It’s the start of a new year, and perhaps you’ve set some goals—maybe you want to exercise more, eat healthier, get a promotion at your job, or spend more time with family. While these goals are commendable, upgrading your finances in the new year should also be a priority. 

 

1. Update your spending plan

 

Has your life or your list of financial obligations changed over the past 12 months? If so, be sure to alter your spending plan to reflect the changes. You can take note of your fixed expenses and your discretionary spending: Are you spending more than you realize? Are there certain things you can cut back on? 

As you examine your spending, look at what percentage of your income is going toward building wealth. Are you investing as much as you’d like? Do you have enough set aside in savings? Are you reserving money for large expenses? Updating your spending plan (by ensuring you have limits on your spending as well as an allotment for saving and investing) is one of the first steps you can take to improve your finances.

 

2. Gather your tax documents 

 

Start the process now by gathering all of your necessary tax forms so that it is easier for you or a tax professional to process. This means thinking back to all the employed jobs you had in 2023 and ensuring you have a W2 from each. It also means thinking about any contract work or locums gigs you had and ensuring those places have given you a 1099 form. 

Lastly, take stock of any other side income you made, and gather receipts for expenses you may be able to deduct.

 

3. Adjust your work retirement account contributions

 

The contribution limits for work retirement accounts, such as a 401k and a 403b, have changed. As of 2024, you can contribute a maximum of $23,000 into the account annually if you are under age 50 and up to $30,500 if you are over age 50. Your employer can also “match” your contributions for a total account limit of $69,000 for people under age 50 and $76,500 for people over age 50. 

 

As the contribution limits have increased from 2023, be sure to log into your work portal and adjust your paycheck deductions. Figure out what percentage of your total pay allows you to contribute the maximum to your work retirement account and input that into the system. 

 

 

4. Invest money in your (backdoor) Roth IRA 

 

While it’s great to invest money in work retirement accounts, consider investing money in individual retirement accounts as well. One type of IRA that many physicians invest money through is a Roth IRA. Unlike your work retirement account, a Roth IRA is not tied to your employer, so you have many more investment options to choose from. 

 

Roth IRAs allow your money to grow tax free, and you can withdraw the profits tax free as well. A Roth IRA also gives you flexibility, as it allows you to withdraw your contributions at any time if an emergency were to arise or if you need the money for any reason. The only caveat is that many physicians cannot contribute directly to a Roth IRA given their high income. They have to make the contributions indirectly through the “backdoor” first. This involves putting money into a traditional IRA first, then moving the money into a Roth IRA afterward.  

 

5. Set up your automatic savings 

 

Whether it’s saving for a down payment on your first house, paying for your wedding, planning an international vacation, or building up an emergency fund, don’t forget to set up automatic savings.

If you’re like me, the amount you saved last year may not have been sufficient, so you may need to increase it this year.

Keep in mind that you may have a better chance of meeting your goals if you make these savings automatic and have them completely separate from your normal checking account. Many people keep their savings in an online high-yield savings account or money market fund at a brokerage firm so they can also earn interest on the dollars they save. You should certainly consider doing the same.

 

6. Consider opening a solo 401k 

 

If you’re one of the many doctors with additional sources of revenue from a side gig, consider investing some of this revenue in a tax-efficient way. If you have any source of self-employed 1099 income (from work as a locums doc, your status as contractor, profitable side gigs, or other ventures), then you can open a solo 401K. 

 

7. Re-evaluate your debt reduction plan

 

 

Like many physicians, you may have varying sources of debt in the form of student loans, a mortgage, credit card balances, and car loans. Instead of feeling ashamed about you balances, or avoiding addressing your debt for decades, re-evaluate your debt reduction plan—the higher the interest rate, the more having that debt can hamper your ability to build wealth. 

Can you put a little more money toward some of your debts to pay them off sooner? Can you enroll in a loan forgiveness program?

 

8. Update your estate plan

 

No one likes to think about the day they may pass away, but do yourself and your family a favor by at least making sure they are taken care of. Make a living will, consider setting up a trust fund, and choose guardians for your children. Tell your family your healthcare wishes, update the beneficiaries on your investment accounts, and be sure you have all the necessary insurances in place. 

Even if you set this up years ago, make a habit of re-evaluating this periodically, especially if your marital status, family size, or life priorities have changed since the last time you did it.