Give Yourself the Gift of Independence

Physician's Money Digest, February15 2004, Volume 11, Issue 3

It may not be fun paying for your owngifts, but the payoff from the followingeight financial gifts adds up to oneof the best presents you'll ever receive—the start of financial independence:

• Set goals and make plans. Perhapsno single financial act can providea greater payoff than planning for yourfuture. Just taking the time to consideryour goals and what it will take financiallyto accomplish them for the comingyear and beyond, brings youhalfway there. If you have made plans,review them in light of any changes oranticipated changes to your personalcircumstances, such as a new job, a newbaby, or marriage.

• Create a spending plan. Many peoplewould feel better off financially if theysimply spent their money more wisely.That's where a spending plan comes in. Itdirects your money to the priorities inyour life—not just the basics such as housingand food, but savings, paying downdebt, and, yes, the fun things.

• Make better use of your money. Away to free up money within your spendingplan so that you can spend more of iton priorities is to ensure that your moneyis working hard for you. Put pretax moneyinto a flexible spending account at workto pay for childcare or health expenses.This saves money for expenses you knowyou'll have during the year.

• Start an emergency fund. Thecombination of a spending plan andsmart spending should free up moneyfor a rainy-day fund. Ideally, it shouldhave enough to see you through 3 to 6months of bare-bones living expenses. Ifyou can't do that, just remember thatevery bit helps in a financial crisis.

• Review your investments. See ifthe allocation of assets still meets thegoals you originally set for your portfolio.Changes in values of the portfolio'scomponents may have altered your originalmix, so that now you have too muchor too little in a particular asset. Thisimbalance increases the risk involved inachieving your investment goals.Also, review your investments inlight of any significant changes in yourgoals and financial circumstances. Suchchanges include an inheritance or a newjob that offers stock options.

• Save a percentage of your income.It's commonly recommended that peoplesave at least 10% of their income, usuallyfor retirement. However, many find10% difficult and end up saving nothing.Saving even a small percentage will help,and may make you more comfortablewith saving so that you can eventuallyraise the total percentage.

• Financially educate yourself. Educatingyourself about managing moneymay not sound like much fun, but the payoffcan be financial independence andfreedom that much sooner.

• Reconsider your retirement. Retirementis a big, long-term financialchallenge, but the concepts of retirementare changing dramatically—peopleliving longer in retirement, people wantingto work in retirement, and possiblechanges in Social Security and Medicare.How you envision your retirement willhave a huge impact on your currentfinancial planning.

This article has been produced by the FinancialPlanning Association (, the membershiporganization for the financial planningcommunity.