The end of the year is a good time to revisit that budget, see how it worked last year, and make adjustments for 2016. Here are a few tips to get you started and then keep on track.
Back when you were in dental school and your means were a little leaner, chances are pretty good that you relied on some kind of budget. It may not have been a fancy spreadsheet or an interactive phone app, but you used something. Now that you’re an established dentist, the need for a strict budget may be less acute, but it’s still a good idea to have some general financial parameters you set and stick to. The end of the year is a good time to revisit that budget, see how it worked last year, and make adjustments for 2016. These kinds of adjustments are not just necessary, because your income probably changes every year, but they’re also important for helping you with long-term savings.
Here are a few tips to get you started and then keep on track.
Get the facts straight
The first time you sit down to do a budget, you may be astonished by how much you spend on certain things, such as grocery shopping, data plans, or restaurant dining. You may find ways to cut back on things that aren’t as important to your overall lifestyle and goals. But the most important aspect of this first step is just being aware of where your money goes each and every month. A good budget helps you plan and estimate expenses, of course, but it also helps you assess your overall life goals and compare your spending habits with those goals. You’ll need a record of what you earn, bank statements, copies of current bills, and any favorite money-management tools.
Review Your Budget
You may already have a pretty good budget. If so, do you review it from time to make sure it’s still accurate? With apologies to Jerry Seinfeld’s rant on his eponymous sitcom about taking reservations, anyone can make a budget; the key is to stick to the budget. The step that many people forget is to compare current and past expenses to what you budgeted, making sure you didn’t set aside too much or too little. Look at last year’s bills to help you estimate seasonal expenses, such as travel or electricity, more closely.
Share Your Budget
Budgeting, like swimming, can be dangerous if done alone. Involve your partner, and, if appropriate, your kids in the budgeting process. They are likely to play a significant role in whether or not you stick to that budget, of course. Perhaps more importantly, getting input from your family members is an essential part of future financial planning. Does your slightly-below-honor-student son plan to further his semi-education at Expensive Out of State University (EOSU)? Is your soon to be texting-while-driving daughter convinced that her upcoming birthday gift will be a shiny new car?
Budgets aren’t just for now. They should project future expenses—including your own retirement and insurance needs—and set aside savings for them.
Adjust Your Budget
Long-term planning always involves projections. You don’t know what the economic climate may do to the value of your practice or even your annual income, but you can estimate, using patient growth trends, the values of other practices in your area, and other variables you can measure. When you do, take into account things like inflation, potential changes to income, and unanticipated expenses. A good budget may be consistent year over year, but it won’t be static.
Why Budgeting Matters
Even if money isn’t necessarily tight, the simple fact is that long-term saving requires discipline, sacrifice, and planning. Knowing where your money is going now can help you and your family assess how much you can save for the future. The sooner you make those kinds of decisions, the sooner you can benefit from a long-term investment strategy that may make your retirement years less dependent on the value of your practice when you’re nearing retirement.