How To Set Effective Short, Medium, and Long-Term Financial Goals
When you’re a physician with a busy schedule, finding the time to set and pursue long- or short-term financial goals can be challenging.
It’s critical to learn how to navigate your financial situation and create a strategy that solidifies your personal finances and gives you the flexibility to set up a retirement account, build an emergency fund, pay off credit card debt, and see to your student loans.
Keep reading to learn how to save money and fulfill your financial goals.
Why Is Goal-Setting Important in the Financial Planning Process?
Medical professionals spend a third of their lives becoming specialists in their field and spending thousands of dollars getting there. Even after they’ve entered practice and have a full roster of patients, many more financial and medical challenges pop up throughout their careers that could strain their funds.
While planning for every potential outcome is almost impossible, setting long-term financial goals and understanding your situation can help you maximize and protect your earning potential. Structuring and pursuing actionable goals offers clarity and peace of mind, allowing you to focus on your professional and personal life without fearing the specter of student loans, credit card debt, and sudden medical bills.
How You Can Set Short, Medium, and Long-Term Financial Goals
Becoming a practical financial planner can feel like a tall order as a doctor with patients to treat and a practice to run, but finding the time can improve your financial situation significantly. Form a few tangible financial goals and keep track of your progress toward them—you won’t regret it.
Financial Short-Term Goals
Short-term goals are an excellent way to build the foundation you’ll need to deliver on larger goals that take more time to achieve. With enough smaller steps, you build confidence and give yourself the tools and resources to create a more robust plan next year.
Here are a few things to consider when planning your short-term financial objectives:
Set an Emergency Fund
Graduating from school and finally entering practice is an incredible achievement. It also comes with significant stress from matters like student loan debt, tax planning, and cash flow concerns.
An emergency fund keeps you flexible and adaptable so that you can remain stable, make informed decisions, and keep your goals in sight when your financial situation fluctuates. Start with a small amount of money to get started and increase the fund as you accomplish more goals. Work your way up to saving six months’ worth of expenses to cover your most pressing financial obligations and basic needs.
If you need help making room for your emergency fund:
- Scale back or cut out one item on your budget.
- Open a savings account and set up automatic transfers to avoid manually moving funds into your budget.
- Consider contributing tax refunds, bonuses, or other extra income to your emergency account as soon as you earn it.
Create a Monthly Budget
Building a monthly budget is an effective way to gain visibility of your financial situation and start formulating a plan of action to protect your income and maximize your savings. Collect and consolidate all your account information in one place. List your retirement plan, savings account, credit card, and emergency fund details. Review your bank statements and bills from the last few months and categorize expenses on a spreadsheet.
What you discover from your investigation should inform your budget. Use what you learn about your spending habits to shape your budget and optimize your financial plan.
Improve Your Credit Score
Credit card debt can accrue interest which makes fulfilling your financial goals challenging. To reduce credit card debt, list your debt from lowest interest rate to highest and pay the minimum on everything but your highest-rate debt.
Alternatively, pay off credit card debt from smallest to largest. The confidence you gain from wiping out the smaller account will encourage you to tackle the next debt and the next one until you have nothing to settle.
Mid-Term Financial Goals
Your mid-term financial goals are the bridge between your short-term and long-term objectives. They’re more ambitious than your first goals and lay the foundation for your continued well-being.
Consider investing in the following:
Acquire a Disability Insurance Plan
If you have children or a partner who depends on your income, you should have an insurance plan to ensure their well-being in the event of an unforeseen medical issue. Disability insurance is built for medical professionals, providing the funds to stay afloat as you recover from injury or live with a long-term or permanent health condition.
Many options include riders and future increase options that help you keep up with student loan payments and adjust your coverage to match your current life situation. Your disability plan should develop with your career, offering the terms and funds you need to remain mobile.
Maintaining your financial standing requires constant review. Physician’s Resource Services has the tools, resources, and experience to help you build and implement a financial strategy that evolves with you.
Pay Off Your Student Debt
Physicians spend many years pursuing their degrees, and it’s common to be burdened with a large amount of student debt by the time they enter practice. Addressing student debt strategically improves your financial agility and allows you to focus more on building your retirement plan and savings account. Pay more than the minimum to account for interest and shorten the repayment timeline.
If you have issues balancing your student loan payments with other financial obligations, consider refinancing or consolidating federal student loans into a new loan with a lower interest rate.
Long-Term Financial Goals
Your long-term financial planning should help ensure your financial stability from now until the end of your career. Indeed, the primary focus of a high-quality long-term financial plan is saving money for retirement. To start, you should save 10% to 15% of every paycheck in a 401(k), traditional IRA, or Roth IRA. Every cent counts, and while it may feel intimidating to plan for your final years as a physician when you’ve just started practice, laying the groundwork can prevent financial hardship.
If you aren’t sure which retirement plan is the best for your situation, consider these programs:
Physicians who receive a W-2 listing wages or salary may have a workplace retirement plan to contribute income to the program. You can defer up to $18,500 a year (or $24,500 if age 50 and older) to the retirement account. Withdrawals made before age 59 and a half are subject to income taxes and a 10% penalty.
Traditional Individual Retirement Account (IRA)
Traditional IRA programs can receive up to $5,500 per year ($6,500 per year if age 50 or older). If you don’t have access to a workplace retirement program, you can make non-deductible contributions depending on your filing status and earned income.
Physician’s Resource Services Can Guide Your Financial Planning Efforts
It’s easy for your financial responsibilities to slip when you’re providing for family or caring for patients. PRS helps you feel confident and secure in your financial situation with our consultative services. We give time back to you by helping you navigate your finances and secure the insurance plans and strategies you deserve. Our tools and resources are designed with your success in mind.
Ready for peace of mind? Reach out today.
*This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.
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