How many of your New Year’s resolutions were related to money?
Instead of making several one-time yearly resolutions that you may or may not keep, why not resolve instead to break the harmful financial habits that are holding you back from your goals?
In this post we highlight the five common habits that prevent doctors like you from achieving financial freedom.
As a bonus, we’ve also explained the five healthy financial habits that you should replace those bad habits with.
Bad financial habit #1: Working more to earn more
More work isn’t necessarily the answer to financial freedom. Too many doctors make the mistake of working overtime to earn more thinking that’s the answer to achieving their goals. But they only suffer burnout as a result.
Overworking can deprive you of the time you need to tend to your own wellbeing and care for your family. In the long term, this habit of striving to earn more and more can, ironically, lead to increased costs in the form of damaged relationships, impaired working ability and health problems.
Replace it with this good habit: Setting aside time to rest
It’s a financially-sound practice to take time away from work to get sufficient rest.
Schedule time each week to mentally and emotionally recharge and to care for your family. Remember that there are some things money can’t buy such as time and peace of mind. When you’re well-rested, you’ll be empowered to enjoy more years in your profession. Additionally, you’ll have a clear mind that will let you make better decisions both at work and in your personal and financial life.
Bad financial habit #2: Dreaming about your financial goals and not making any plans
It’s all just talk until you put it down in writing. If you dream about all the things you’d like to buy and do but don’t have a plan, then all those goals can start to feel out of your reach.
Replace it with this good financial habit: Write down concrete goals and an action plan to achieve your aspirations
Whether you want to pay off debt, fund your children’s education, set up for retirement, buy a home or take an exotic holiday, put those goals down in writing. Next, create an actionable plan with specific benchmarks for measuring your progress towards those goals.
Having a plan in writing will make your goals feel much more concrete and realistic. This can give you the motivation you need to stay disciplined and you’ll experience greater satisfaction in saving up for those goals.
Bad financial habit #3: Spending whatever money you happen to have
Just because you take home a large pay packet doesn’t mean you have the freedom to spend, spend, spend. Even with a high salary, your spending is still limited by the amount you earn and you can quickly become a slave to that limit with little or nothing left over for savings and emergencies.
Replace it with this good financial habit: Spending on a budget and saving to meet specific financial benchmarks
Set up a budget to make your money work for you. Budgeting gives you greater control over where your hard-earned income goes. Incorporate into your budget an allotment for regular deposits to a savings account or investments. You’ll see that extra money grow over time and you’ll always know how much you have to save up to reach those benchmarks towards your financial goals.
Bad financial habit #4: Making only the minimum payments on your debts
It’s tempting to spend only what you absolutely have to when those credit card bills come rolling in. You might even be deceiving yourself into thinking that regular monthly minimum payments are helping you stay on top of debt.
That’s not that way credit cards or any form of bank debt works, unfortunately. Paying only that minimum will ensure you’re paying interest for the longest amount of time possible.
Replace it with this good financial habit: Prioritise strategic debt payments
To successfully clear away accumulated debt, you need to make it a priority. Work into your budget consistent payment amounts that will help you actively chip away at that debt instead of keeping it afloat. Creating a schedule will help you know how large and frequent your payments should be so that they successfully knock down your debt.
Avoid acquiring more unnecessary debt as you tackle your current ones. Cut down credit card use or cut it out entirely to get back on top of your finances.
Bad financial habit #5: Thinking it’s too soon to worry about retirement
The earlier you plan for retirement, the better financial position you’ll be in when that time comes.
Replace it with this good financial habit: Get proactive and regularly review your retirement position
Do you have any super sitting around in funds you’ve forgotten about? Track it down to consolidate it so that you don’t lose any to account maintenance fees.
Research your best investment options for each stage of life. For example, you can tolerate more risk when you’re younger and have more time to recover from investments that don’t perform well. Property is always a good bet in Australia and shares can work for you too.
Working with an expert accounting and financial planning team will revolutionise your life, giving you great advice and setting you up with habits that will put you on the path towards financial success. And it pays to work with experts who understand the unique needs of medical professionals.
Contact Nitschke Nancarrow, specialists in accounting, financial planning, loans and finance, investment and business for medical professionals. We operate in Adelaide, Sydney, Melbourne and throughout Australia. Managing partner Kym Nitschke is available for a free initial discussion about your situation. Call us on (08) 8379 9950 or send me an email.
– Kym Nitschke
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.