Regardless of your annual income, wealth management for doctors in Canyon County can be a tricky subject. Contrary to common belief, merely earning a substantial paycheck is not enough to ensure one’s future financial security; in fact, high-earners are often more prone to overspend and make other costly financial mistakes due to having an inaccurate sense of savings stability.
Nevertheless, there are simple habits you can implement into your daily life to increase the amount of money you contribute to your savings accounts. As you evaluate your financial standing, consider these four ways to allocate more funds towards your long-term savings goals.
Here is a quick infographic to remind you about a few smarter ways to save:
1. Focus on the Expenses That Matter
When you hear “saving money,” you may think about couponing and hunting for sales. Although we acknowledge that saving on small things can add up, there are places to put your saving efforts which may prove to be more effective. For example, instead of cutting coupons to save a couple of bucks on groceries, take a look at how you can save on major expenses like your car and home.
For example, rather than driving that new car right off the lot, purchasing a previous model can save you thousands, if not tens of thousands, of dollars. When buying a new home, most banks will be willing to lend you much more money than you should be comfortable spending. In these instances, spending less than they are offering, and having smaller mortgage payments can quickly accelerate your savings rate.
Of course, couponing and seeking out daily discounts can save you a little money; but if you aren’t taking advantage of the saving opportunities on life’s most costly expenses, those instances of small savings will likely be insufficient for retirement stability down the road.
2. Pay Yourself First!
We’ve heard it a million times: always pay yourself first. The majority of us will admit, however, that this is much easier said than done. Regardless of one’s income, inevitable aspects of life pick-away at our paychecks and money often finds ways to spend itself before you even know it’s gone. However, by investing money into savings first, you can guarantee that your savings account will start to grow. To receive thanks from your future-self, consider setting up an automatic transfer after each pay period from your bank account to a savings or investment account. By automating the process of wealth-building for retirement, you’ll never have to worry about forgetting to set money aside for future financial stability.
3. Max Out Your Annual 401 (k) Contributions
Looking back, many retirees admit that one of their greatest regrets is not properly utilizing their 401 (k) plans. Are you maxing out your 401 (k) contributions and taking full advantage of any match that your employer offers? If not, it is time to reevaluate your retirement savings plan. Tax-advantaged savings is one of the quickest and most efficient methods of accumulating retirement wealth. Additionally, benefitting from a company matching your annual 401 (k) contribution is the closest thing to free money you’ll receive in life, so our financial experts encourage you to establish a 401 (k) plan as early into your career as possible.
In the event that you are above the income limit for contributing directly to an IRA, speak with your financial advisor about the benefits of Backdoor Roth and Mega Backdoor Roth strategies. These savings strategies can offer the ability to take advantage of pre-tax accounts even as a high-earner who cannot contribute directly to an IRA fund.
4. Partner With a Professional Advisor
When formulating a viable financial plan for your future, especially as one of society’s highest-earners, it’s crucial to understand how to allocate your funds more effectively. With complexities lurking around every corner in areas such as: investing, retirement savings, setting up college funds, or any of the countless other expenses that pull at your paychecks; it’s essential to partner with a financial expert to establish a financial plan which factors these aspects of spending, as well as current and future financial goals.
As the most trusted partners for comprehensive retirement planning for healthcare professionals Ada County, IMA Financial Services is here to ensure our clients’ finances stay on track to not only achieve but exceed their financial and lifestyle objectives.