Establish Year-Round Financial Planning

Many physician-investors tend to put offfinancial decisions. They start thinkingabout tax planning in April and readjusttheir investment portfolios only when thestock market is in a slump. However, successful financialplanning deserves year-round attention. Therefore,consider the following tips to help come out of2004 in better financial shape:

• Get organized. The first step to successful financialplanning is to get organized. Create a filing system(or empty a drawer) for your bills, invoices, and bankstatements. Financial planning computer software canalso help track expenses and important documents.Write down your expenses vs your income and noteareas where you can save. Once you're organized, itwill be easier to create a budget.

• Set goals. Think about what you'd like to accomplishin the next 3 to 10 years and prioritize thosegoals. Once you know where you are and where youwant to go, you can use this information to set realisticfinancial goals. Write down short- and long-termgoals that are specific. Then create a budget thatworks for you and stick to it.

• Reduce debt. Prioritize debt by interest rates. Payoff debts with the highest rates, such as credit cards, first.Throw out department store cards and use a debit cardfor holiday purchases. Consolidate all of your debt ontoone low-rate card or get a consolidation loan. Bothoptions will reduce monthly payments.

• Address estate planning. Contrary to popularbelief, creating a will doesn't have to be complicated orexpensive. If you're under age 50 and don't expect toleave assets valuable enough to be subject to estate taxes,a basic will might suffice. You can write it yourself withthe help of books or computer software. This way, you,not the state, decide who will receive your property, raiseyour children, and be the executor of your will.

• Build an emergency fund. Grow your emergencyfund. Try to set aside at least 6 months' income in anaccessible savings account.

• Assess your insurance. Review all your insurancepolicies and shop around for the best deal. Using thesame company to insure your home and car could saveyou money. Remodeling, landscaping, and refurnishingare all reasons to increase your homeowner's or renter'sinsurance. You can also consider increasing home or carinsurance deductibles to $500 or $1000. A birth in thefamily is a good reason to purchase or beef up life insurance.Consider having enough life insurance to replace80% of your annual income.

•e for retirement. It's never too early or too lateto begin planning for retirement. Contribute the maximumamount possible to your retirement plan, whetherit's a 401(k) plan at work or an IRA. Consider enrollingin an automatic savings plan that deducts a percentageof your take-home check so that you pay yourself first.Many financial planners recommend saving 5% to 10%of every paycheck.

• Plan for taxes. Exemptions and deductions are thetwo easiest ways to reduce your federal income tax bill.Exemptions reduce the amount of income taxed. Beingmarried or having dependants are the most commonexemptions. Deductions are personal expenses you cansubtract from your income. Charitable donations, studentloans, and interest from property taxes are a fewexamples of tax deductions.

• Diversify your investments. By balancing yourportfolio, you can avoid the risks associated with anyone type of investment. For example, when the stockmarket goes down, bonds may generate a positivereturn, and vice versa.

• Consult with a professional. Planning your financialfuture can be overwhelming, but whether you havemillions or are paying bills month to month, a professionalfinancial planner can help you create a budget andaccomplish your financial dreams.

Rick Adkins is chair of the Board of Governors,Certified Financial Plannerâ„¢ Board of StandardsInc. He works for The Arkansas Financial Groupin Little Rock, Ark. He welcomes questions orcomments at 501-376-9051.