10 personal finance tips you can take to the bank
You may own a veterinary practice, “just” run it—or both—but financial management is an integral part of your daily business life. So why neglect your personal finances? Are you paying as close attention to your own pocketbook as you do your veterinary practice's? Here are a few personal finance tips from Lacher McDonald CPAs to balance your own books:
Stash some cash. Keep a relatively small amount of cash on hand that would help you leave town in a hurry in case of a family emergency. Credit cards do a lot to obviate this need, but when you’re in an emergency situation, cash is king.
Stash U.S. savings bonds. You register them in your name and can name a beneficiary for them. They earn interest until you cash them and can be “invisible” until you do cash them. Savings bonds pay interest for 40 years and you can get them online.
Pay off the house or prepay the mortgage. Prepayments have proven to be a profitable investment while others went steadily down with the stock market. A house that’s paid off provides sound sleep to many entrepreneurs. Interest rates are low right now though, and some people won’t like this option because they think they’ll earn more in other investments. This is a much-debated topic, but it comes down to how you feel with no mortgage to pay. Someday you'll reach an age where you won’t want a mortgage, and prepayments make it happen.
Be careful of home equity lines of credit and similar debt. Your house is never free and clear with these debts. Possessing such a line with nearly no balance does provide a safety net you can easily tap. Just don’t turn your house into an ATM.
Don’t rack up credit card debt. Paying all credit card accounts in full each month is a strong indicator that you’re living within your means. If you have credit card debt as part of a business strategy related to start-up or expansion, recognize the reality of the debt and have a strategy to pay this off in a timely manner.
Avoid vehicle loans. Zero interest loans are a possible exception. But you may save just as much if you can receive a discount for paying cash. Buying a vehicle with a home equity line may get you a deductible for personal interest, but this is a cloud on your home and should be paid off over a period that’s appropriate to the life of the vehicle, not the longer time permitted by most home equity loans.
Consider I savings bonds. Similar to U.S. savings bonds, these pay a relatively low flat rate of interest but also a variable rate in addition to the base rate. This variable rate is usually the inflation rate and never goes below zero.
Get life insurance. If your cash is scarce and you have young children, term insurance offers more coverage for the dollar. If you have cash available, whole life insurance builds some internal value and you can convert it into other kinds of insurance or cash when you get old and need care or money. Buy life insurance early—it’s cheaper when you’re younger. In the case of whole life insurance, the rate may be set for life at a lower point. Don’t consume all of your ready cash in premium payments.
Get disability insurance. You’ll feel more secure if you know that a serious illness won't put you on a street corner with a sign. Disability coverage gets more expensive as you get older, but the need is statistically there, so don’t eliminate it too soon or reduce it too drastically.
Organize your will or trust and any related documents. Do this regardless of your age. If something happens when it isn’t supposed to, others will be able to care for you. Of course, this means that somebody else knows where the documents are and they are accessible (not in a safe deposit box).
Review your property and auto insurance coverage. Talk to a qualified insurance agent and ask for definition of terms (know what uninsured motorist coverage is). Don’t store your homeowners’ policy in the house that is insured.
Set aside money to help others. Set money aside to help those who need—or will need—your help because they didn’t or couldn’t save a dime. Don’t help those you don’t need to help. The first group will be taken care of, and the second group will be mad at you—but so what?