How often are you making decisions about your financial future? A lot of people answer this question by saying something like “a few times a year.” After all, you only make a few big decisions every year about retirement accounts or investments that will fund your golden years.
But that’s not the right answer. The right answer is every day. Every financial decision you make impacts your financial future, whether that’s paying your mortgage, covering a child’s college expenses, or making changes in your practice that will affect your bottom line. Some financial decisions are bigger than others, but they all affect your financial future.
A Microeconomic vs Macroeconomic View
These individual decisions are microeconomic decisions. They’re made on an individual level, item by item. Over time, these microeconomic decisions add up to up to affect your financial life from a macroeconomic perspective, which takes a broader point of view. Understanding how these two levels interrelate is extremely important if you want to get a good handle on your financial well-being.
For example, think about your mortgage. How often you pay your mortgage and how much you pay towards it doesn’t just affect the loan itself. It also affects your finances on a macroeconomic level and, therefore, your financial future. When you think of it like this, you see that each decision you make when you pay a bill or make a purchase has ramifications for the whole of your financial health.
The Consequences of Ignoring the Macroeconomic Viewpoint
Many people only view their finances from the microeconomic point of view. But doing this can cause you to lose hundreds, thousands, or even millions of dollars over a lifetime without even realizing it. You miss out on the opportunities and added value that a macroeconomic approach brings. This is a big reason most dentists retire on just half of their preretirement income.
This viewpoint also calls into question a lot of the conventional wisdom in the finance world. Some commonly advised strategies we aren’t in favor of include compounding of interest in a taxable environment, excessive tax deferrals for retirement plan contributions, or the acceleration of debt repayment. Purchasing the wrong financial products and following the wrong strategies can result in disappointing income in retirement, too.
A Plan with Macroeconomic Positioning
The Financial Treatment Plan we create with our clients takes into account the relationship between microeconomic decisions and macroeconomic benefits. The way we help our dentist clients plan for their financial future results in a secure retirement with no cut in income.
Interested in learning more? Look out for our upcoming book Your Retirement Smile and check out our website to discover more about the Financial Treatment Plan as well as how to take control of your financial future.