[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!
11. Live. Money is a tool that can make for a better life. Many physicians spend too much time trying to make money and then show other people that they have made it. (See yesterday’s Sermo thread on physician wristwatches, for example.) In the long run, experiences that are purchased provide much more happiness than “stuff”. Enjoy the ride.
12. Money is freedom. In a way, money is like potential energy. Once it is used, it is gone. However, it can be stored and even “growed”. If you are smart about it, at some point, you can look around and say that you no longer have to put up with EHRs, MOCs, PQRS, CMS, ACOs, ACA, VBP, and all of that other alphabet soup nonsense. Or you could live as a slave to a car, a home, a country club, and other stuff. Money is freedom.
Excellent comment!!! I had to cut my list somewhere as WCI was gracious enough to entertain plenty of words from me. Thanks!
Im going to have to check it out. Maybe some people need watches for something, but…mostly they fall into the wholly unnecessary category. Why would you take the time to put on a redundant piece of equipment?
They are pretty cool when they can monitor your heart rate and help with exercise though! But you can get that pretty cheap on Amazon.
Having all your ret assets in stocks at a young age might not be appropriate for most investors risk tolerance
I bought in the 70’s-80’s many double digit zero coupon bonds which are 100% secure. If rates were in the high single digits bonds sound be a quite solid move
Aldo having ret assets in cash is not wise. Be totally invested with ret assets, contribute early in the yr or dollar cost monthly
And do not buy individual stocks as there is a 50% chance of buying at the right time and the same when selling
It’s a losers game. Index funds as close to 100% as possible
Agree with no individual stocks personally but I am part of a team and my husband is not there in his thinking yet. My advice to go 100% stock allocation (in index funds/etf’s not individual stocks) is for younger market participants only in their retirement fund and only after having an emergency fund. Emergency money is for piece of mind and should be in a money market tucked away in cash and forgotten about. Emergencies don’t time themselves to financial markets. My advice was not meant to apply to all markets, in all times. What you should tolerate in retirement funding and what you can tolerate are often at odds. Sites like this try to educate and offer varying opinions. The great thing is you get to decide for yourself what you want to listen to and what you want to do. For what it is worth, my kids at 20 and 21 are at 100% stock allocation in their Roth’s. Today, looking forward to the next 40 years, it offers them the best chance for high returns.
Excellent lessons. I like hearing the author does things differently (for example deciding to buy individual stocks), I think the point is knowing what you are getting into if you decide to do something different. I also like the discussion of the emergency fund. I personally think it is important to have some amount of emergency money, particularly if you own a house and have a family.
Please do not misunderstand our choice to use individual stocks. I am bad, bad, bad at picking them. Any money my husband made, I initially offset until I started indexing. I hope my husband continues to move toward indexing everything. It is far easier. But, I think we found a good middle ground for when, as a couple, you see things differently in finance. We have some ground rules for investing in individual stocks we both can live with.
I don’t think I miss understand. I think my point is, if you understand the consequences it can be OK to do things differently. Like have a little play money to play stocks, or buy a fancy car. As long as you realize what you are giving up by doing such a thing, and as long as you are in a financial position to do such things…
Absolutely. There are no trailer hitches on hearses. Gotta spend your money on something. If you’d rather spend it on the lower returns you’re likely to get by picking your own stocks than a boat, that’s your prerogative.
Good notes on what has worked for you….Maybe it’s the lack of sleep this week but hearing about your husband was the first WCI entry that ever brought a tear to my eye! Glad to hear he is doing better. #9 – Add in Long Term Disability…at least prior to having a large nest egg built up. Thanks,
Thanks John. The first that brought a tear to my eye was RL’s yesterday. We see all this life stuff happening to our patients almost daily. It is easy to think we are somehow immune to it.
Even with what we went through we still don’t make the jump to thinking LTC is worth the money. You can’t insure everything. Insure where most cost effective: term life, disability, health, auto, home, umbrella.
Oh, and write a will if you have kids. Consider health care and durable power of attorneys if you have a partner. We had all those in place.
Wow – thank you for the great posts! Not only does it provide the “time machine” benefit to readers earlier on in their financial journeys, but also encourages the “start late, finish rich” crowd. But most importantly – amazing to hear of a success story from a female professional. Because regardless of decades of equal rights movement and numerous equality wins along the way, women still have babies :). So being successful in your career and even more successful as a mother is so commendable. My favorite is the “mommy match”! I’ll definitely be using that to entice my kids to save. Thanks again for providing your perspective and lessons learned!
So are you a David Bach fan too? Loved “Start Late, Finish Rich” as well.
Dr.Mom:
Your fortitude and resolve through the many vicissitudes of life are commendable.
You obviously are a smart, strong, intelligent individual.
Keep up the good work and wish you and your family all the best in the years to come.
Thanks for your posts, Dr. Mom. It’s great to hear your experienced perspective. I do find that it is hard to get both spouses on board, but I like the way you phrase it. And I do *need* my husband on board, especially since he is now the stay-at-home parent. I am also reminded of how much work I have to do to bring my children into the process. This is a process, and one we all have to be in on together.
I do have a question on your funds, and one that I can’t seem to get a handle on despite having read about it in different areas. I don’t understand the choice of ETFs. We have our funds at Fidelity, and use their advantage class index funds. What advantages are there to ETFs if you are buying in large quantities? Thanks!
Main advantage is intraday liquidity, but that shouldn’t matter to long-term investors. This article should help:
https://www.whitecoatinvestor.com/vanguard-etfs-vs-mutual-funds-friday-qa-series/
Thanks–very helpful!
ETF’s can often be cheaper than funds. I ignore the liquidity aspect as I don’t trade them. But since others do trade them, I take advantage of it when I rebalance and when I purchase them.
The process of bringing the family on board is often like catching butterflies. Wait and let them come to you. None of this financial stuff needs to be done in any kind of a rush.
Way, way off topic, but since you and you’re husband switched jobs a few times thought you might be able to help with some guidance.
Recent grad looking to switch from a small group to going solo (perhaps that its self can be instructional for upcoming grads :). Do you happen to know much about the process of getting you’re medicare number (PTAN?) switched from your group to yourself as an individual? Can you still bill or do you have to reapply and wait 6-8 weeks before ou can see (or at least bill) for medicare patients?
I’ve been learning all lot through this process and it may provide for a good post about the process of switching to a solo practioner for those who have been used to being employees.
It would make for a great guest post. How about sending me one once you get through it all?
I recently helped my husband with Medicare Revalidation but am certainly no expert. For what it is worth my understanding is that you will reapply to Medicare with your NPI number (which is unique to you forever) and will receive a new PTAN for your new practice. Depending on how you structure your practice you may need a separate number and PTAN for the practice itself. My husband operates as a C Corp so the practice has its own numbers.
When you apply you will have a choice to use paper or the internet based PECOS system which is the most user unfriendly internet site ever. But you still should use apply online as it will cut off about 2 weeks on the process. Even applying online you will have to print off some papers and send them in by mail with your signature though which makes it tempting to just do the whole process by mail. By applying online you will more quickly be able to follow the status of your application.
The people processing your application are like the DMV and very unhelpful so be patient. My husband called and emailed when his office manager seemed to be getting the run around and we think it helped. Be patient with them so you aren’t delegated to some stack where you get delayed on purpose.
I don’t know about seeing patients and billing before you are approved. You could end up not getting reimbursed. You’ll have to look into that further.
Hope this helps! Good luck with the new practice and having your time under your own control. Learning the business side of medicine will serve you well.