6 Principles For Living Financially Smart


Financial success does not happen overnight and it does not happen by chance. Even doctors who are considered high income earners can falter without a plan. Financial success most often results from making smart decisions over a period of time and sometimes the most basic financial principles are the ones that guide you toward that success.

1.  Write Things Down

A big picture plan along with short, medium and long term goals can really help guide your financial decisions. You and your spouse should both agree to these priorities and keep each other accountable. When you are faced with financial decisions that seem daunting, you can refer to your written plan to determine which choice would be in line with your goals.

2.  Live Below Your Means

Are you spending money on things that make a difference in your life? Difference makers could be things that improve your earning capacity, increase your net worth, help you stay healthy or give you peace of mind. If the majority of your spending goes to things that only give passing enjoyment, drain your earnings, or are guilt/impulse purchases, a shift in your spending habits could really make a difference to your financial success.

3.  Pay Yourself First

Some people set aside savings from the money left over after they’ve done “everything else.” Instead, consider yourself a priority and pay yourself first the moment your paycheck arrives. If you can have money from each pay period deposited or moved directly into savings and investment accounts (rather than doing so manually), you can greatly reduce the temptation to spend more. Instead of saving a specific dollar figure like $1,000, consider saving a percentage of your income (say 10%-20%) so the amount grows proportionally as your income grows.

4.  Protect Yourself In Case of Injury 

As a high-earning physician, your ability to earn money for your skills is one of your biggest assets. What if that ability to earn was taken away for any length of time? What impact would that have on you or your family’s standard of living? Consider disability insurance to cover a loss of income at a level that makes sense for your needs and life insurance to protect your family if that proverbial truck shows up someday while you are crossing the street.

5.  Eliminate Debt

Whether you’re carrying medical school debt or spent more on things than you could afford, create and follow a plan to get rid of your debt fast. Paying off debt means you are “guaranteed” a return at least equal to the interest rate you were paying.

6.  Don’t Let the Tax Tail Wag the Dog

A solid tax strategy can help you save but shouldn’t cause you to do things that otherwise would not be prudent or profitable such as buying more house to deduct more interest or a high-risk, illiquid tax-shelter with little likelihood of success.

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