Now's the time of year when many Americans clean out their closets, re-evaluate that shirt they bought last fall, and tend to the to-do list they've been ignoring for months. It's also a great time to do a similar "cleaning" of your finances.
I know, I know…it feels like you just started remembering to put the year as 2016 on your dental records. So how it already be time to do a financial check-up?
The truth is that right now is a great time to look at your 2016 financial goals with a fresh set of eyes. Why? Because the end of the year is always hectic with the holidays and some significant financial decisions. Because the beginning of the year for many dentists is likely taken up with business planning. And because the end of the 2015 tax season may trigger some needed adjustments in your financial planning. Yes, the weather is warming up across much of the country and you’ll want to spend some of your free time in outdoor pursuits. But just a little bit of indoor maintenance can help you make sure you either get or stay on track toward your financial goals.
Here, then, are three key areas to zero in on.
Tax review. Now that your 2015 dealings with Uncle Same are finished—they are finished, right?—it’s a good time to assess what went right, what went wrong, and what you might need to do differently for the remainder of this year to make sure next April is less painful. Because dentists’ income can swing significantly from year to year, it’s important to reassess either your quarterly tax payments or, if you’re a staff dentist at a larger institution, your federal and state tax withholding.
Nobody likes to pay a tax bill in April, of course, but owing a small amount to the Federal government or to your state is actually preferable to getting any kind of refund. Why? Because while some people intentionally have too much tax withheld over the course of the year as a “savings” strategy, doing this is actually better for your Uncle than it is for you. The extra income you could have been earing through interest on that money, while not always significant, can add up over time.
Insurance review. We’ve covered the important topics on insurance previously here, but in case you don’t have time, we’ll sum up: making sure your dental malpractice insurance; health and disability insurance; home, auto, and business insurance; and life insurance policies are in place should be a precursor to any long-term investment plan. Yes, that includes saving for your retirement. No one is planning on using their life insurance policy anytime soon, but making sure you’re prepared for the unexpected is an absolute must. Now is as good a time as any to review your policies to make sure that as your life changes, your insurance needs change to meet them.
Retirement review. Once again, the change of seasons should remind you that even if you’re just starting your career in dentistry, you’re now one year close to your retirement—whenever that day may be. No matter when it is, it’s overly simplistic but nonetheless true that the earlier you start an aggressive saving and investing strategy for your retirement, the better off you’ll be in the long run. If you haven’t started putting money away, start now. If you have begun your retirement planning in earnest, schedule some time with your advisor or financial planner to look at how you did last year and consider any adjustments you may need.
Spring financial maintenance doesn’t have to be like lawn maintenance—a chore to dread. It can be quick and painless, but you’ll be planting seeds that will bear fruit for the rest of the year and beyond.