Every financial decision has an impact on your future. For physicians, the many life changes from school, to training, to practice and then retirement often result in lots of transactions – several bank accounts, insurance policies, investments, annuities and more. After a while, if you’re like most physicians, things may get away from you.
Just like the junk drawer most of us have, your financial junk drawer accumulates over your career. Yours may be full of various financial accounts, including old retirement accounts from residency, insurance policies, Roth IRAs, 529 plans, wills, or trusts, to name a few. The accounts are inherently important but are left in a useless pile with outdated information.
Here are four steps to organize your financial junk drawer:
Decide what is most important when it comes to your finances at this point in your life. Is it saving for your kids’ education or buying into a practice? Do you want to reduce your debt, curtail your spending and lifestyle habits, build a retirement nest egg or leave a legacy?
Compile an Inventory
Make a complete inventory of what you own and what you owe. What you own makes up your assets. These can include your saving accounts, home, car, retirement plans, mutual funds, stocks, bonds, annuities, or cash value life insurance. What you owe are your liabilities and these are your student loans, mortgage, or car loan. List each of your assets and liabilities, then Include what each is tied to.
Now that you know what you own and what you own, you can identify your risks. Common risks are being out of work due to sickness or an accident, death, a lawsuit, market volatility, or taxes. This is when your newly organized list of accounts comes in. Do you already have protection for the risks you have identified? If not, determine the common risks that aren’t linked to your current insurance or retirement accounts and find the best protection.
Determine if You Are on Track
Connect what you have and what you owe into a strategy to achieve your goals and reduce your risk. You should now have a clear and concise view of your finances. Every product or account you have should be serving a purpose. Discern if a product is either protecting your wealth or growing it – if not, get rid of it or update it.
If this task seems overwhelming, then work with a financial planning professional to assist you in going through the steps of organizing your financial junk drawer. An advisor can help you move forward knowing you are on track to reach your financial goals.
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ABOUT THE AUTHOR
John Dameron is a financial planner and partner, Spaugh Dameron Tenny. He is the author of the Residents and Fellows Financial Survival Guide. CRN202010-238797