Let me help you make your financial DESIRES come true. I have helped others and I can help you too.
I have had a passion for personal finance and investing for decades. And I love to teach it. So word has gotten out to my peers. They often ask me for advice. They have specific questions such as:
- “Should I invest in BitCoin?”
- “I hear Roth IRAs are good?”
- “Should I pay down debt or invest?”
- “Is it too late to buy stocks before a crash?”
The only honest answer to these questions is, “It depends.” That isn’t helpful though, and it isn’t the answer they seek.
Over the years I formed a more sophisticated way of answering. I now ask, “What does your Financial Plan tell you to do?” The blank stare and shoulder shrug then leads to a more substantive discussion.
Personal Finance is more Personal than Financial. Use math to inform your choices. But let your values guide your life.
You Need a Plan
“You’ve got to be very careful if you don’t know where you are going, because you might not get there.”
Do-It-Yourself investors NEED a clear written guideline. If you have a competent financial advisor you SHOULD still have a written plan. You should create or at least understand the plan.
A solid plan can serve to guide your financial decisions. It can also be a tool to help talk you off the ledge. Our animal emotions can rise up and take over in times of stress and market turmoil. Raging emotions aren’t conducive to building wealth.
You should also have an IPS (Investor Policy Statement). That should detail what and how you will invest.
A more comprehensive Personal Financial Plan has many components. Creating a comprehensive plan from scratch can be overwhelming. Let me give this some structure for you. Mnemonics are a great way to understand and remember concepts.
For any readers who like a little mental crutch, I offer my acrostic. This common word offers a latticework on which you can hang your personal financial world.
Achieve All Your Financial DESIRES!
Money is for spending. You should plan to spend all the money you make. 100% of it. Does that shock you? It may since I’m known to promote frugality.
The question is do you want to spend all of it now or some now and the rest later.
This view of money requires a strategy and a plan. Doctors still earn generous incomes. You can buy many of the things you want. But you can’t have everything you want. And not all at the same time. Another way of saying this is, “You can have anything you want, but not everything.”
So when you dream about your future, what do you see? If you struggle with this, imagine this thought experiment:
What would you do or change if you received $10M?
Would you quit work, cut back, move to another state? Do you dream of exotic vacations? Private schools for all? New Teslas for every family member? This dreaming exercise can clue you in to what is important.
Those insights can lay the groundwork for your Financial Plan. Dreams can lead to goals. Goals lead to expense plans.
Whatever your dreams and financial goals, debt poses a barrier. A large debt load feels like a backpack filled with lead. How fast can you climb the hill of financial net worth? If you could lighten that load or remove the backpack imagine how fast you could climb?
Even an average student loan debt of $200K can be a big obstacle. Interest payments alone are $1K/month or $12K/year with only a 6% loan.
So you need a plan to conquer your debt. Will you attack it hard and fast? Will you go the PSLF (Public Service Loan Forgiveness) route? Could you refinance for a lower monthly payment?
Physicians are among the highest-paid professionals. The choice of specialty drives a lot of the variation of income among doctors. There is also intra-specialty variation. Once you chose your specialty there are still steps to take to optimize your income.
Choosing a solid private practice helps. Improving practice efficiency and productivity helps. Time management and marketing skills become critical. Effort spent negotiating salary and your employment contract is high-yield.
Working on a “side gig” can boost your income. You could start consulting or a medico-legal side business. That could provide income, tax deductions, and another retirement fund.
There are ways to spend money and boost your happiness. There is a complex relationship between money and wellbeing. Much like health, the absence of money causes misery.
As income increases above the poverty level, happiness goes up. But there is a diminishing benefit as salaries climb. Once incomes are six-figures, going higher causes minimal or no improvement.
Be wise & get a bang for your buck.
- Help others.
- Actualize your values.
- Outsource your chores.
- Enjoy unique experiences.
Some spending is unwise.
- Spending to impress others.
- Accumulating toys.
- Escaping from your life.
So spending more won’t make you happier. The good news of this is you can boost your savings rate without feeling deprived. “Relative frugality” may be part of wise spending. But there is no need to feel deprived.
So, how much will you save? And how? The higher your savings rate, the sooner you can become “financially free.” Saving 10% of your gross income is not enough. 15% will put you in a weak financial position later in life.
20% should be the floor. That requires a long, full medical career. 30-35 years of work would set you free. Even if you love medicine and hope to never retire, that isn’t an ideal plan. What if the field worsens? What if you get burned out?
I recommend a 35-40% gross savings rate for most doctors. That will allow Financial Independence within a 20-year career. That is my default recommendation. It is reasonable and doable. It isn’t too aggressive or enough to cause a career of deprivation. Yet it allows a lot of options around age 50 or so.
Financial Independence will allow flexibility. If you still love what you do 100% of the time then you can continue. But if you find burnout creeping in, as so many of us do, you can make changes. If you are planning on retiring early you will need to consider a 50-60% gross savings rate. That is hard, but doable for the motivated.
Once you know your savings rate, you can set up a set-it-and-forget-it electronic system. Money should transfer from your paycheck to your savings and investment accounts. Make the default transactions automatic.
Here’s a summary so far:
- Know your goals.
- Decimate your debt.
- Make serious cash and set some aside.
Is that enough to reach financial success? Likely not.
Another key skill is wise investing. It sounds intimidating. Learning how to invest wisely is simple. You can master the basics. Then set the plan in motion and watch your wealth grow.
You won’t need to be able to predict the economy. There is no need to analyze financial statements or predict the stock market.
You need to pick a mix of stocks and bonds. Buy those assets often and at a low cost. I will show you how. You won’t need to pay an investment advisor.
Owning financial assets will allow you to enjoy compound interest. Your money will grow faster than inflation. You will earn interest and dividend income.
Your investments will produce cash flow. Spending it is easy. Resist the urge. If you reinvest that income it will grow exponentially. That will also make it easy to have a high savings rate.
Currently, I make less money from my practice than I did at my earnings peak. I could make more but opt not to. Working part-time allows more balance. Our household spending is higher than ever and goes up every year.
We don’t feel deprived. This is mostly because we spend more each year and yet work less than ever. How is that possible? You might assume I’m saving less or my investment returns are higher. Neither is the case. My returns are low since I started de-risking my portfolio. Yet my savings rate is higher than ever.
The reason I can spend more while working less is because of investment income. Reinvesting dividends, rent, or interest allows me to save less from my paycheck. My savings rate keeps going up and it is easier than ever. That’s what I wish for you.
When reinvesting the money you could keep your same set of low-cost stocks and bonds. Or you could consider building a business. Or invest in a friend’s private company.
You may want to buy rental real estate. I know, I know. You are busy and don’t want 2 AM tenant calls. Trust me there are ways to invest in real estate with minimal time or risk. Real estate has helped me grow my wealth for over 20 years. And I practiced as a full-time clinician too.
Establish a Defense
This plan creates large assets. You must take steps to protect what you have grown. We live in a litigious time. Bad things happen, and someone must pay when things go wrong. Don’t be an easy target.
Learn how to title assets to keep them safe from lawyers and creditors. Learn which insurance policies you need and which are a waste of money.
You worked way too hard to get where you are. You planned, toiled, and sacrificed. Don’t let all you built evaporate due to a weak financial defense.
Secure Your Future
Follow these steps and you will become wealthy. You will create more assets than you need. You won’t be able to spend it all. Think about what will happen to your money and reputation after you pass.
Secure a legacy. A will is a must. There may be a role for a trust or foundation. Consider setting up a charitable fund to support worthwhile causes. Clarify who will receive from you an inheritance.
Spending a few hours reading a good finance book or making your plan will be time well-spent.
Schedule an hour to work on your own financial plan. Feel free to use my DESIRES format. Let me know if you like it or hate it. Or show me a better way. Let’s learn together!