I'm Financially Strapped -- on $175,000 a Year!

Dennis Murray, MA

May 01, 2014

Other Legitimate Reasons to Spend

Education Costs

We're talking less about your own school loans here than we are saving for your kids' college educations. Although you may be able to spend less by sending your children to state schools, the overall cost of higher education shows few signs of slowing. As with your retirement plans, look at education as a legitimate fixed cost that you should fund regularly.

The Friskels are doing very well on that score, having socked away $90,000 each for their 2 oldest kids (aged 12 and 10 years) and $60,000 for their youngest, who is 8 years old. The couple contributes $500 a month to each of the kids' accounts.

Professional Advice

A smart advisor can save you money in ways you may not have considered. For example, Al Zdenek helped an internist and his wife refinance their $400,000 mortgage to pay off $152,000 in med-school and car loans. The free cash flow from the refinancing allowed them to fully fund their 401(k) plans in 2013, which provided an additional $15,000 in federal and state income tax savings.

"A lot of doctors aren't aware of what impact their spending decisions can have on their tax bill," says Zdenek, who is a CPA in addition to a wealth advisor. "All of these decisions -- purchasing or financing real estate, a car, a home, medical equipment -- can affect whether and how soon you meet your financial goals."

Bottom line: Make sure you hire advisors you can trust, including a smart accountant and a good financial planner. "Just because you have a lot of education," says Eric Friskel, "don't presume you know how to manage money too."

Conclusion

As you can see, there are plenty of things that are worth opening your wallet for and others that you ought to seriously rethink on a case-by-case basis. No one said it would be easy, of course; it'll entail sacrifice and a new approach to things. But ultimately you -- and your family, if you have one or plan to start one soon -- will find it easier to live comfortably within the good salary you work so hard to earn. And that will surely pay dividends for years to come.

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Cite this: I'm Financially Strapped -- on $175,000 a Year! - Medscape - May 01, 2014.

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