My Money Mistakes

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Money Mistakes; Adventures of a tax-ignorant, overconfident, fickle financial fool.

Despite what some of my audience thinks, I don’t have all the answers. Nor did I do everything right. I have made dozens of blunders along the way. Here I’m airing some dirty laundry and revealing some of my money mistakes.

Debt/Credit/Over-leveraged

  • I used credit cards irresponsibly.
  • Borrowed an above-average amount of student debt.
  • Went into over $500K of debt.
  • In residency I ran up credit card debt. It was so bad that I needed a credit card counseling service to help structure my debt.
  • My credit card misbehavior trashed my credit. That ruined my credit rating for many years due to the “charge-offs” on my report. A couldn’t get a credit card, car loan, or mortgage for many years.
  • Took out a car loan.

Inaction

I created a business model for a profitable physician finance business. But I failed to put it in place. I started a new medical clinic for my employer instead. This was before Jim Dahle created his White Coat Investor Empire.

Delay

  • Took a gap year after college. That year of minimum-wage work delayed the start of my six-figure income later.
  • I deferred my MBA. That decision postponed the start of my better business and investing decisions.

False Positive

I learned this term from Matt Manero. It implies letting your foot off the gas pedal too soon.

  • I cut back to part-time work at age 50. I decreased my hours even further at age 55. Each change required pay cuts.
  • I left a private practice with top 1% income to join academia. This required and initial 80% pay cut that later leveled out to about a 60% cut. This came with a loss of investment and equity ownership.
  • Stopped my lucrative medico-legal work.
  • Dropped a spasticity clinic directorship.
  • Dropped multiple medical directorships.
  • Cut back to even fewer hours.
  • Didn’t use free time or days off to make money.
  • Spent money helping relatives.
  • Paid rent for my adult brother for two years.
  • Set up REIT to pay my father instead of me or reinvest.
  • Paid living expenses for my aging parent.
  • Cut out high-paying work-comp.

Inadequate focus on boosting income.

  • I was accepted into an interventional fellowship after residency, but I declined it. That would have boosted my annual income for the following two decades. After a few years, the country’s most competitive fellowship program accepted me. Again, I declined. This angered the fellowship director, burned bridges, and reduced my future earning opportunities.
  • Time teaching and writing.
  • Haven’t my monetized blog.
  • Declined profitable private practice in Chicago.
  • Encouraged spouse to stay home.
  • Didn’t lease equipment to employer.

Over-insured

  • I continued life and disability insurance long past when I reached financial independence. Even the insurance salesman recommended I drop the coverage.
  • Continued paying for many disability policies after reaching FI.
  • Continued to max life insurance policies after FI.

Under-insured

I didn’t buy life insurance when I was healthy in my early 30s. This put my family’s finances in jeopardy. Especially since I became uninsurable after being diagnosed with cancer at age 34.

Too Risk-Averse

  • I have owned a large portion of bonds in my portfolio my entire investing career. I owned conservative government bonds in the 1980’s and 1990’s when I was young and stocks were booming.
  • I have invested too conservatively. I would be much richer now if I had owned more equity than bonds, especially 2009-2022 when I invested 40% – 50% in bonds.
  • Too much cash drag.

Poor Timing

  • I sold all my gold and precious metals in 2001. That was immediately before 9/11/2001 after which gold prices began their upward ascent.
  • I sold stocks after market declines in 2008. I sold individual stocks. I also reduced my allocation to stocks at exactly the wrong time. In 2009 my business school economics professor recommended I buy stocks immediately. I ignored his excellent advice.
  • Avoided Microsoft, Amazon, Tesla.
  • Bought real estate in 2007.
  • Listed house for sale in 2009.
  • Sold cash-flow positive rental houses.
  • Bought bitcoin late.
  • Didn’t buy commodities.
  • Sold stocks at the wrong time and then paid a capital gain.

Over-simplified

Didn’t buy I-bonds for family members.

Under-leveraged

I paid off all debt at the first opportunity, even my mortgage, and real estate debt. I would have many more millions with even a tiny amount of prudent leverage.

Overconfident

  • I bought and sold countless individual stocks over the years. Some went bankrupt. I sold some at a loss. Others returned a profit which lagged their low-cost index.
  • Stopped buying I-bonds.
  • Declined Bitcoin purchase.
  • Signed worse contracts.
  • Agreed to yet another pay cut.
  • Didn’t insist on raise, bonus, or even COLA.
  • Owned equipment but allowed employers to bill facility fee.
  • Accepted all payers for decades.

Emotional Investing

  • I was fearful and anxious in the market crashes of ‘87 ‘00, ’08, ’20. I let my emotions get out of control. It made me grumpy, anxious, and fearful. I acted on emotions and tried to time the market at the wrong time.
  • I avoided real estate in 2009. I experienced declines in value and was afraid of further losses.

Overly Complicated

I created complicated and suboptimal portfolios and asset allocation. They satisfied my complex theoretical thinking but prevented me from simple, effective investing.

Too Fickle

  • I have not been steadfast in my investing. Successful investors like Warren Buffett Jack Bogle exhibit that trait in spades. Instead, I moved in and out of funds.
  • Not followed plan.
  • Change investments after reading almost every finance book.
  • Changed asset allocation often.

Poor Planning/Undisciplined

  • Lacked a written plan.
  • Never had a budget.
  • Don’t track expenses.
  • Didn’t apply for Medicaid waiver.
  • Used too many financial advisors.
  • Didn’t get and follow enough solid professional advice.

Naive

Chose low-paying specialty.

Tax-Ignorant

  • Bonds in Taxable accounts.
  • Stocks in retirement accounts.
  • Didn’t take advantage of TLH.
  • Used SEP-IRA then needed to convert to Roth IRA.
  • Avoided solo-401K.

Over-Spent

  • Bought a new car.
  • Pay over $80k for school for daughter.

Despite these money mistakes, I reached Financial Freedom in my Forties. I’m hoping that my blunders give you hope. You don’t need to be all-knowing or perfect to reach financial success through a medical career. Make a few key choices and have faith that you will succeed.

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2 Comments

  1. That’s quite a list!

    It’s amazing how the combination of a reasonably high salary and prudent spending can help one overcome scores of money mistakes. In your case, many were only mistakes in hindsight or were deliberate choices that didn’t put the most money in your pocket.

    Way to rise above those “mistakes” to be FI in your 40s!

    Cheers!
    -PoF

    June 30, 2022
    Reply
    • PoF,
      It is quite a list. Honestly, I could add a couple of dozen more.
      All of them set me behind financially but they may not all be true “mistakes.” As you implied many were very conscious choices and I have no regrets. Cutting back hours, teaching, and helping family members are excellent uses of money and time in my view.
      My main point is to encourage others that even if you messed up a lot (like me) or didn’t really even plan for or know about Financial Independence (as in your case) you can still achieve your goals.
      It is never too late to get moving in the right direction.

      June 30, 2022
      Reply

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