The events of 2020 threw a wrench into even the best laid plans – financial or otherwise. As a dental professional, the impact to your practice, staff, patients and finances likely ranged from moderate to significant. Whether you successfully weathered the storm or are still facing financial challenges, the onset of 2021 is the perfect time to check in on your financial plan and re-evaluate it against your current situation.
As you consider how your financial plan should adapt for the year ahead, here are five points to keep in mind.
- The importance of a financial plan
If you don’t currently have a financial plan, this is the time to create one – whether you’re just starting out, nearing retirement or somewhere in between. That’s because a financial plan acts as a roadmap for your professional and personal goals, and outlines strategies to enable you to achieve what’s important to you.
A customized financial plan will also establish how to protect yourself and your income, maximize your savings, minimize your taxes, invest wisely and pay down debt. And when life throws in a curve ball, as it did in 2020, your financial plan can help keep you on track.
- The value of professional advice
According to a report1 from the Investment Funds Institute of Canada, households who work regularly with a financial advisor have nearly three times more investable assets than those who don’t and are more likely to feel confident in their financial lives.
When times are uncertain, the sound advice of a financial advisor is particularly invaluable. Throughout 2020 there were many unknowns, causing investors to make decisions based on fear and emotion. An advisor can help you see the full picture – and talk you through the roller coaster.
- The impact of a sound tax strategy
For most established dental professionals, your income level puts you in a higher tax bracket than the average Canadian. As a result, your tax burden can be significant, reducing the amount of hard-earned money you keep for yourself. If you’re a practice owner, you have several options that can help you minimize your taxes, including the way you pay yourself, structure your corporation, get your family involved, and withdraw cash from your practice.
Working with your accountant and other advisors, a financial planner can coordinate a holistic tax strategy that is grounded in your financial plan – allowing you to make the most of your money.
- The benefit of scenario planning
All businesses operate under a certain degree of uncertainty, and dental practices are no different. Disruption can happen at any time – whether it’s an office fire, the departure of a key staff member, new competition in the neighbourhood… or a health crisis. That’s why scenario planning is an important business strategy, and one that is wise to integrate into your financial plan.
Often referred to as ‘what-if’ planning, business scenario planning can prepare for a variety of situations. For example: What would happen if you lost half your patients? What if you need new equipment to address new health policies? What if there’s another lockdown that shuts your doors? What if the dental supply chain grinds to a halt?
Having gone through one of the most significant periods of uncertainty in recent history, incorporating ‘what-if’ questions into your financial plan can help you spot potential weaknesses in your practice, identify cash flow issues and more.
- The COVID-19 benefits available to you
The Canadian government has introduced many relief programs for individuals and businesses to support them through the COVID-19 pandemic.
For instance, if you retained your staff during the pandemic yet your practice experienced a revenue decline, you may be eligible for the Canada Emergency Wage Subsidy (CEWS), which would cover part of your employee wages. If you rent your practice space, you may be eligible for the Canada Emergency Rent Subsidy (CERS) to cover part of your commercial rent or property expenses. The Canada Emergency Business Account (CEBA), meanwhile, is an interest-free loan up to $60,000 to help small businesses cover operating costs during COVID-19.
Understanding your eligibility for government programs can impact your financial plan – your advisor can help you determine how and whether to take advantage of the opportunities available.
Starting the year off with a refreshed financial plan will enable you to approach 2021 with financial strength and confidence. An adaptable, resourceful plan can also prepare you for changing circumstances, allowing you to seize unique opportunities and face new challenges as they surface.
Our advisors work exclusively with dentists and dental professionals and can develop a financial plan that considers your unique circumstances. To learn how they can create or refresh your financial plan, contact an Investment Planning Advisor* from CDSPI Advisory Services Inc. at 1.800.561.9401 or investment@cdspi.com.
1 – New Evidence on the Value of Financial Advice. The Investment Funds Institute of Canada (https://www.ific.ca/wp-content/uploads/2013/08/New-Evidence-on-the-Value-of-Financial-Advice-November-2012.pdf/1653/)
*Investment Advisory services are provided by licensed advisors at CDSPI Advisory Services Inc. Restrictions may apply to advisory services in certain jurisdictions.