[Editor's Note: Yesterday, Dr. Mom, a regular WCI reader and commenter who wishes to remain anonymous, shared her family's financial journey to relative wealth. Today, she continues her post with some tips for readers. We have no financial relationship.]
Now that you have had a chance to comment on our financial lives, here are the points that are most important to me. They are vastly more personal than financial. Remember that in personal finance, the word personal is as important as the word finance. It comes first in the phrase for a reason.
Lesson 1: WAKE UP! You made it into medical school. You are smart. You can learn this financial stuff. It is just not that hard. If you don’t want to do it yourself then at least learn enough to not get ripped off. Plenty of people will be more than happy to take your hard earned money away from you. The fault is on you if you let it happen.
Lesson 2: No magical thinking. Finance is not going to magically work out for you just because you are a doctor. You have to make it happen. Learn about finance, you may surprise yourself. Turn off CNBC or FOX; they are marketing to you, not educating you. Read from the list on WCI’s site.
Lesson 3: Make your money behave. Money is a tool. Nothing more. The most important things it can buy you are time and experiences. If you mess up, no one is going to die or get hurt. You will make mistakes. Learn from them and don’t make the same one twice. The worst that can happen is you lose it all and start again. By finding WCI you are so far ahead of where we were in residency.
Lesson 4: Try not to wander too long. Many of you are starting further in the hole than we did almost 25 years ago. Be intentional from the start with your job selection. Don’t be afraid to leave the city where you trained. They have an endless supply of new graduates that can often keep the wage pool low. Having said this, do not be afraid to leave a job when you know it is wrong for you.
Lesson 5: If you are able to stay home to raise your children, see the experience as the gift it is. Do not squander it. It will be gone in the blink of an eye. Running a home is very much like running a business. Whether you realize it or not, you are getting business experience that applies to personal finance and whatever your life will become when the kids are grown. You are qualified to have an opinion and owe it to your spouse to have one. Something drew the two of you together. You know each other better than probably anyone else can. You need to balance each other’s weaknesses. You may find your inner financial nerd like I did.
Lesson 6: Be willing to accept trustworthy help. If you are a physician, you spend all your work time helping people. It feels good most of the time. Let people help you back so they can feel good too, but be wise in whom you place your trust. If you are single and have found this site, then spread the word and talk to people who can offer you mentoring. If you are the spouse who does all the finance, ask your spouse for help already! Stop trying to teach the spouse about finance and let them have a voice. You both don’t need to be finance nerds. If you were the same, then one of you would be unnecessary to the relationship. My husband leaves much of the finance details to me. But, he sits down with me, even when he doesn’t want to, because I NEED his help and opinion. We all like to be needed. I don’t bog him down with details unless he asks. His big picture view is invaluable. Honestly, taking care of the finances is easier and faster without outside input. But, the easy path is not usually the best path. Be sure you are not putting off the vibe that you really don’t want, need, or have time for your spouse’s help. My husband once told me that playing basketball with Michael Jordan on the team while appreciated is not always fun or rewarding for the supporting players. In the fast-paced flurry of his game, they can become more spectators than participants. Well, Michael Jordan gets tired too. Finance in a family needs to be a team effort. Make it fun and rewarding for your supporting players.
Lesson 7: Teach your kids. Our older two started volunteering at our hospital when they were allowed which was about age 14. They started summer jobs as lifeguards at 16. They have Roth IRA’s started from those jobs. They were required to save 15% of their earnings to get the Mommy Match. They have brokerage accounts from old UTMA accounts my husband started for them when they first got gifts as babies. Their accounts of birthday money, Christmas gifts, allowance, etc. invested conservatively are now at 12K each. They are more interested in talking about money when it is applicable to them. For my daughter I had to find “the hook” to get her interested. It took awhile. She wanted me to read The Body Book by Cameron Diaz this summer. So I traded her for Dave Ramsey’s Total Money Makeover. The concepts of personal fitness and personal finance are very similar. She found a budgeting app she likes that is very similar to the calorie counting app she made me get. Who knew that when I removed cheese, fried onions, and changed the dressing on my Zaxby’s salad the calorie count was cut in half? Which leads into the next point.
Lesson 8: Take care of your health. None of this really matters if you aren’t around to enjoy the fruits of your financial labor. What a shame if you die first and your partner is not ready to take over the reins or know how to recognize a crook. And, for those of you whose partners won’t get involved, keep trying to find “the hook.” Maybe taking better care of yourself or scheduling a date night where you swear not to talk about finance would work.
Lesson 9: Buy term life insurance only and buy it early. You read my husband’s history.
Lesson 10: Make sure your portfolio fits you. I debated putting this one in but thought for balancing how touchy feely the post was getting that it might be useful to add my view on this subject. I view our portfolio in pieces (Retirement vs. Non-retirement) and as a whole. Online tools make this super easy.
For retirement money if you are young then you should be in 100% stocks. Put it all in a Broad US Fund or ETF; or divide it with some international. Index funds are preferable. As you learn more about finance you can adjust to whatever make up you are comfortable with. Remember this is PERSONAL finance. It is fine if we are all different. We are not racing each other. We are racing time. We can all win. [Oooh…I like that. -ed] Don’t let the quest for the perfect portfolio riding out there on the efficient frontier stop you from trying at all.
Overall, I use tactical asset allocation. I was using it even before I knew it had a name. I do not try to time the market, but I am okay with having some sway in our asset classes. For our retirement we are at an 80/20 mix as follows: 50% Large Cap US, 15% Small Cap US, 15% International, 10% Bond, 10% Cash. I am a little more in Large US right now because that is where I am comfortable over Small and International. We are mostly in index ETF’s and a few low cost active funds. Per the “bonds = age rule”, we don’t have enough bonds. But again, that is where I am comfortable. Blindly following the rules of others is not my forte. Within these percentages, we do invest (not trade) in individual stocks. My husband likes them and has been good or lucky at it. We keep them to no more than 10% of the portfolio and usually have no more than five at any given time. We use proceeds from them to feed into core assets. I can easily follow our portfolio mix to keep it balanced across our asset classes and across individual sectors. If this all sounds like too much trouble to you, then you need a simpler portfolio. There is nothing wrong with simple.
The non-retirement investments are a 20/80 mix due to a large emergency fund of cash which by happenstance gives us a 60% Stock/ 40% Bond or Cash portfolio overall. I am not including home and business equity in these figures or the kids’ 529’s.
The importance of an emergency fund cannot be overstated. Knowing that we had the money to take the time we needed for my husband to heal last year was priceless. Incredibly he was back in the office in a few weeks and up to full speed in about 2 months. Time is the most important thing your money can buy you. Remember that when you spend money you don’t have, it is going to be repaid not just in future dollars but most importantly in your time to earn them.
So there you have ten lessons of many I have learned these past ten or so years. I hope reading this saga has given you some motivation for starting, continuing, or changing your own personal financial journey. Blame Megan, Joseph, and NerdyWife if you didn’t like the posts since they asked for them. Much luck to you all from Dr. Mom.
What do you think about Dr. Mom's ten lessons? Agree? Disagree? Comment below!