By Chad Chubb, CFP®, CSLP®, Guest Writer
You probably know how often you should get your car’s oil changed, your teeth cleaned, or a checkup at your doctor’s office (you should really know that one!). But do you know how often you should be checking up on your finances?
Many physicians think of a financial planning meeting as an annual task, like paying your taxes. But it can be beneficial to break up your financial planning into distinct pieces throughout the year.
Whether you’re working with a dedicated financial advisor or doing financial planning on your own, coming up with a calendar for tackling financial issues and plans can help you stay on track and ensure that nothing falls through the cracks.
So, what exactly goes on this calendar?
Essentially, everything related to your financial life, including tax returns, saving, investing, your estate plan, insurance, and more. In this guest post, we’ll cover what you need to do, when you need to do it, and a whole bunch of other things you should consider when reviewing your financial plan.
- Physicians, especially DIY physicians, can find an immense benefit from following a dedicated financial planning calendar.
- It’s a good idea to review your finances throughout the year, not just annually. It also makes it more digestible and manageable for your hectic work schedules.
- Tackling different financial tasks one at a time can help you stay on track to reach your goals.
It makes sense that you might want to review your taxes in the spring before the yearly tax deadline, but when should you review your investments or check up on your insurance coverage?
Without coming up with a clear plan for what task to tackle when, it can sometimes be easy for things to fall through the cracks, like forgetting to apply for new employer benefits, not automating your investments, or missing prime tax-planning opportunities.
This financial planning calendar breaks up different financial areas of concern to review at separate (dare we say, strategic) times throughout the year while also keeping your broader financial picture in mind. You can use this calendar to make a plan to check up on your finances throughout the year and ensure everything’s on track for success.
January and February: Saving for the Future
Free Workflow: “What Accounts Should I Consider If I Want to Save More?”
New year, new you!
Like most people, chances are you’ve probably made a few new resolutions or goals to start off your year, and they may even include getting a better handle on your finances. The beginning of the year is a great time to review your saving strategies and plan for the year to come and beyond.
The new year also tends to be a time of financial opportunity. Maybe you’ve just received a raise at work—or a bonus—or perhaps you’re expecting a chunk of change from your tax return (Pro tip: Update your W-4, refunds are not ideal.) Either way, it’s a good time to get smart about your savings and craft a plan to implement throughout the year.
Some areas where you might want to consider stashing away savings include:
- Emergency fund: You should have three to six months’ worth of living expenses saved up (at a minimum). You may opt for more based on your “feel-good number” and upcoming needs.
- Healthcare savings accounts (HSA): These tax-advantaged accounts are a great way to save for healthcare costs. If you’re enrolled in a high deductible health plan, you can save in an HSA. HSAs offer triple tax benefits (tax-free contributions, gains, and qualified withdrawals). If not, check to see if your plan offers access to a Flexible Spending Account (FSA). There are a few key differences between an HSA and an FSA: FSA contribution limits are lower, the entire balance doesn’t roll over each year (aka you can literally lose money), and the funds can’t be invested.
- Retirement accounts like 401(k)s, 403(b)s, and 457(b)s: Be sure to meet your employer’s matching contribution limit if you have one. Maxing the match is just step one. You’ll likely want to start saving above and beyond the match to bolster your retirement accounts.
- High-interest savings accounts, CDs, and money market accounts: These accounts are great for stashing short-term savings while earning a little interest (very little 👎).
- 529 college savings accounts: Save for your child’s future education expenses in a tax-advantaged way. Both gains and qualified education expenses are tax-free. (Pro tip: If your state’s plan offers a tax break, you don’t need to have a child to start a 529 plan. So, if family planning is in the future, you can get a jump start and save a few tax dollars.)
- Other investment accounts: Sustainably grow your wealth with any extra funds. Take a look at a brokerage account, real estate investing, practice buy-ins, surgical center buy-ins, 1099 work (Solo 401(k)), and more. Once you have the basics covered—investing for retirement, saving for emergencies, and paying down debt—you can look at getting more creative with your money.
As a doctor, it’s essential to put your money to work early. Once you have an emergency fund shored up, there are several other avenues to consider instead of leaving your money sitting in a traditional checking or savings account.
You work hard; your money should do the same. Prioritize investments that will help you reach your goals, like being debt-free, education for your kids, retiring early, etc. You can do that by increasing contributions to your retirement accounts, automating investments in a 529, and saving for your current or future health in an HSA.
You have a lot of goals, so how can you save appropriately for each one?
Retirement and college costs are a bit simpler as there are dedicated accounts for these goals, but what about other medium-term goals like a wedding celebration or a down payment on a house?
Ideally, you should save for these types of expenses in an account that earns some interest, like a high-yield savings account. This option would work well if you don’t know exactly when you’ll need access to the money. If you do have a clear timeframe (for example, if you’re planning to buy a house in three years), CDs can be an option for savings.
Exposing your money to compound interest is a great way to save for long-term goals, both ones you expect and ones you don’t. Say you’re passionate about taking a sabbatical from work. If you’ve been investing for several years, you may have the reserve to do it.
March and April: Checking in on Your Taxes
Free Workflow: “As Someone Who Is Working, What Issues Should I Consider When Reviewing My Tax Return?”
Love it or hate it, tax time rolls around each year in mid-April. Depending on your tax situation, you may expect a generous return from the IRS or owe money. Either way, March and April are good times to review your taxes and make sure that everything is in good shape.
Reviewing your taxes is especially important if there’s been any change in your financial situation.
You may want to spend extra time reviewing your taxes if:
- Your marital status has changed
- You’ve had a child
- Your income has changed
- You’ve changed jobs
- You’ve moved to a different state
- Any tax laws that affect you have changed
Many financial advisors offer tax planning and preparation services for their clients. What’s the difference?
Tax preparation is the traditional April madness of filing your tax return.
Tax planning is a proactive strategy that looks at the way different financial decisions impact your tax situation.
You can also work with a dedicated tax preparer to review your taxes. If you have a simple tax situation, you can file your taxes yourself online using programs like Free Tax USA or TurboTax. However, we almost always suggest working with an accountant. There are some wonderful accountants on WCI, if you are not already working with one.
If you haven’t filed your taxes yet, now is a good time to review your financial information and make sure you’re taking advantage of all applicable deductions and credits. If you’ve already filed your taxes, you may want to file an amended return if you spot any issues or discrepancies.
Spring is also a great time to conduct a tax-planning review. You should make sure that you’re contributing to any applicable tax-advantaged accounts, such as accounts for retirement, health-related expenses, and college savings. If you know you’ll be receiving a tax return from the IRS, you should also plan how you’ll use those funds.
Pro tip: For any physicians on a visa and working on getting their green card, I know it may sound simple, but make sure your Social Security number is correct every year. We have seen horror stories where accountants had a small typo in a Social Security number, which in turn has led to a delay in their green card because the IRS thinks they didn’t pay taxes in a given year. Truthfully, everyone should review this data each year.
Another note on tax returns: receiving a big check from the government may feel like an extra special payday, but it really means that you should take another look at your tax withholdings on your W-4. Often, a significant tax return (or owing a lot of money) signals those withholdings are a bit off.
A higher return can mean that you’re withholding too much, aka giving the government an interest-free loan. Do you think it'd repay the favor? Take a look at your W-4 to ensure it accurately reflects your situation.
May and June: Reviewing Your Investments
Free Workflow: “What Issues Should I Consider When Reviewing My Investments?”
Investments are what spring to mind for many people when it comes to financial planning. Investing over the long term is one of the best ways to grow your wealth and plan for the future.
But whether you’re an investing pro or just sticking to the basics, it’s never a bad idea to set aside time to review your investment strategy and make sure that you’re on track to reach your goals.
When reviewing your investments, you should consider:
- Your investment timelines and objectives
- Your risk tolerance (willingness to take risk) and risk capacity (your ability/need to take risk)
- Contributions to and withdrawals from investment accounts
- The current market and other economic trends
- Asset allocation and diversification
- The accounts you’re investing in
It’s important to remember that investing is a long game: while the market may experience temporary fluctuations, it’s a good bet that your investments will grow over the long term.
In fact, the stock market has an average annual return of about 10%. In full disclosure, I don’t like that number for financial projections, and we often use a rate closer to 6% in our plans. So, even if a bear market hits your investments, it’s likely that they’ll climb back up again, as long as you’re disciplined and continue your investment strategy according to plan.
This is also a good time to review your plans for the future.
Are you investing to save for retirement, grow wealth, or fulfill another goal?
As you get closer to a goal like retirement, it’s often a good idea to shift your asset allocation to lower-risk investments to protect your savings. On the other hand, if you’re just starting out your investing journey and don’t plan to access the funds for decades, you might consider a more aggressive investment approach that balances risk with potential rewards.
You should also make sure that you’re making regular contributions to your investing accounts. Whether you contribute biweekly, monthly, or yearly, it’s a good idea to set up a schedule and stick to it so that you can pay yourself first and put your contributions on autopilot.
July and August: Updating Your Estate Plan
Free Workflow: “What Issues Should I Consider Before I Update My Estate Plan?”
Do you have an estate plan in place? If not, it’s time to make one. If you do, July and August are a great time to review your plan and keep everything in order.
Estate planning is a great way to be proactive about the future, but if you haven’t touched your estate documents in a few years, it’s definitely time to brush them off and take a look.
Some things to consider when reviewing your estate plan include:
- Your beneficiaries (a powerful but often underrated tool)
- Your designated general and healthcare powers of attorney
- Your living will
- Any recent changes to laws regarding estates (federal and state tax exemptions)
- Any significant life changes, like the birth of children or grandchildren
- Other life changes for you and your loved ones—such as marriage or divorce, career changes, death, or disability
- Your assets and property
If you don’t already have an estate plan in place, it’s a good idea to work with a lawyer or other qualified professional to draft one. Keep in mind that in most cases, the details of your estate plan don’t have to be set in stone; it’s meant to be a plan that you can update over time as your circumstances change.
September and October: Checking Your Insurance Coverage
Free Workflow: “What Issues Should I Consider When Reviewing My Property and Casualty Insurance Policies?”
Free Workflow: “What Issues Should I Consider When Reviewing My Health and Life Insurance Policies?”
Insurance definitely isn’t one of the most glamorous pieces of financial planning, but it’s one of the most important. Proper insurance coverage can help ensure that you’re protected if anything ever happens to you or your family—whether that means a natural disaster, health issue or disability, or even just a run-of-the-mill fender bender.
The fall season is a great time to review your insurance coverage and update it if necessary. It may make sense to shop around for different insurance coverage in some cases since rates can change from year to year depending on your life circumstances.
Here are some types of insurance to consider reviewing:
- Health insurance: Health insurance is one of the most important types of insurance coverage. If your health needs or those of your family have changed, you may want to consider switching insurance plans.
- Dental insurance: Dental insurance usually isn’t included in your health insurance policy, but it’s still crucial for your overall health (am I right, dentists?!?)
- Life insurance: Life insurance is another significant piece of the financial planning puzzle. Make sure that you have proper coverage for yourself and your family.
- Homeowners or renters insurance: This type of insurance protects your home and belongings and can help to cover costs in the event of theft or natural disaster.
- Auto insurance: Be sure to shop around for car insurance rates periodically since you may qualify for lower rates the older you get and the longer it’s been since an accident or a moving violation.
- Umbrella insurance: If you need additional liability insurance coverage, umbrella insurance is worth considering. (Pro tip: If you are a physician, you should have an umbrella policy.)
This is also a good time to review not just how much insurance coverage you need but how much you’re paying for it. You may be able to get a better rate from another insurer. You could also qualify for potential discounts, like policy bundling discounts or good driver discounts.
Alternatively, you may decide that you need more or less coverage if your circumstances have changed. Either way, now is a good opportunity to reevaluate how insurance fits into your budget and financial plan.
November and December: Taking a Look at the Big Picture
Free Workflow: “What Issues Should I Consider Before the End of the Year?”
It can be easy to get lost in the minutia when it comes to financial planning. Throughout the year, we’ve recommended paying attention to different pieces of the financial puzzle, from saving and taxes to investing and insurance. But the end of the year is a great time to zoom out and get a view of the big picture when it comes to your personal finances and long-term goals.
November and December are a good time to take stock of where you’re at financially and how the past year has affected your finances.
You should consider:
- Any financial changes you’ve experienced in the past year, like a job change or loss, windfalls, or big expenses
- Progress you’ve made toward savings goals
- Contributions you’ve made to tax-advantaged and investment accounts
- Changes in life circumstances, like marriage or children
- Changes in life goals or plans
After assessing all of these items, you’ll have a better idea of whether you’re on track to meet your financial goals or whether you need to tweak—or even radically alter—your financial plan. You should pay special attention to your goals and plans for the future: where you’re at, where you’re headed, and where you’d like to be five, 10, or even 20 years from now.
The end of the year is also a great opportunity to clean up any loose financial ends. If you’re planning to max out contributions to tax-advantaged accounts, now is a good time to do so if you haven’t already. You may also want to consider making charitable contributions.
Putting It All Together
Whether you’re already interested in personal finance or just trying to get your finances in order, it’s no secret that the many different aspects of financial planning can be a little overwhelming. When viewed together, making a comprehensive financial plan can seem like a daunting task with many moving parts.
To make managing your finances more manageable, it can be helpful to tackle different financial issues separately. This makes it easier to avoid getting overwhelmed. You can also focus your mental energy on one task at a time and ensure you’re getting everything done by checking off one thing at a time. Using a financial planning calendar is a great way to space things out while also covering all your bases.
The above calendar isn’t a hard and fast rule—it’s just one way we’ve found to make financial planning simple and approachable, whether you’re working with a financial advisor or tackling the basics of financial planning on your own. If any questions or concerns pop up at any time, you can always get in touch with a financial planner to ask questions, get advice, and solidify your financial plan.
Life isn’t predictable, and your financial plan needs to change with it. Regularly reviewing all aspects of your financial plan, from the simple to the complex, can help you to safely weather these changes. While no one can predict the future, a solid financial plan is an excellent way to prepare for it.
Good luck out there, Doc!
Does taking this piece-by-piece approach to your annual financial checkup seem less overwhelming? Or do you have a different strategy for how to tackle this yearly chore? Comment below!
[Editor's Note: Chad Chubb, CFP®, CSLP®, is the founder of WealthKeel. WealthKeel is a paid advertiser, and it has been a WCI Recommended Financial Advisor since 2016. However, this is not a sponsored post. This article was submitted and approved according to our Guest Post Policy.]