Given current market conditions, many doctors may find themselves sitting on more cash than usual and fear the risk of reentering the markets. The right level of cash is important to protect you and support your goals, but too much cash can actually weigh you down. You want your money to work hard for you, after all, you work hard every day.
When it comes to maximizing your money, it’s all about creating a plan that aligns with your goals and values. Today, let’s look at four easy ways to confidently get your cash working for you again.
1. Evaluate your current reserve.
Retaining a strong cash reserve is critical — especially in the unpredictability of COVID-19. Take the time to evaluate the solvency of your reserve.
- Is it where you need it to be?
- Do you need to increase it to better protect yourself?
- Are your long-term financial goals still achievable?
Now is the perfect time to reevaluate your budget, emergency funds, and any remaining debt (student loans, credit cards, the works) and how they fit into your lifestyle. For example, physicians who are particularly elective-surgery heavy may need to ramp up their emergency/rainy day funds from 3 to 6 months. While 6 months of savings would be ideal, it’s not always possible, so just focus on putting as much as you can towards your reserve.
You have your reserve for a reason, and that’s great; now what’s the point of adding even more cushion to a fully-functioning couch? Sitting on money just to sit on it won’t further your goals — money that isn’t used decreases in value every single day. You want your money to work for you. Here’s how you can make that happen.
2. Take emotion out of the equation.
Finances and emotions have a complex relationship, but one thing is for sure, too much emotion can dampen your finances. A certain level of emotional competence and understanding can be helpful within your financial plan, but oftentimes, our emotions and feelings tend to take over the decision-making process.
You might be hesitant to get back into the market with the volatility, but the market will always be volatile. There will always be a certain level of risk that may lead you to question your motives — ignore that (to an extent). Try to take a step back from your fears and look at the situation from a logical, analytical perspective.
Emotional financial choices, especially negative ones, often won’t set you up for success. They can keep you from moving forward and achieving your goals. We aren’t saying to ignore your gut instincts, and throw your money everywhere and just see what happens. It’s all about thoughtful and careful planning. Focus on what you want in the short-term and long-term, then decide how to best put your money to work to help achieve those goals.
3. Start investing a little bit at a time.
Want to become a savvy investor? Start by contributing smaller amounts regularly. Say you have $50,000 to invest. Instead of sticking it all in the market and watching it like a hawk, spread it out into 5 scheduled contributions over a few months.
Investing smaller amounts (dollar-cost averaging) can actually help improve your returns and keep you from the dreaded investment faux pas: timing the market.
Even if the market isn’t exactly where you want it to be, consider investing anyway. The S&P 500 index shows that current market performance should not influence the timing of investing in stocks. Even after the stock market has fallen more than 10%, one-year returns are positive, yielding 11%+ returns. Remember, markets will always be volatile, but when considered a long-term investment, many investors find success.
4. Look outside the market and diversify your portfolio.
The stock market isn’t the only place to put your money to work. Vestia offers many opportunities for private investment in medical technology, real estate investment trusts, and other avenues to diversify your savings. Investing in vehicles outside the stock market is a great way to diversify and alleviate the pressure of market volatility.
Bonus: Always consult with your financial advisor.
The best thing you can do to set yourself up for a successful financial future is to put your money to work. Talk with your financial advisor to see what strategies best fit your short-term and long-term goals.
When it comes to investing, there will always be a reason to stay on the sidelines, but sitting on cash won’t get you where you want to go. You want to have enough cash to weather a storm, but make sure that the rest is working for you.
Take the next step in controlling your financial future and make your cash work for your lifestyle and goals — give our team a call today.
Investment advisory services offered through Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, and Vestia Advisors, LLC. Securities offered through Ausdal Financial Partners, Inc., 5187 Utica Ridge Rd, Davenport, IA. 52807 (563)326-2064. Member FINRA/SIPC. Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, Vestia Advisors, LLC, and Ausdal Financial Partners, Inc. are independently owned and operated.
This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor. This information is not an offer or a solicitation to buy or sell securities. The information contained may have been compiled from third-party sources and is believed to be reliable.