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6 financial tips for physicians in 2023

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It’s been an intense year for Canadians and their finances. Soaring interest rates have had an impact on everything from paying down debt to qualifying for a mortgage. Stock market volatility has had people stressed about the value of their investments. Increasingly, people are feeling financially unsettled and fearful about the possibility of an economic recession. 

If your finances are keeping you up at night, why not make the new year a reason for a financial reset. The good news is that you don’t have to radically change your lifestyle, or how you’re handling your money. 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

Research shows that people who put their goals on paper are typically 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, budgeting for a well-deserved vacation, or saving for retirement, putting them in writing helps you make sure your financial goals are realistic and achievable.

You and your MD Advisor* can work together to define your goals and build your financial plan.

2. Create a budget to set limits on spending

Things cost more these days, and inflation is still driving prices up. Rising commodity prices, recovering demand, supply chain issues and a shortage of workers: these are all contributors to higher prices for everything — raw materials, household goods and essentials like gas and groceries.

A budget is a great way to help you make sure you’re spending less than you earn — and it’s not about depriving yourself, but about making sure you don’t have to. Keep track of what you spend, whether you love spreadsheets or prefer to keep lists on paper. Once you see it all written down, it's easier to find the places where cutting back will be painless, or nearly so — and the places where you need to make sure you're not cutting back, like on preventative care for yourself, your family, your pets, or your property and belongings. There are some great budgeting apps and online sites that can make this easier — your bank may have its own budgeting app or spending tracker. But always be cautious about third-party services that ask you to link to your personal banking data — this can leave you vulnerable to fraud.

3. Avoid emotional investing — and divesting

Market volatility can be uncomfortable, and being uncomfortable can cloud investment decisions with emotion. It's important to focus on the things that you can be control, like developing an investment plan that minimizes overall risk while still helping you achieve your long-term financial goals, rather than dwelling on day-to-day market fluctuations and media headlines. Read more about how to avoid making investment decisions that are driven by emotion.

4. 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. But make sure you're keeping the balance of that account high enough to meet your withdrawals — you don't want to find yourself paying overdraft or NSF fees.

5. Make a will, or update the one you have

Your will is the foundation of your estate plan: it ensures that your wealth will be distributed according to your wishes, and aims to minimize stress, distress, and expense — especially the income tax and other taxes your estate could end up owing — for your loved ones. Taking the time to prepare a will can help put both your mind and theirs at rest about your financial affairs.

For still-practising physicians, having an up-to-date will is especially important. If you or your spouse has an active medical practice, winding it down will be a time-consuming matter, separate but related to settling your estate. 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 yet another long list of administrative and financial tasks.

When you create or revise your will, be sure the executor you appoint is willing and able to make these decisions.

6. Look for ways to reduce taxes

Tax planning should be a year-round activity. Take a forward-thinking approach and make sure you’re on the alert throughout the year for 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 expenditures 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) and other registered savings plans can be a great 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 approaches like income splitting and whether you should incorporate for the tax advantages.

Bonus tip: get (even) smarter about your finances

Investing in yourself by improving your financial knowledge is one of the best resolutions you can make this year — and MD wants to make it easy for you! 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 2023.

* 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