Your financial x-ray is a look at every financial decision you’ve made – good or bad, right or wrong. It’s a financial overview that shows you what you own, what you owe. The difference between the two is considered your net worth.
Many physicians and dentists in training have a negative net worth due to student loans. This is typical and shouldn’t discourage you. The main reason to start understanding your net worth now is to see how it increases or decreases over the years. You can positively affect your Financial X-Ray by either saving money (adding assets) or paying down debt (decreasing liabilities).
Why Your Financial X-ray Matters
You know what to look for in a chest x-ray, but what should you be looking for in your financial x-ray?
You should look at your Financial X-Ray at least once a year. When you look at your financial x-ray you want to determine:
(1) Has my net worth increased or decreased over the last year and Why?
If it increased, did I pay off liabilities? Did I add assets?
If it decreased, did I add liabilities? Did I lose assets?
(2) Do I have any leverage points?
Can I identify any opportunities to decrease the interest rate of my liabilities?
If your current credit card has a $5,000 balance at a 15% interest rate, your leverage point could be that you call your credit card company and ask for a lower interest rate. Another option is to get another credit card with a lower interest rate, but beware of the fine print.
(3) How much accessible cash do I have in case of an emergency?
A good rule of thumb is to have at least 3 months of expenses in an emergency fund. This is often challenging for physicians and dentists in training, but it’s important to save something each month and build toward three months of expenses.
John Dameron has been a financial planner and partner with Spaugh Dameron Tenny since 2002. With the help of the SDT team, John created a lecture series called Physicians Financial Focus, authored a book entitled The Residents and Fellows Financial Survival Guide, and has coached hundreds of physicians from residency/fellowship into practice. His expertise has also been featured on KevinMD.