Money Minutes for Doctors #34 ~ The Triple Whammy

Here we are, four months into 2020, still battling the pandemic on so many fronts. As the economic fallout comes into focus with a sobering sharpness, so do the realities of how our economy will continue to change (and what changes will be made to ensure its stability for the future). As storms go, this one is unpredictable ~ but the signs are there in the form of three distinct predictors. Ms. Katherine Vessenes, JD, CFP®, RFC, Founder and President of MD Financial Advisors is here help us decode the weather map.

About Ms. Vessenes:

Ms. Vessenes works with over 300 physicians and dentists from Hawaii to Cape Cod. Her firm uses a team of experts to provide comprehensive financial planning to help doctors build their wealth and protect their wealth while reducing taxes now and in the future. Katherine is a longtime advocate for ethics in the financial services industry; and has written three books on the subject of investment strategies. She has received many honors and awards including: numerous tributes from Medical Economics as a top advisor for doctors, multiple 5-Star Advisor Awards, honored as a Top Woman in Finance, in addition to being selected to be on the CFP® Board of Ethics. Katherine can be reached at: Katherine@mdfinancialadvisors.com or 952-388-6317. Her website: www.mdfinancialadvisors.com.

Quick Notes:

Prediction: High inflation, increased taxes, reduced income

Problem: Inflation – too many dollars chasing too few goods. We also have an abundance of college educated workers but too few in blue collar trades so prices are increasing.

Doctors are in the cross hairs of the proposed tax increases due to the physician income. Congress proposes to increase the tax rates but also increase the tax brackets. Now lower income will get you to a higher percentage tax bracket. Estate taxes are also proposed to increase which will affect physicians as well.

Reduced income – physician income has been historically stagnant or marginally increase that does not keep place with inflation. You would need a 3-4 % increase in salary each year to protect your buying power anything less you will fall behind.

How to protect ourselves?

(1) Look at your budget and get your spending under control. Tracking your spending has been shown to decrease spending vs those that do not track their expenses. Divide categories into fixed and variable. Fixed would be mortgage, car payment, etc. Variable is clothing, vacation, furniture. It’s very difficult to decrease fixed expenses. Focus on reducing variable expenses. “Doctors are never going to have serious money, until they get serious about their money.”

(2) Pay off credit card debt – using credit cards is ok as long you pay them off every month. Many cards have significant incentives that can help your lifestyle – college savings, travel miles etc. Anyone who has existing credit card debt year over year means you are not living within your means. Make sure you understand the terms and the rates of each credit card.

(3) Investments savings – increase investments savings now. Set long term savings and investments goals. Start with a designated amount to save each month then work to increase periodically.

(4) Start your side gig – diversity your income as this will be the best way to protect yourself in the future. This will also allow for alternate vehicles for saving and investment. This will also be way to decrease tax burden.

(5) Investments & Risk – Stocks are much riskier than bonds. Look to see where you are making gains or suffering loses to balance before taxes increase.

**This is our new reality for a number of years and likely won’t turn around quickly.