each year, you’re entitled to three free credit reports, so there’s no excuse to not look at this important financial report annually, especially since errors are not uncommon.  Order your free report at www.annualcreditreport.com. 

Andrew D. Schwartz, CPA runs MD Taxes, a nationwide network of CPAs who specialize in the tax issues affecting physicians and other healthcare professionals.