No matter what happened in 2016, you should take a few moments to consider where you are and where youâ€™re going.
If you’ve been following our
, you’ll note that much of what we covered involves reviewing your priorities and setting fresh goals for 2017. The end of the year isn’t the only time to take stock, of course, but it is often a time of reflection and review. Maybe the year brought unexpected income, or surprising expenses, or some significant change in your financial goals. No matter what happened in 2016, you should take a few moments to consider where you are and where you’re going.
It’s OK if that process is informal, and it doesn’t necessarily have to involve your partner or your
, although it’s typically more helpful if others affected by your financial situation are included. Either way, here are a few things to consider when looking back and looking ahead.
Earnings and Spending
Lifestyle creep is when our spending choices increase alongside our earnings. When you first graduated from dental school, you probably lived more modestly. Maybe you rented an apartment and wore cheaper duds. As your income grew, your lifestyle likely grew with it. This is perfectly natural; your lifestyle should improve as your income does. But one thing that can get lost in the shuffle is that lifestyle creep means that the extra income isn’t necessarily going to your future self.
To find the balance between desirable lifestyle creep and putting funds aside, consider the difference in control most people have over two key components of their financial situation: earning and spending. Depending on your dental practice, and whether you work for a health system or own or share a partnership in a practice, your earnings likely fluctuate a bit from year to year. A typical dentist may be paying off debt for the first few years, buying into a partnership shortly after that, and earning significantly more in their late 40s or early 50s.
Unless you’re in some sort of fee-for-service arrangement, you’re likely to have significantly more control over what you spend than on what you earn. Curbing spending in favor of saving is often a more promising avenue than simply trying to earn more.
Spending, all by itself, isn’t the enemy. Not spending at all can be discouraging and actually make it more difficult to sustain a good saving strategy. It’s only when spending goes beyond our means or prevents us from meeting our financial goals that it becomes a problem. Life is happening right now all around us, and living like a pauper now for some theoretical enjoyment once you’re retired doesn’t sound like a panacea. Consider this carefully when setting your 2017 goals.
Investing vs. Saving
If you run your own dental practice or are part of a partnership, what do you do with your income? Do you “save” it for retirement, or “re-invest” it in your practice, perhaps to upgrade equipment, hire additional staff, or seek other improvements. There are many variables to these decisions, and the decision will depend on your goals and circumstances. The key is to carefully analyze the risks and potential benefits in both approaches before making any impulsive decisions. Goal-setting is a big part of this process; fully defined objectives take the mystery out of what can otherwise be confusing decisions.
Find Your Balance
The key in all these decisions is to find the right balance for you. It won’t be simple. There are too many factors at play to simply plug numbers into a spreadsheet. To help find your balance, stick to the basics: Set your financial goals after a great deal of thought and planning; build a great budget and stick to it; and consider both short-term happiness and your future.