Studies show that for many Canadians, money is among the biggest source of stress. In fact, 36% of physicians in a recent MD survey said that they are concerned about running out of money. Nearly half of physicians under 60 told us that they find it hard to save for retirement because of other expenses.
If your finances are keeping you up at night, there’s nothing like the start of a new year for a money reset. The good news is that even making small changes can have a big impact on your financial future — and your peace of mind.
Here are a few tips to help you improve your financial health.
1. Write your goals down
Our MD survey shows that only 1 in 3 physicians have set specific retirement goals. In fact, research proves that people who put their goals on paper are more successful in achieving them.
Writing out your financial priorities forces you to really think about what you want to accomplish over the next year, and what you want your future to look like. Whether it’s paying down your mortgage, saving for a child’s education, indulging hobbies or interests, or saving for retirement, your financial goals should be realistic and achievable.
Together with your MD Advisor* we can work together to create your goals and build your financial plan.
2. Create a budget to set limits on spending
You’re not imagining it: things cost more these days as inflation continues to drive prices up. Rising commodity prices, recovering demand, supply chain issues and a shortage of workers: these are all contributors to higher prices for everything from raw materials to household goods, and essentials like gas and groceries.
Also, as we head into the third year of the pandemic, the urge to splurge on so-called discretionary purchases may be increasing too.
A great way to ensure you’re spending less than you earn is to create a budget. Keep track of what you spend, whether you love spreadsheets or prefer to keep lists on paper. Popular budgeting apps and online sites make this even easier, and your bank may have a budgeting app or spending tracker. But be cautious about third-party services that ask you to link to your personal banking data — this could leave you vulnerable to fraud.
3. Set up automatic contributions
Pre-authorized contributions (PAC) make saving automatic and help you stay on course. PACs let you invest regularly by automatically directing savings from your bank account into your investment account; you choose the amount and the frequency. And because it’s automatic, you’ll never miss a payment, making investing easier and helping you stick with your financial plan. PACs help you stay focused, ignore the ups and downs of the market and stick with your goals.
4. Make a will, or update the one you have
In the MD study, fewer than two-thirds of physicians age 40 to 59 reported they had a current will and power of attorney.
A will is the foundation of an estate plan: it ensures that your wealth will be distributed according to your wishes, and it aims to minimize the administration and income tax for your loved ones. Taking the time to prepare a will can help put your mind at rest about your financial affairs.
For physicians, having an up-to-date will is especially important. If you or your spouse has an active medical practice, it must be wound down as a separate but related matter to settling the estate, one that includes several time-consuming steps. If you or your spouse has a medical professional corporation, the corporation will continue to exist and the executor of the estate working in partnership with the director or successor director of the corporation, will face a long list of administrative and financial tasks.
When you’re creating a will, be sure to appoint an executor who is willing and able to make these decisions.
5. Look for ways to reduce taxes
Tax planning should be a year-round activity. Take a forward-thinking approach and make sure you’re aware throughout the year of the credits and deductions that you may be eligible for, particularly if you are a self-employed physician.
Effective tax planning involves tracking your income and contributing to investments in a way that prevents you from paying more tax than you should. And remember, minimizing taxes can also help you reach your financial goals more quickly. As a physician, optimizing your use of registered retirement savings plans (RRSPs) can be part of your financial plan, depending on what stage you’re at in your career.
Your MD Advisor can help you determine tax-effective strategies for your situation, including household tax-saving approaches like income splitting and whether you should incorporate for the tax advantages.
Bonus tip: Get smart about your finances
Investing in yourself by improving your financial knowledge is one of the best resolutions you can make this year. The MD Financial Literacy Podcast series covers a broad range of topics specific to physicians including debt, retirement planning and why your finances are different. It’s also got great advice on steps you can take to feel more confident about your money now, and in the future.
Your MD Advisor can help make sure you’re on track to a healthier 2022.
* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.
The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.