Written by Josh Lantz, CRPC®/ Chief Investment Officer, Financial Advisor
Inflation is all the buzz lately. We hear it all over the news—it’s a hot topic. Yet, it’s amazing how little information is out there on what you can do about it in your daily life.
I read a dozen articles or so on this topic, and to be honest it was a lot of fluff. So, the list below is meant to be to the point. This article is advice doctors can take action on today.
At the heart of it, inflation just means everything is getting more expensive. If we can find ways to reduce your expenses, then you’re combating inflation.
As of March 2022, current consumer price index or CPI inflation was 7.9%. What does that mean? If your annual expenses were $150,000 last year (excluding taxes), then those same expenses might be as high as $161,850 this year. That’s a $11,850 increase! Any action you can take today to cut that from your budget will help.
Step 1: Refinance everything you can
Most of our doctors have refinanced their home mortgages by now, but we still see doctors who haven’t refinanced student loans and automobile loans.
For student loans check in with our team and we can shop the rates.
For automobile loans, try hopping onto Google Maps and search, “Credit Unions Near Me”. Credit unions tend to have competitive rates. Check out at least three credit unions’ websites from your Google search list. Each company will post their refinance rates on their websites, usually found under “rates”. Make sure to search under used vehicles. If you find a competitive rate you should consider refinancing.
Step 2: Lower your tax bill
Work with your financial advisor to see if you’re maximizing all of your retirement account options. Maybe there are some other options you haven’t considered yet. We’re often surprised how many doctors are not max funding their 403bs, 401k, and more likely H.S.A. plans.
A tax hack for doctors is: pick up a side gig. The money earned as a 1099 contractor has more tax advantages than standard W2 income. You can keep a larger portion of the income made from the side gig. It pairs nicely for doctors already making W2 income because you can get your standard employer benefits through your day job and tax advantages through your side gig.
Tax advantages on a side gig often include items you’re already spending money on. This includes home office deductions, equipment, licenses, and it gives you more retirement options like a Solo 401k or cash balance plan. This is one of the biggest tax hacks out there.
Talk to your financial advisor on where to start. It might be as simple as signing up at Teledoc.com for telemedicine or GLG for consulting opportunities. What you can do often ranges based on your specialty.
Step 3: Reduce gas consumption
Worried about gas prices going up? Maybe you want to switch to an electric vehicle (EV). You might be surprised that there are more affordable options now than in the past.
Many EVs still qualify for the $7,500 tax credit. Keep in mind, Tesla no longer does. Here’s a list the government puts out of which make and models qualify.
It’s appealing to save the $100 to $300 per month you pay on gasoline and get a $7,500 tax credit. Keep in mind the vehicle’s range and that your electricity bill will go up, but it still can be a savings.
Step 4: Skip the middleman
Staying on the topic of cars for a second. If you’re already planning to get a car made in Europe you might consider their overseas delivery programs.
While the perks vary based on the manufacturer, traveling overseas to get your car normally saves you 5-7% off MSRP. Plus, many of the manufactures pay for airfare and hotel. You can make a fun vacation out of it too!
Here’s some options
· Audi
· Volvo
· Mercedes
Again, only do this if you’re already planning on getting one of these vehicles. Buying a car right now with supply chain issues is difficult and it can take some patience.
The biggest money saver is probably to wait to buy any car until next year when hopefully some of the microchip issues can be resolved.
Step 5: Shop your ongoing expenses
If you pay it regularly, then it’s worth reviewing. These little expenses add up to big things compounded over time. The future value of saving $50 per month over time adds up to $67,372 in 30 years at 7.5% growth. Little changes compound to big impacts.
Common examples we see clients over-pay for:
· Automobile insurance
· Homeowners insurance
· Life and disability insurance
Verify you still want your current subscriptions. Many clients join a streaming service to catch the latest TV show only to realize they haven’t canceled them yet.
Maybe you no longer use that subscription to your Pandemic-Peloton splurge.
Maybe you’re not really reading the WSJ or NYT’s anymore.
Just scan your credit card and bank bills. Knowing where your money is going is half the battle.
Step 6: Get an Energy Audit to save money on your energy bill
This is a special technician that comes out to your home to evaluate your home’s energy efficiency. Sometimes your local energy company will have auditors on staff. Other times it’s a local company. You pay a small fee in turn for advice that can lower your utility bills.
The auditor will find your home’s weaknesses. They might suggest you change your insulation, switch out lighting, change outdated appliances, install a smart thermostat, or find drafty areas to fix.
The older your home the more beneficial this can be.
Step 7: Check out a different grocery store
I didn’t think much of this idea until a few years back I ran an experiment. I went to all my local grocery stores. I wrote down most of the usual items I purchase and their exact price. I ended up comparing four grocery stores. To my surprise there were huge differences.
One item might be $1.00 to $2.00 more depending on the store. At first glance that doesn’t seem meaningful, but switching my grocery store up ended up saving me at least $30 weekly for one person. That’s a savings of $1,560 per year. This compounds more for larger families.
The point is that you can probably get the same groceries at another store for less. The first step is to explore your other options.
Step 8: Ask for a raise
You’ve earned it. You can use inflation as an excuse to make it easier. I spoke with a doctor a couple weeks ago that hadn’t had a raise in five years. That means this doctor was making 14.9% less after inflation than they were five years ago. You want your income to keep up with inflation.
Here’s inflation rates going back from February, 2022 according to BLS:
1 year = 7.5%
2 year = 8.9%
3 year = 11.2%
4 year = 12.8%
5 year = 14.9%
Hopefully, one of these 8 tips help save you a little money.
If you’re concerned about the impact of inflation, please reach out---we’re here to help and want to hear from you. Many of our clients want to see if they’re still on track for retirement and their other goals.
Josh Lantz, CRPC®/ Chief Investment Officer, Financial Advisor With over a decade of financial planning experience, Josh has worked on more than 450 doctors’ financial plans. “It’s very hard to find a doctor’s situation I haven’t seen before,” says Josh. This is only a snapshot of the expertise Josh brings to MD Financial. He was recently recognized in Medical Economics for Financial Adviser for Doctor’s in 2017-2018, as well as Dental Products Report’s Best Financial Adviser for Dentists in 2019. In 2022, Josh was recognized as a Five Star Wealth Manager Under age 40. He can be reached at Josh@mdfinancialadvisors.com.