Money Minutes for Doctors #46 ~ Inflation
There it is…the dreaded “I” word. Have you heard about inflation? Talk of inflation and its effects have dominated news programs, podcasts, editorials, and political talk shows ad nauseam as of late. But aside from the chatter from the talking heads, do we really know about inflation and what to expect (or how to flourish financially in an inflationary period)? Here to give us her 9 cents (it used to be 2 cents….but, inflation) is Ms. Katherine Vessenes, CFP®, RFC, Founder and President of MD Financial Advisors.
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.
Practical Steps Doctors Can Take During Inflation
Inflation simply means everything is getting more expensive. If we can find ways to reduce your expenses, then you’re combating inflation.
As of March 2022, current consumer price index or CPI inflation was 7.9%. So if your annual expenses were $150,000 last year (excluding taxes), then those same expenses might be as high as $161,850 this year. That’s a $11,850 increase!
Causes of inflation:
Today’s high rate of inflation was partially by the Coronavirus pandemic. CPI rose 2.3% from 2018 to 2019. In March 2022 the CPI hit 8.5%. Highest in 40 years!
Action steps for now:
Look at all of your variable expenses then work to reduce – gym memberships, dining out, vacations etc.
Put off expensive remodels now and wait for supplies and labor costs to drop
Use existing cash reserves for buying into the market now
Refinance everything to lower rates – home, car, student loans, etc.
Lower your tax bill – maximize all of your retirement accounts,403b, 401k, HSA etc.
Start a side gig – can be of the most effective way to reduce tax liability.
Reduce gas consumption – consider electronic vehicle but would recommend a lease
Shop ongoing expenses – auto, homeowners, life and disability insurance
Check and cancel any ongoing subscriptions you do not use – exercise, news subscriptions etc.
Get an energy audit on your home
Consider shopping at large box stores – Cosco etc rather than boutique stores
As for a raise – If you haven’t had a raise in over a year then would need a 7.5% increase to keep pace w inflation, if more than 2 years need 8.9 %, if more than 3 years 11.2 % and more than 5 years need 14.9%
Katherine’s advice: These things pass, we’ve been through these situations before.