Welcome to The Wealthy Mom MD Podcast—a podcast for women physicians who want to learn how to live a wealthy life. In this podcast, you will learn how to make money work for you, how you can have more of it, and learn the tools to empower you to live a life on purpose. Get ready to uplevel your money and your life. I'm your host, Dr. Bonnie Koo.
How many of us have started the year with amazing financial goals? Then life happens--especially this year. It's 2020, and it has been quite the year so far. Most of us were not planning for a global pandemic. Well, the good news is we still have about six months left. It's not too late to get back on track. And if you didn’t make goals, it's not too late to make some.
Now, before I walk you through a five step process to do a mid-year money audit, let's just take a moment to even talk about goals. Why make them? Why bother? I know some of you resist making money goals or any goals in general. We're tired. We've spent our whole lives achieving so many goals. I hear you. I get it. One thing I've learned over the past few years is that it's not even so much about reaching the goal. I know it sounds trite. It is about the journey. It's about who you become. Goals force you to get out of your comfort zone and to grow. Otherwise, you kind of stay the same. That's how I look at goals, including money goals.
Alright, let's get started. Here are the five steps in general, and then I'll take a deeper dive.
- Number one is that you need to remind yourself what the goals are or create goals if you haven't.
- Step two is to examine the data.
- Step three is to identify what you've done.
- Step four is to identify what isn't working.
- Finally, step five is to create a plan going forward.
Step one first. You need to remind yourself what the goals are. If you made them back in January or maybe the end of the year. Personally, my favorite time to kind of think about goals for the following year is actually October or November before things get crazy with the holidays. Your goals might be buried somewhere. Hopefully, you wrote them out because that's such an important step. When you're creating goals, write them out. Don’t just think about them. If you haven't made goals, this is your opportunity to do so. Like I said, I recommend you write this out. Don't just think about it. Maybe your goals were something like maxing out your retirement accounts. Maybe you don't even think about those as goals because they are automatic for you. But those are goals. You're maxing out your 401k or 403b or your Roth IRA. For example, maybe it was to buy rental properties, maxing out your health savings account. Maybe it was to pay down debt, et cetera. Write them all down.
Step two is what I like to call examining the data. I want you to put your objective, scientific hat on right now. This is not your judgy brain. This is your scientific brain. Meaning you need to look at what has been done and what hasn't been done. This is not the time to judge yourself. We're simply gathering data points so you can objectively see if you've made progress or not. Let me give you some examples because sometimes our brains will offer up thoughts like, “Well, I haven't made any progress.” Is that true? Maybe you bought a book. Maybe you read a book. Maybe you opened up that HSA account and put some money into it. It all counts.
Step three. Now I want you to take off that scientific hat and ask yourself, “What have you done?” I want you to notice how our brains immediately want to point out how we aren't on track, what we've messed up, or maybe you want to start feeling bad about what you haven't done. This is automatic. I like to always start with what have you actually done? Force yourself to ask that question and you've definitely done something well, I promise.
Step four is to identify what isn't working and what you can learn and what you can improve, but not from a judgmental place, not from a “Oh, I'm so bad with money” place. Answer from a “What can I learn from this?” place. How can you create a strategy around all of these things?
Step five is to create a plan going forward. We still have about six months left in the year. You know, a few things I've learned about goal setting--I think I heard Brooke Castillo say this. We overestimate, or we tend to overestimate what we can do in the short term, like in a week, for example. All of us grossly underestimate what we can accomplish in the long-term, like six months, a year, and a lifetime.
Let me give you an example from my life on how I did this midyear money audit. Like many of you, I had to remind myself what the goals are because life got busy. Lots of things happened this year. I even kind of forgot what our goals were. One of our goals from last year, actually for the end of 2019, was to buy a rental property. And some of you may know that was a goal of mine, but it didn't happen in 2019. And it's so easy to go into, “Oh, I didn't do that. I messed up,” et cetera. I just want to offer that those types of thoughts, that type of thinking is just not useful because it doesn't have you do anything about it. It doesn't help you examine why you didn't accomplish that goal or why you didn't take action towards it.
Now I said earlier, it's not so much about reaching the goal. It's about who you become and how you grow as a person and how you deal with the obstacles that come up. I will say, if you pick a goal, that's “too easy”--it's not that there's anything wrong with that. It just doesn't require you to grow and do something new. For me, for Matt and I, buying a rental property, our first one was going to be something new and it was going to take something, especially for me since I had a lot of fear around real estate. I kept saying, “We're going to do this,” but I would keep not doing that. And so I saw that as an opportunity to take a look under the hood of my brain to see why I keep not doing this. Honestly, the reason was fear. I built up all this fear in my mind that it was going to be hard, that it was too complicated. Then when I got coached and coached my software around it, I realized that yes, they were excuses superficially, but that my fears were sort of out of proportion to the reality of things.
What I found interesting is that once I actually committed, not just sort of say, “Oh yeah, I want to do this”--because a lot of us make goals like that from a place of, “Yeah, that would be nice”-- but truly commit and take action from that commitment. Once we actually started, I realized that it really wasn't that hard. Dr. Leitiza Alto is a friend of mine and one half of Semi-Retired MD. She even says that real estate is not med-school hard. Physicians can do hard things. Real estate is not one of those hard things. That was kind of a long-winded story, but I just want to share it with you because I know many of you are also afraid to invest and maybe you're also afraid to invest in real estate.
When I put on my objective scientific hat, I was examining the data to see if I had made progress with buying a rental property. So automatically my brain wanted to say, “You have not made any progress around this.” Is that true? Was that true? Of course not. We had made tons of progress. It's funny, our brains look at the goal and whether it was done or not, and if it's not, then we kind of go into what I call all our non-thinking. It’s like when we see that the goal wasn’t met, so we think we haven’t made any progress and you’re a failure type of thing. When I was able to sit back objectively, there was a lot that we had done to get closer to that goal. So for example, we had met with an investor agent. We had taken the Semi-Retired MD course Zero to Freedom with Cash Flowing Rentals. We had started just networking and meeting other people who are also investing in real estate. All of these things count.
Then, the next step I talked about was step three, to identify what you've done well, and I've pretty much, I've mentioned them already. I had read some books, done some courses, talked to some people, et cetera.
Step four, identify what isn't working. I talked about this a bit earlier when it came to sort of my personal goal about real estate, what wasn't working was mainly mental issues, meaning fear, not taking action. These were some of things I had to really examine and get coached on and coach myself around.
What I've learned with all goals is that each of these sort of mental obstacles, there are opportunities to create strategies. Meaning when my brain goes into fear mode-- Here's the thing. Everyone feels fear around something new, something different. It's the normal human response. The problem is that most of us think that when we do feel fear, we think it means something's gone wrong. We think it means it's like a signal that we shouldn't do it. That there's actual danger. I think it's easy to think that when you see people who are doing things that you want. For example, with Leitiza and Kenji, it's really easy, even for me, to look at them and think they must not be scared. They must not be feeling what I'm feeling. That's simply not true. All human brains will offer up fear when something new is happening. It's the normal thing to happen. The strategy I created was to honestly write it down on a piece of paper. When I started feeling scared about investing in real estate, I wrote a few things down and I'll share some of them with you. I wrote down, “It doesn't mean something's gone wrong. It's just my brain being my brain.” I also wrote down some alternative beliefs to anchor me. Things like “Fear means I'm doing it right. I can still take action.” Things like that.
Step five, create a plan going forward. We ended up buying our first property by the time of this recording. And so we met that one goal, but since we still have six months left, I thought it was time to work on some other real estate goals. Even though we bought the property, there's still work to be done on the property. We're going to rehab it and we're going to hopefully do a cash out refi so we can put that money into another property. I guess I made a new goal to acquire a second property within the next six months.
Now it's your turn. I also have a bonus money audit for you here as well. Make sure you do an income tax audit as well. What I see all too often is people getting really upset when they're slapped with a large unexpected tax bill. This should never happen. All of us should be doing midyear tax planning, whether you just gather some information, so your accountant can do it for you, or whether you do it yourself.
Here are the steps to do a midyear tax audit. I don't want anyone to ever be surprised at tax time. You need to gather all of your income so far in 2020. For most of us, that'll be gathering pay stubs, et cetera. Then, you have to make best guesses at your income for the rest of the year. I know it's not always possible to fully know, but you have to take your best guess, and it's better to overestimate rather than underestimate. Then, you simply plug in the data into a tax projection calculator. I've linked to one that I like in the show notes. You also need to get the information, not just the income, but also the taxes you've paid. Because if you're a W2 employee, taxes are taken out automatically. If you're an independent contractor, you have to save or put money aside for taxes, and you should be making quarterly payments. Once you do this projection, you'll get a good idea whether you are on track or not, meaning whether you need to put more money aside or whether you need to put less money aside. If you're not on track and you have a lot of taxes you'll owe if you don't make changes, well, guess what? You've got six months to course correct.
I recommend this process for what I consider simple personal income taxes, where you have sort of standard W2 or 1099 income. If you own a business, whether it's an S Corp or a pass through entity, I personally recommend you work with a CPA. Yeah, you can do it yourself, I guess. I just feel like it's probably not worth your time to do this, and you're probably not an expert. I have an accountant. I also have a bookkeeper for my business. This is something my CPA does with me every summer. I am never surprised at tax time. The goal is to “break even” or maybe a little refund. I know many of us love getting refunds. I don't. I'd rather get the money beforehand. A good CPA will also run different scenarios based on what's happening in your life and business and the circumstances of the world.
I hope this was useful for you. I hope that you truly do make some time to assess your money goals for the year and to create some new ones.
There is still plenty of time left in 2020. See you next week.
Hey, if you're a woman physician who is ready to take control of your money, you've got to check out my program Money for Women Physicians. It's part course and part group coaching and a hundred percent guaranteed to put more money in your pocket. Go to wealthymommd.com/money to learn more.
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