Charting a Path to Financial Success in 2021: Your money, your life

Editor’s Note: As we enter tax season, now is the time to think about financial planning and tax implications for 2021. The ADA has financial content to support dentists at all stages of their career on the path to financial success. Follow the New Dentist News financial series to learn more about strategies to decrease student debt, financial planning strategies at all career stages, and considerations for planning an exit strategy as retirement nears. This financial series is brought to you by a generous grant from Crest + Oral-B.

Financial expert Jean Chatzky recently presented a webinar as part of the Accelerator Series aimed at supporting women dentists in regaining financial control, mastering financial resilience and charting a course for future success. The recording of the webinar is now available.

As statistics increasing show that at some point in her life, a woman will be the sole manager of her family’s finances, now is the time to consciously plan and save, rather than waiting until an emergency arises or a major decision is looming. She shares that women are different, and we need our own playbook, not written by men or tailored to the different ways men earn, save and spend.

She encourages you to ask yourself: what do you want from your money? Start with what you need – it may be safety, security, stability and/or savings -before moving to what you want.

The pandemic has created a she-cession, where discrepancies between genders have been exacerbated. As more women are in professions that lost jobs and more women had to step back from a career to focus on family, now more than ever it’s important to plan for or regain financial footing. Ms. Chatzky shared that more women want cash on hand, whereas more men choose to invest. As a result, men traditionally have greater returnson these investments.

While some of this is learned behavior from childhood and observing how our parents managed finances, Ms. Chatzky shares that we have to unlearn some behaviors in order to understand our own unique spending and saving behavior to make positive changes. She offers these steps:

Assess – Just as we look in the mirror daily, we should look at our finances frequently as well to know where our money is really going.

• Review statements and determine how the pandemic has positively or negatively affected these finances. At all times, know how much money much is going in, going out, where is it going and how that how has that changed. Track your spending for a month to get a handle on this.
• Ensure there is a 3-6 month emergency stash of cash on hand. As we’re currently in an emergency situation, it’s okay to draw from this reverse or use stimulus funds, tax refunds, or other rainy-day funds to get by.
• If you are drawing from your emergency fund, when the pandemic ends, you’ll need to begin thinking through strategies for rebuilding this reserve. Emergencies happen, so we need to be prepared for the next one.

Adjust – After you assess your spending, make adjustments. Spending patterns have changed since the pandemic; work to carry on some of the positive changes.

• Consider ways you may be able to spend less and save more – can you buy used, can you reduce restaurant or retail spending?
• Think about what’s really important – we know what we really value and what we can live without.
• Develop a plan to deal with bills you cannot pay. With a freeze on mortgage payments, you may be able to defer payments; some auto companies are allowing extensions on leases rather than entering a new lease; paying only the minimum on a credit card may be needed; are there subscription services you can cancel?

Refinancing – Now is a good time to refinance due to very low rates on student loan rates, mortgages, cars. All signs point to low interest rates staying around for a while.

• Refinance only the highest interest rate if it’s not possible to refinance all loans.
• There are several ways to improve your credit score if you may not be eligible to refinance right now:
  • Check your credit report frequently (once a month or quarterly) and correct errors
  • Pay bills on time, every time
  • Don’t spend the maximum on your credit card, rather aim for spending only 30% of what you are approved to spend
  • Keep long credit relationships by keeping a credit card for a long period, rather than opening many cards
  • Freeze your credit if you won’t be making a big purchase to prevent identify theft. During the pandemic, identify theft is on the rise. It’s easy to turn off, then turn on again when needed

Revisit your investment strategy – As you age in your career and income increases, also try to increase investment percentages of yourincome.

• Diversify investment types and asset allocations, as they have differing tax implications and you will then have a choice of where to draw from based on rates and need.
• Aim for investing 15% annually, mid-career. That is considered the gold standard for achieving retirement savings.
• If you need to draw from investments during the pandemic, while there is no fee on doing so, make a plan for how to repay within the allowed period to avoid taxes or penalties.
• Automate savings through direct payroll deductions or direct investments. What you can’t see, you can’t spend!

Ms. Chatzky emphasized that these investment strategies will enable women to pursue their hopes and our dreams and not only meet needs but also fulfill wants. And in doing so, women will not only clear the way for themselves, but also future generations of women. Check out other resources offered through the Accelerator series .