With April 18th quickly approaching (yes, the government changed the date due to a weekend/holiday) it is time to file our taxes, which will lead to some either miserable or happy campers. Three states (California, Georgia and Alabama) are eligible for a six-month extension through October 16th due to storms that happened in those areas. With this delay for certain counties in those states, they have the opportunity of having more time to contribute to their IRA’s or health saving accounts (HSAs). 

As of this writing about 28 million households have received a tax refund and it typically takes about three weeks to get after filing. The most important thing is to not only be smart with your tax return, but also be diligent on efficiently using the money you continuously get year-round. Buckle up and time to take you on your first class ride!

Budgeting is just like dieting. You start off great, but at times it’s hard to keep up with and then the train derails. This is why most gym memberships are applied during the month of January. A lot of people’s New Year’s resolutions are to look more fit, eat healthier, have better relationships and of course make more money. 

The reason why most budgets do not work is because people tend to overspend so it becomes too time consuming to keep up with. Other people just do not want to know what they spend, so they live their lives blindly (no pun intended). It can be scary to know the true outcome but there is a light at the end of the tunnel if you just trust the process and be diligent. 

In the optometry world we have the 20-20-20 rule. Well, when it comes to budgeting and money management there is something called a 50-20-30 rule. This can be a baseline for most people but does not work for everyone depending on where they live throughout the country. 50% is utilized for essentials such as gas, groceries, rent, etc., etc. 20% goes to your savings such as 401Ks/403Bs, IRAs, HSAs, emergency fund, loans, credit card payments etc etc. 30% would cover everything else such as gym memberships, movies, restaurants, monthly streaming subscriptions etc etc. 

Other people like the envelope approach where you keep a certain amount of “savings” into an envelope and you keep it for a particular expense you want to pay off. Now you are more visually aware of what is going where. It is prepping you psychologically. Personally, for me this is not my favorite because you are losing money due to inflation. Also, someone can come into your home and rob you, for example, or your house could burn down. 

You could also use the 50-20-30 rule but make it a little easier by condensing it to the 80-20 rule. 80% of your money goes to everything else other than your savings account and 20% goes into paying yourself.

Are we being smart with our time and money financially? When I speak with my fellow colleagues about personal finance, I tell them that it is an absolute must to pay yourself first and that is done by setting aside between 10-20% of your pay check BEFORE taxes! Most people work 8 hours a day. They may work 10 hour four day shifts or they work 9 hours one day then 6 hours another day as private practices want to accommodate patients. If we take those normal 8 hour work days I would tell my colleague to pay yourself 1 hour a day every single work day which would be equivalent to 12% of your salary! 

Here’s what I mean: lets pretend you only make $104,000 a year for easy math; hopefully everyone reading this makes more than that. With a salary of $104,000 your daily salary would be $400 which means you make $50 an hour. That $50 an hour you would set aside into a wealth management account every single work day. For example, $50 an hour x 10 days (2 week pay period) = $500; $500 x 25 weeks (lets account for two weeks off for vacation) = $12,500. Out of your $104,000 salary you would have paid yourself $12,500 for the year. All the other money you have remaining would have been to fund your lifestyle, pay off debts, go out to eat with loved ones, watch a game, go to a concert, travel the world, buy a home, etc.

We must first start to create small habits and make it automatic for the best chance of success. Personal finance is all about controlling your emotions than actually being savvy with technical terms on money management. Sadly, most Americans do not even put in 5% of their salary into an investment, and this is why 95% statistically will fail financially – that includes doctors. 

There is a lot more to cover, but for now if people can start implementing this small routine into your everyday lifestyle you will thank your future self! For more content be sure to stay tuned on my next issue and thanks for reading!