By Jarrett Suddarth
The new year is known for new beginnings, fresh starts, and resolutions like reading more or going to the gym. If you’re a new attending physician, it’s also a great time to check in on your finances and make sure everything is in place for the upcoming year. As you have just recently made the transition from training into your first attending job, you may find your financial life left largely unattended. To help you make sure you’re on track, I’m going to share five things new attending physicians should do right now to make sure you kick the year off right.
#1: Update your retirement contributions
New attending physicians face unique challenges when it comes to saving for retirement. They start their careers later than most people and the stress of their jobs often leads to shorter careers too. It’s important to make sure you are maximizing all of your tax-advantaged retirement accounts from the get-go to put you on track for retirement. But this requires active attention to the changing tax laws.
Each year, typically in early November, the IRS releases new contribution limits for retirement accounts for the upcoming year. These contributions apply to workplace retirement plans (401K, 403B, 457B, TSP, etc.), IRAs (Traditional and Roth), Health Savings Accounts (HSA), and more. It isn’t a guarantee that they will increase contribution rates, but they do most years. In recent years, this increase has been anywhere from $500 to $2,000. Hopefully, you started off your new job by maxing out your workplace retirement plan. If you did, then at the start of the year, it’s crucial to adjust your contributions to reach the new maximum contribution. Otherwise, you might be missing out on important contributions that could save you taxes in the near term and grow toward your retirement in the future.
If you didn’t, then the start of the year provides a perfect opportunity to begin maxing your plan out.
Either way, to figure out how much your contributions need to be to max out the plan for the new year, you will need to calculate what your contribution should be for each pay period. To do this, take the maximum contribution ($23,000 for 2024) and divide it by the number of paychecks you receive each year. For example, if you get paid every two weeks, the math works out to $23,000/26 = $884.62 per pay period. If you need to calculate what percentage of your salary that is, divide your annual salary by the maximum contribution amount. If your current salary is $250,000, then that equals 9.2% ($23,000/$250,000).
To update your contributions, you will need login to your online benefits portal or retirement plan custodian. If you are unable to update your contribution amount yourself, then you should reach out to your benefits/HR/payroll department.
It’s the same idea/process for your HSA if you have one and are maxing it out. Backdoor Roth IRA contributions are better off being completed on an annual basis, and not monthly.
#2: Check your credit score
Having a good credit score can help young physicians in a variety of ways, including getting better rates on student loan refinancing, qualifying for a lower interest rate on a mortgage, better home and auto insurance rates, and more. Because a good credit score affects so many areas of your financial life, it’s important to keep tabs on it to make sure it continues to improve and that nothing unexpected negatively affects it.
Once per year, you can request a free credit report from AnnualCreditReport.com. This report includes your credit reports from all three major credit agencies – Equifax, Experian, and TransUnion. Requesting this report allows you to stay informed about your credit history and current lines of credit. The most important thing to do, however, is to check for any errors. Errors might include an on-time payment that was counted as late, the wrong name or address on an account, accounts that don’t belong to you showing up on your credit report, and more.
To correct these errors, you can first dispute the incorrect information with the credit reporting agency – Equifax, Experian, or TransUnion. After that, dispute the incorrect information with the specific company. This could be American Express, Discover, or a specific store.
#3: Review your spending
The holidays can be hectic on your wallet, so the start of the new year is a great time for new attending physicians to make sure their spending levels are still good. Especially after recently experiencing a big jump in income, it’s always good to make sure reckless spending habits haven’t started forming (you wouldn’t be the first physician to experience this!)
Now this doesn’t have to be a deep dive, but just take a look at the last few months of your bank statements or credit card statements. What categories do you spend the most on? Is it eating out? Is it entertainment? Is it groceries or travel? Once you have a general understanding of where your money is going, ask yourself if your spending aligns with what is important to you. If it doesn’t, then consider changing your spending habits to better match what’s important to you. Now, this isn’t an excuse to spend everything and not save any money. It’s still important to pay yourself first and make sure you’re saving enough for your future goals.
It’s also important to think ahead about any large purchases that you’re expecting to make during the year. You could be planning to buy a new car or a new house, might be anticipating a larger than normal tax bill, or something else. Starting early and saving monthly is a great way to make these expenses more manageable when they come.
After you’ve gained a better understanding of your spending, this is a great time to reevaluate whether or not you have enough money saved in your emergency fund.
#4: Revisit your financial goals
The start of the new year is also a great time to check in with your deeper financial feelings too. Even though you likely don’t have a lot of free time outside of work, consider setting aside some time to think about your financial goals and your financial future. It doesn’t have to take multiple hours, but here are some good questions to through:
Are your short-term and long-term goals still the same or have they changed?
When would you like to reach financial independence? Am I saving enough to retire when I want?
Do I still want the same things out of life?
If you have a spouse or partner, I’d strongly encourage you answer these questions with them, separately and together.
#5: Recertify for PSLF
For new attending physicians on the path to Public Service Loan Forgiveness (PSLF), it’s important to recertify your employment annually. Although certifying once a year isn’t required, it’s a great way to keep a pulse on your progress toward forgiveness. It also helps you catch problems sooner rather than later, so there are no surprises when you formally apply for forgiveness.
When you are recertifying your employment, make sure that you use the PSLF Help Tool to speed up the process and ensure accurate reporting.
As you enter the new year, prioritizing your financial well-being is one of the most rewarding things you can do. By taking these easy steps, you can quickly gain peace of mind. And if you integrate these practices into your normal routine as a new attending physician, you can establish a solid financial foundation and have confidence that your finances are on solid ground as you navigate the challenges and opportunities of the coming year.
If you’d like help with this and more, Panoramic Financial can assist you in creating a financial plan in line with your retirement and other goals so that you can be confident in your financial future. Please click “Work With Us” at the top of the page to learn more.
