Happy almost 2020. This is the perfect time to set your Financial New Year’s resolutions. Make 2020 the year you get your finances where they should be. If they are already where you want them to be, then make goals to get them to even the next level. In this article I will discuss some resolutions you could set. I will start with some basic resolutions for the beginners, and then will get into a little more advanced resolutions.
Basic Financial New Year’s Resolutions
1) Increase your savings rate
If you are not putting at least 20% of your income towards building wealth, then commit now to do it in 2020. Building wealth can be investing for
retirement financial independence or paying off debt. If you are in massive amounts of debt, this rate should be much higher than 20% until your debt load is under control
2) Get rid of high interest consumer debt
If you have credit card debt or other high interest rate consumer debt, come up with a plan to rid yourself of this burden this year. Then promise yourself to not get into credit card debt again.
3) Destroy your student loan debt
If you are not doing PSLF then commit now to get rid of your student loan debt within the next 2-5 years. There are 20-25 year student loan forgiveness programs but this sounds miserable. Not only are your loans weighing you down for 2-3 decades, but you are also sticking the taxpayer with the bill. Start by refinancing your student loans to get a much better interest rate than your federal student loans. There are several good options to do this in my Student Loan Refinancing tab above.
4) Get a financial education
You may or may not have someone managing your money. Either way, you need to have a financial education. There are several great blogs and books that can get you started down the right path. I recommend you begin with those in my recommended resources tab. Make a commitment to read one financial book every two months this year. Reading 6 good financial books this next year will boost your confidence with your finances tremendously.
If you need help to begin managing your finances while you are in the process of getting your financial education, hire a fee only financial planner like Smart Path Financial.
Advanced Financial New Year’s Resolutions
For those of you not in debt, or at least not struggling with a lot of debt, here are some goals for you.
1) Get a full fledged financial plan
There are really three ways you can do this. One is to hire someone to develop this plan for you. With your input obviously. Having a financial education like I said above is still critical if you hire someone so you know they are giving good advice.
The second way is to read a lot of books and blogs and participate in forums to figure out how to do it by yourself. This can take a lot of time if you are going to learn enough on your own.
The third way, and the way I did it myself, is to sort of combine one and two. I did get a good financial education by reading a lot of books and blogs and forums, but I still needed a little help. I didn’t want to hire someone though. So I took the White Coat Investor’s “Fire your financial Advisor” course. This takes you from step A-Z on how to create full financial plan. Taking this course combined with knowledge gained from my financial education helped me create a full financial plan that I am very proud of and am confident will lead me to financial independence.
2) Make sure you have proper asset protection
Make sure you have proper professional liability coverage. Personal liability is also very important. Review your home and auto policies with your agent to make sure you have enough personal liability coverage. Stack an Umbrella policy on top. We live in a litigious society. Having proper coverage will help protect your hard earned wealth.
3) Get a revocable trust
Having a living will, power of attorney, and revocable trust are all something dentists and other high income professionals should have. Especially if you have dependents. Talk to an estate planning attorney about how to set this up in your state.
4) Increase your savings rate
If you are out of debt or have minimal debt, saving 20% towards retirement is probably enough. That is if you want to retire well at age 60-65. But rather than spending all of the other 80%, maybe increase your savings rate. That way you can achieve financial independence at a younger age. It doesn’t mean you have to retire, but it does give you peace of mind and the option to retire, change careers, work part time, or do anything you want really. I encourage you to see if you can save 25 or even 30%.
5) Credit card hacking
If you are out of debt, have good credit card habits, and are disciplined then I encourage you to use a credit card for any expense you were already going to have anyway (as long as there isn’t a fee associated with it).
As dentists and other high income professionals, we don’t need to think we are above getting deals or free money. That sort of elitist attitude is what prevents high income earners from ever achieving financial independence.
I have a post on how to do this. But essentially, my wife and I strategically sign up for several different credit cards per year. We choose the one’s with the best travel miles and cash back sign up bonuses. This has allowed us to have many flights and hotels for free, as well as enough cash back to pay for Christmas the past 4 years.
Happy New Year
I wish you a happy new year. Please set some financial new year’s resolutions. I sincerely hope all of your financial goals are made a reality this year. It takes effort and discipline, but if you do these things you will be on the path to becoming debt free and financially independent.
-Debt Free DDS
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*Nothing on my website is professional or legal advice. I am only sharing information that I have learned and it may or may not be accurate. I am not liable for any problems you may have by following this advice. Please do further research and get professional and/or legal advice about any of these topics. This post likely contains affiliate links. This site could be paid for clicks or purchases made through these links.