- You Need a Plan
- Dream & Dump Debt
- Earn Optimally
- Spend Wisely
- Invest Prudently
- Reinvest Profits (& Consider Real Estate)
- Establish a Defense
- Secure Your Financial Future
- Change Policy and Signatures
You can make your own financial future. It won’t just happen automatically. You must make a written financial plan and follow it.
You Need a Plan
I reached financial freedom by following a plan. Now, let me guide you down the path to Financial Independence by helping you make your own financial plan.
You must tailor your plan to your situation, life, and desires. But we will follow a structure and format that has a proven track record of success.
One Word Covers It All: DESIRES
Each letter of the word DESIRES stands for a key to financial success. Learn these lessons and you will be able to carry them around in your head. You can do this by spending a few minutes each week on your DESIRES plan.
Dream & Dump Debt
Dream of your financial future. What do you want from your life? You won’t hit a target unless you aim for it.
Would you like European vacations? Early retirement? Vacation home in Florida? Private schools for the kids? Create your own clear and specific goals.
“You can afford anything, but not everything.” – Paula Pant
And not all at the same time. Your priorities need to be clear.
Designing your dreams will shed light on your top priorities. When you know your priorities your life will get better. Selecting your goals will also become easier. Your life will be more orderly, simpler, and less busy.
WRITE OUT YOUR DREAMS
(Specific Examples: retire early, vacation home, FI by 50, your #, the role of money in life)
D = Debt
WRITE DOWN YOUR DEBT PLAN
(Specific Examples: refinance, PSLF, pay off student loans in 2-3 years)
Most doctors make generous incomes, with salaries in the top 5-10%. But there is also a wide range of salaries within each specialty.
Those with the most procedural skills and who work the most make more money. Ensure you are in the upper tier by learning some business skills. Being efficient, negotiating better, and improving your contract terms or payer mix can boost your income.
You may want to have a “side gig” too. Or a separate business that you grow with your career. Thousands of doctors have done that. You could too.
WRITE DOWN YOUR EARNING PLAN
(Specific Examples: side gig, adding procedures, marketing, contract review)
If you spend every penny, you will never develop wealth. You can’t earn your way out of all financial problems, no matter how high your earnings. “It isn’t how much you make, it’s how much you keep that counts.”
So, you need to save. Although that sounds painful, it need not be. Spending more is not always better. Especially if that extra spending does not bring you an extra boost in your happiness. Some spending improves your well-being, while other spending does not. How do you know how much to spend and on what? It is necessary to prioritize your spending.
WRITE DOWN YOUR SPENDING GOALS
(Specific Examples: save 20%, limit spending to 8K/mo., housing plan, plan for bonuses or raises, buy experiences over material goods, college savings)
Doctors get a late start on earning and want a high return to make up for the lost time. We have above-average intelligence, education, and income. Expecting above-average investment returns adds unnecessary risk.
Many of us know little about investing. Yet we think our intelligence will make up for that knowledge gap. The resulting overconfidence is dangerous. We also tend to trust other “professionals.” High-stress levels, little sleep, and minimal free time compound the problem.
We can become impatient when doing our “due diligence” around investing options. Make your IPS (Investment Policy Statement) and solid financial plan before chaos hits the stock market and panic grows.
WRITE DOWN YOUR INVESTING PLAN
(Specific Examples: max out retirement plans, choose low-cost broad index funds, % of bonds, Roth)
Reinvest Profits (& Consider Real Estate)
Saving and investing will get easier and easier as you practice and develop your career. One key to success is to reinvest any interest, dividends, or profits from investing. That way your investment will fuel more investing. If you siphon off the income and profits and spend it, you won’t get ahead. Although real estate investing is not required, it offers many benefits for physician investors.
WRITE DOWN YOUR REINVESTMENT GOALS
(Specific Examples: automate reinvestments, build taxable accounts, consider real estate funds or syndications)
Establish a Defense
Once you build wealth you must protect it. Fortunately, powerful tools are available to help you do that. Keys to a strong defense include asset management, ownership structures, legal protections, insurance policies. Know which policies are critical and which are optional. Don’t make the dumb mistakes that so many doctors make.
WRITE DOWN YOUR ASSET PROTECTION STRATEGY
(Specific Examples: increase umbrella policy, flood insurance, disability, term life)
Secure Your Financial Future
Do you have your will, estate, power of attorney paperwork in place? Have you thought through your inheritances, estate plans, or charitable donations? Plan for significant wealth. Plan what you will do with that wealth.
WRITE DOWN YOUR ESTATE PLAN
(Specific Examples: house jointly titled?, a revocable trust, up-to-date will, correct beneficiaries, guardian, trustee, wipeout provision, real estate LLC)
Change Policy and Signatures
We are sometimes our worst enemy when it comes to investment decisions. When the economy is crashing and stocks are dropping, panic tends to set in. Likewise, when markets are bounding up it is tough to not be too exuberant and begin speculating.
New future highs seem all but guaranteed, yet they are far from it. It helps to have a friend, advisor, and/or a financial plan to prevent you from self-sabotage.
A cooling-off period can often give us time to become cooler and more rational. That plan can tame your animal instincts. An agreed-upon plan can also keep your family members on the same page.
Who should be involved? A close personal friend? Personal financial advisor? CPA? Significant other?
WRITE DOWN REQUIREMENTS FOR A PLAN CHANGE
(Specific Examples: How often allow change, waiting period, who must agree & sign)
Next Action Step:
What are 1-3 small tasks that I will do within the next 2 weeks. Even a tiny task gets this moving in the right direction.
(Specific Examples: set up your automatic savings, pick a book to read, find a CPA, start a 529, fund a Roth, buy an umbrella policy)
Completion Date of Action Step: ___/___/___