January 3, 2020
by Dr. Wilson Chen BSc., DDS, CFP, FMA
Happy New Year! Now that 2020 has arrived, it is a perfect time to reflect on the highlights of the past decade and plan for the future. I realize that planning is likely low on the list of fun things to do but, before you turn on that Netflix series, know that the effort spent on this exercise will reward you many times over.
To help kick-start this endeavour, here is my top ten list of financial planning actions:
1. List your Top 5 Life Goals – The Bucket List
Planning never starts with a spreadsheet. The ultimate goal of getting your finances in order is to fund the things that are most important to you. It may be as diverse as “retiring by age 60” or “climbing Mt. Kilimanjaro” or “making sure my special needs child is cared for”. Whatever the goals, putting the things you value most on paper solidifies the intent and allows for active preparation. Once it is out in the open, then you can start to make it happen.
2. Do a Holistic Financial Review
In many cases, dentists are just trying to get through one day and onto the next. Over time, we fall into easy habits that can be detrimental to our financial well-being. By sitting down with your financial planner and looking at your overall picture, you can often uncover numerous small actions that can benefit you and your family. Here are some of the more common things that we see:
3. Commit … and Diversity
When I first started investing 30 years ago, my financial advisor would transfer us from one fund to the next, chasing the “big” theme of the day, and incurring fees along the way. Needless to say we were always behind the curve. It was an expensive and valuable lesson that has shaped my investment philosophy ever since.
4. Concentrate on Dentistry
Simply put, dentists generate a majority of their wealth through the practice of dentistry – it is an area where they have unparalleled expertise and ultimate control. Investing in yourself and your practice has always been a good venture. One way to do this is to identify three areas to improve your dentistry/dental practice. Here are some common themes:
– Are patient phone calls answered? Are they kept on hold?
– Are they being greeted by name on arrival? Are all team members familiar with the scheduled appointments?
– Is there flexibility to accommodate patients on different schedules?
– Are they being seen on time?
– Do they feel that their questions are being answered?
– Do they feel rushed through the procedures?
– Are payment options available?
– Do you follow up to make sure they are doing well post-operatively?
– Can they depend on you in an emergency?
5. Automate Your Savings
Once you establish a savings target to fund future life goals, the next step is to stick to the schedule. The best way to do this is to make it automatic. Setting up pre-authorized monthly contributions to your accounts is beneficial in a number of ways.
6. Timing Your Generosity
After working with your advisors and generating conservative projections, if you are fortunate enough to have excess savings, you may wish to consider gifting to your family now rather than through your estate. Direct gifting to adult children and grandchildren has perhaps more impact than leaving them with an inheritance since you can help during the times of most need. Many adult children could benefit from a head start when they are establishing their professions and when they have young children. On top of that, you are around to see the benefits of your assistance.
Consider the following:
7. Plan Early for a Dental Transition
If you are within 5 years of retiring from dentistry, then an active plan is absolutely necessary. There are numerous moving parts in a transition and virtually all have a time limit. The first order of business is to sit down with your financial planner to determine whether your assets can sustain your future goals. From there, most dental accountants will quarterback the transition and advise input from various professionals. If you plan on selling a practice(s), there are a number of points to consider:
8. Outline a Retirement Cash Flow Strategy
If retirement is rapidly approaching, you need to get ready for a shift in thinking. For many retirees, the lack of a regular paycheque can be an overwhelming source of stress. You are now dependent on your savings to generate income for 30+ years of retirement. To prepare, work with your advisor to set out a regimented approach to draw income.
Setting up a predictable withdrawal plan with your advisor alleviates the anxiety of watching daily market gyrations.
9. Get Your Will and Powers of Attorney in Order
Our future health, our cognitive abilities and our lifespan are all unknowns. Although our decline and death are uncomfortable subjects, it is imperative to plan for the future. By doing so, we are able to define our own wishes and provide clear guidance to those managing our affairs. Paying attention to the following can ease a difficult process.
10. Think about the Final Years
When we think about retirement, images of holidays and leisure come to mind but we rarely think about the final years. There are financial considerations associated with assisted living, medication and healthcare costs, and long term care. More importantly, thought should be given to where you would like to live (close to family, healthcare, etc), whether you would like to stay in your own home and what type of care arrangements would suit you. In reality, these choices could affect your decision to downsize or modify your home, set aside money for care, and to plan for caregivers. We all hope to enjoy our family and friends but never to burden them with the pressure of continuing care. Communicating your thoughts with loved ones will greatly ease this weight.
Information in this article is from sources believed to be reliable, however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, Dr. Wilson Chen, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member Canadian Investor Protection Fund.
About the Author
Dr. Wilson Chen BSc., DDS, CFP, FMA received his DDS from Western University in 1992 and, for over 20 years, built a family dental practice in Hamilton. In 2014, he sold his practice to take a more active financial management and business advisory role for dentists and their families. Wilson is a partner at the Wyndham Group of Raymond James Ltd. He is the only practicing dentist in Canada to hold the Certified Financial Planner (CFP) and Financial Management Advisor (FMA) designations. Wilson can be reached at email@example.com or www.wyndham4dentists.ca
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