Resolve to Improve Your Financial State

Most physician-investors beginthe year by promisingthemselves to improve theirfinancial situation, but mostabandon their resolutions quickly, as theyslide back into their old bad habits. Try tomake this year different and focus onimproving your financial well-being bysetting up the following strategies:

Build Emergency Funds

Short-term goal:

Decide how muchmoney you will need to have availablein case of a financial emergency. Ideally,this would be approximately 2 to 3months worth of living expenses.

Yearlong strategy:

Using 2% of yourpaycheck as a minimum guideline, haveyour bank automatically transfer thisamount from your checking account to amoney market account each pay period.By the end of the year, you will be wellon your way to building appropriateemergency reserves.

Reduce Current Debts

Short-term goal:

Review and analyzeyour current debts. Sit down and make alist of your creditors, how much you owe,and the interest rate charged on eachaccount. If you can consolidate yourloans into one with a lower interest rate,do so. Determine how much extra moneyyou can commit to debt repayment aboveyour minimum payments.

Yearlong strategy:

After you establishhow much extra money you canfree up, have your bank set up automaticmonthly drafts for that amountand make them payable to the number-onedebt on your list. Once that debt ispaid off, apply the amount to debtnumber two on your list, and so on.

Increase Investments

Short-term goal:

Review and analyzeyour current investments. Pay particularattention to any money you have in a401(k) plan. With stocks now offeringbetter opportunities than bonds, makesure you own a healthy dose of stocks orstock mutual funds.

Yearlong strategy:

Have the amountof additional money you are committedto investing this year automaticallyinvested each pay period. If you can dothis with your 401(k) plan, you willneed to contact your employer. Otherwise,have your bank set up an automatictransfer to your IRA or personalinvestment account.

Organize Finances

Short-term goal:

Commit two eveningsto reviewing and organizing yourfinancial files. The first evening, reviewyour life, disability income, homeowners,and auto insurance policies and determineif the coverage is appropriate. Thenext evening, review your estate documents.These include your will, power ofattorney, and health care power. Organizeall of your files in a file cabinet or file box.Extensive changes will take longer thantwo evenings, but will be worth doing.

Yearlong strategy:

As new paperworkcomes in throughout the year, be sure toadd it to your files. This will ensure thatyou stay consistently organized and up todate with your files.

Find a Financial Mentor

Short-term goal:

One of the fastestways to become more financially successfulis to learn from someone who hasalready achieved financial success. Make ashort list of people whom you admire fortheir financial accomplishments. See if youcan meet with one or more of them to talkwith you about their successful strategies.

Yearlong strategy:

Agree on a timeand place for meeting your mentor eachmonth. In a year's time, you'll learn a lifetimeof lessons from a mentor.

An alternative to working with amentor is to hire a professional financialadvisor. If you decide to go this route,choose one that has a minimum of 5years' experience with financial planningand who is a Certified Financial Planner™ practitioner. For a listing of CertifiedFinancial Planner™ practitioners nearyou, visit www.fpanet.org.

Thomas R. Kosky and his partner, Harris L. Kerker, are principals of the AssetPlanning Group in Miami, Fla, specializing in investment, retirement, and estateplanning. Mr. Kosky teaches corporate finance in the Saturday Executive andHealth Care Executive MBA Programs at the University of Miami.