I have a superpower. I understand your skepticism, but it's true. What I have is so rare that it functions in our society as the equivalent of a superpower by giving me power to do things that most mere mortals simply cannot do. What is this superpower you might ask?
Is it x-ray vision?
No.
Can I fly?
Only in my dreams.
Do I have superstrength?
Well, I did benchpress 225 lbs a few months ago.
But my superpower is none of those. My superpower is that I don't suck at money. I'm not alone. There are a few of us meta-humans out there. In fact, it's possible you are one of these rare meta-humans. But we're like a needle in a haystack. I realized this while watching a presentation by Mr. Money Mustache, and this post borrows heavily from his ideas.
Our society has become more and more financially complex such that negotiating our financial world properly requires a great deal of interest, education, and discipline. Only a tiny percentage of Americans possess all three of those attributes, so if you are lucky enough to be one of the few, it's like having a superpower. Guess what? I qualify, and I bet a lot of you do too.
What Does It Mean To Suck At Money?
Nearly every American willing to work at a full-time job has enough money to meet all their needs, to purchase many of their reasonable wants, and to quit working completely within a decade or at most two. Yet it is so rare for someone to be financially independent in their 30s or 40s that it makes the news when it happens.
Now life is about more than a race to financial independence. Sometimes it is reasonable to choose to spend money on something that makes you happier even if it delays your financial independence by a little bit. But it is not reasonable to mismanage your finances so much that you never actually become financially independent. Yet that is what most Americans do, even high income Americans. How do we know? Well, let's take a look at the Great American Savings Rate. Back in October of 2016, the Motley Fool calculated it at 5.7%. What does that mean? Well, financial independence is not a particularly complicated equation. It is primarily a function of your savings rate. [That average savings rate has steadily crept up to about 7.7% from the time this post was originally written in 2017. Since the Covid-19 pandemic hit the US in March 2020, the savings rate shot up to a high of 33.5% in April. It's steadily dropping since that high, but hopefully, Covid-19 has been a wakeup call for many Americans. -ed]
If you earn 5% real on your investments, and you save 20% of your income, you can retire on 80% of your income after 37 years. It's actually usually a little better than that, since many expenses go away in retirement and you pay much less in taxes when you're only earning 80% as much and you don't owe any payroll taxes because it isn't earned income. It's a lot better than that if you pay taxes like a doctor. But let's use 37 years just for ease of calculation.
Some superpowers are better than others
So if you want to retire after 30 years, how much do you need to save? About 28%.
20 years? About 43%.
10 years? About 66%.
Now, since the average American household makes about $56,000, and the average world household makes $18,000, the average American household can live better than the average world household and still put away more than 66% of their money.
Now, if that's what can be done on an average American income, what could you do on a high-income professional income? Surely 10 years to financial independence is a relatively easy mark to hit, no? Even if you start out way in the hole and make lots of mistakes early on, you should still be able to pull it off in 20 years thanks to your high income. This is classic “Live Like A Resident” stuff.
But what happens if you only save 5.7%? Well, it takes about 63 years — the functional equivalent of never. The average American (and remember half are below average) would never be able to retire without Social Security. Thus, most people suck at money and have to be bailed out in their old age by a social insurance program (a program I am fully supportive of, by the way, since I see that most people lack this superpower.)
It's easy to see why. Look how complex money is these days.
- You have to be able to do some math. Most Americans struggle with fractions and percentages, much less are able to use a financial calculator and understand concepts such as compound interest and the future value of money.
- You have to learn a whole new terminology: Roth IRAs, expense ratios, capitalization rate, etc.
- You have to actually have the discipline to design and follow a plan for multiple decades. [Our Fire Your Financial Advisor: A Step by Step Guide to Creating Your Own Financial Plan course was created to change this from being something complex to a simple, easy to maintain task.] Most Americans don't even have the discipline to maintain a healthy weight; how are they going to maintain a financial plan?
So if you can do all of those things, congratulations, it's like you have a financial superpower! The purpose of money, like the purpose of life, is to find joy and be happy. Since happiness mostly doesn't come from buying stuff, but rather from meaningful work and strong relationships, it seems kind of silly to spend half or more of your income on something that doesn't make you any happier. At the very least, examining every purchase for its “happiness value” ought to help you get to a 20-30% savings rate.
Poor People Suck At Money
Now, there are always examples out there of people who have had terrible things happen to them. Appropriately taking care of them is the role of government and charitable programs, both of which I wholeheartedly support with my time and money. That's not what I'm talking about. I'm talking about people who didn't finish high school because they didn't feel like it. Then stay in a minimum wage job because they're not interested in learning any new skills. Then go down to the payday loan store and rack up some 466% debt so they can play the lottery. Does that person suck at money? Yes, they do.
Middle-Class People Suck At Money
Let's talk about the middle class for a minute. What is the evidence that they suck at money?
- Exhibit A: 5.7% savings rate
- Exhibit B: Percentage of Americans who leave part of their salary on the table by not getting their 401(k) match (25%)
- Exhibit C: Auto loan debt for both new and used cars are at record highs.
- Exhibit D: Number of whole life insurance policies purchased and then surrendered prior to death (70-80%)
Just because you're smart enough to get through high school and maybe even through college doesn't automatically grant you this financial superpower.
High Earners Suck At Money, Too
Lest you think I'm picking on people who make less than I do, I want to point out that most high earners suck at money too. Look around you. How many of your colleagues can explain in their own words how a mutual fund works? How many of them are aware of even the most well-known behavioral finance pitfalls? Why have so many attendings not even purchased disability insurance? How many have purchased a cash value life insurance policy but don't know what a Backdoor Roth IRA is? Why are there so many that haven't refinanced their loans, or still have loans a decade or more out of school? Why do they buy expensive houses and cars when their net worth is still negative? Why don't they know how to log in to their 401(k) website? Because they suck at money!
Even Financial Advisors Suck At Money
Don't get me wrong. I think financial advisors are way ahead of the curve. But even so, way too many of them also suck at money. I find it amazing how many people take advice from financial advisors who are not financially independent. I mean, if they're 30, fine. But the guy is 50, punishes himself with 60 hour work weeks, and hasn't had a vacation in years, and you want his financial advice? Really?
Carl Richards likes to talk about “real financial advisors.” I like that, because it makes it obvious that there are so many out there that are masquerading as such. But even among the “real,” experienced, fiduciary, fee-only advisors with the highest designations in their field it is appalling how many of them are giving bad advice — individual securities, actively managed mutual funds, cash value life insurance before maxing out retirement accounts or paying off debt, market timing, bad asset location advice, etc. The truth is that even real advisors have to focus so much on acquiring new clients and “the big rocks” like getting clients to save more and not bail out of the market during relatively minor downturns that they don't even bother learning the comparatively minor stuff.
What Hope Do You Have?
So, now that we've established that almost everyone sucks at money, what hope do you have? Just one. Unlike many superpowers, you don't have to be born on another planet to have this one. You don't even have to be bitten by a radioactive spider. This superpower is much more like Ant-man's. Not only is it acquired as an adult but it can be taught and learned. You don't even have to develop the technology yourself. You can just borrow it from those who have already invented it. Do yourself a favor. Become a superhero and take control of your financial life. But always remember….with great power comes great responsibility.
What do you think? Do you think the ability to become financially independent is a superpower? Why or why not? What are you doing to acquire it? Comment below!
Interesting observations and you are spot on concerning most advisors.
It does take superhuman characteristics to save 50% + of your household income, especially when you live in states like California.
Lifestyle inflation (living like a resident as you call it) is a real tough discussion to have with clients that just finish training and are finally making a real salary. The delayed gratification does take a toll on their emotions and many aren’t willing to sacrifice for a few more years even though they know it’s financially the best decision. I wish it was different but the reality is that most will not be able to fight their emotions, the bombardment of advertisements for new and shiny things, a car that actually works, starting a family (child care costs are insane!), buying a home etc etc.
Not everyone is built to be superhuman, but recognizing and understanding that their savings rate really does factor into their financial independence and saving enough to be independent in 20ish years is a good start to being a superhuman sidekick.
California is AWESOME!! Financially it has been a huge bonus for me to move here from the Midwest. Just ignore the Jones.
It’s rare to hear that moving to California is great financially. How so? I’m a surgery resident on my last year moving to Chicago for colorectal fellowship. My fiance is foot and ankle orthopedics, and we are seriously considering not coming back to California.
Great post WCI-I’ll be sure to let my three boys know their mom is a superhero! But in all seriousness, it’s so true that most people are not good with money. I’ve seen people sold massive whole life policies who aren’t maxing their 401k; people buying new cars that don’t even get the match; people who “can’t afford to help with college” but somehow can afford large home renovations, and so on. It seems like the ability to delay gratification, and save/invest for the long term, is very rare.
Hi Liz nice to see you posting here.
The ability to continue to delay gratification after residency seems to be rare. I guess it is similar to the mindset of the average powerball winner. Your paycheck jumping by 5x is just hard for so many to handle. One day your 60 year old self will be glad you maxed out your retirement and started a taxable account. Do you need superhuman powers or a genius level IQ to do this? No you need financial education and willpower.
Stress math to your kids which will develop their superpower. If the kid says they don’t like math, then my answer is to learn to do it faster so they are done sooner.
I love it!
I love your answer to not liking math!.. 🙂
My younger is great with math and REALLY understand the math behind money. Incredible depth for a 16 year old. Way, way ahead of the curve. My 20 year old appears “clueless” but she is street smart about it. She is extremely careful and frugal, and not competitive with anyone or herself. And, she listens to Dad’s lessons really well. So she is set too. It’s fantastic to have two who are very different and yet each getting very well prepared for their financial lives. It’s a lot of fun working with them on it.
My favorite illustration of just how bad ordinary people can be at money is that far more households have virtually no liquid savings (e.g. less than $250 or $400 or something equally pitiful) as go without subscription TV services. Recent figures are in the neighborhoor of 16% cord-cutters vs. 36% woeful-undersavers: http://www.citylab.com/work/2016/04/even-a-tiny-savings-cushion-can-help-families-avoid-hardship/479097/#comment-2643591166
Pay-TV is pretty much the definition of an utterly unnecessary frivolity. TV itself is of very questionable social value (in my opinion — I gave up watching virtually all TV and movies years ago); to the extent you feel compelled to have something in your living room, free-to-air TV gets you 50% or 80% of the fundamental value of TV at 0% of the cost. How can someone so near financial rock-bottom not adopt that approach?!?
How many Starbucks offering free wifi do you think are in these neighborhoods? Poor people rationalize the purchase of internet/cable along with lottery tickets as their ONLY possibility of getting out along with giving their children a chance at keeping up with school. It’s the same reason the vast majority of poor people have cell phones they probably can’t afford. It’s a lifeline to the world – along with all of its opportunities – that the rest of us take for granted.
What does internet access have to do with cable television? They can be bought separately despite, and the former for about 1/3 the price of the latter. Im pretty certain having cable television isn’t a requirement for “giving your kids a chance”.
While I disagree with you on the utility of free TV (there is nothing there I want to watch), Netflix has been a solid stand in for 20 years now, which is how long it’s been since we dropped cable.
I like the point that all people are bad with money. I see it all the time, and it’s true in slices of the topic as well. I’m a very good planner and investor, but I’ve had trouble ever saving more than about 20% (not a physician either!) & cash flow is not something I pay enough attention to. Oh yeah, and I hate paying bills. Luckily for me, my wife and I have complementary skills.
WCI, the anti kryptonite. Turning people that suck at money into superheros. Keep up the good work.
Yeah, I am extremely lucky that I am not one of those that ever sucked at money, mainly because I didn’t have much to suck on in the first place. Delay of gratification was never a problem! I could not have retired in my 40s or 50s because I was in a low paying job as a public school educator. Plus I make huge investment mistakes and lost a ton in the tech wreck. No complaining, it’s just my experience. Because of my lifestyle and to feel safe, I had to live in one of the most expensive areas of the country, Los Angeles. While I was and remained frugal all of my life, because I had a ton to learn to be financially independent, it didn’t happen until much later in life. Still, I retired with plenty of money at 61, because at the end of the day, I never sucked at money.
Good article,
Steve
Poor people suck at money reason #5). BigGov lures them into government dependence, which allows a good-enough lifestyle without accountability.
And SmallGov will lure the rich people to all of a sudden be accountable? Please
Hahaha! FIRE is certainly a goal that’s far from the beaten path in our consumption-lovin’ society. I don’t see why it shouldn’t be a superpower to manage money well. 🙂
Super powers are pretty sweet, and as the movie the Accountant featuring Ben Affleck showed….accountants can have super powers.
It is amazing how little people care to learn about money. They stress about it more than most things and it is a big cause of running marriages, but they will not take the time to learn about it.
I watched the Minimalist movie on Netflix last night and it was a good reminder of how much consumerism runs our country.
This post is spot on. I love it. Fortunately (or unfortunately) most of the readers here are on board. My challenge has been trying to get others to understand. How do you show them that they can do it? The person that has been “successful” living pay check to pay check has a hard time learning what it is like to save and have the ability to look forward and see that delayed gratification is much better for them. As mentioned previously, consumption in our society has become very addictive to most of our society members.
I still suck at money, but I’m getting less and less so thanks to sites like yours. Keep up the good work!
While I agree with your overall premise and most of the details, I hear some arrogance here regarding lower income people that does not appear to be fact-based. For example, there is no correlation between income level and rates of buying lottery tickets (i.e., upper income people buy lottery tickets just as frequently as middle income and lower income people). Also, poor people generally choose pay day loans because, given their cash flow situation, those loans will cost them less than use of checking accounts (due to high overdraft and other fees on checking accounts). Just suggesting you put the brakes on some of this shaded commentary, as you don’t have a full picture of all the relevant facts in some of these cases.
Apologies for the arrogance. Obviously not the intent, but it is a little hard to proclaim you have a super power without sounding at least a little arrogant. At any rate, I think the facts are in enough agreement with what I wrote that I’m not missing anything too big. Sources below:
A 2011 paper in the Journal of Gambling Studies conducts a thorough review of the available research on lotteries and concludes that the “poor are still the leading patron of the lottery and even the people who were made to feel poor buy lotteries.
https://journalistsresource.org/studies/economics/personal-finance/research-review-lotteries-demographics
https://link.springer.com/article/10.1007%2Fs10899-010-9194-0?LI=true
https://www.ncbi.nlm.nih.gov/pubmed/21132521
https://journalistsresource.org/studies/economics/personal-finance/payday-loans-exploit-poor-people-research
I don’t know. The relevant facts seem to be in agreement with me both that the poor use lottery tickets and payday loans disproportionately and that use of them decreases their financial well being.
Perhaps, but doubtful.
I’ve read enough books like “Nickel & Dimed”, “Broke, USA”, etc. and worked with companies like Aaron’s Rentals and Rent-A-Center to understand the limited options available to low income people in this country with regard to money. No question that many of them are victims of their own decisions and culture, but far more have chronic problems from being stuck in the box that highly profitable banks and private companies put them into. That’s before even considering the highly skilled consumerism marketing everyone sees every day regardless of income level.
It’s easy to talk about people’s situations from the top of the food chain. Not so easy when it’s literally a regular decision whether to pay the rent, fix the car to get to work every day or put food on the table. All of those decisions comes with long tails of repercussions that aren’t easy to escape.
That’s why my only nitpicky complaint about this post is comparing absolute incomes from other countries with the US. The federal poverty level is about $25K for a family of four. Moving your family here from another country while continuing to earn $18K income means you are dirt poor and certainly won’t be saving 25% of your income regardless of lifestyle decisions.
I agree that sometimes it is easier to earn more than spend less. Both options are available to almost every one.
I like the comment about getting advice from someone who is 50 years old who works 60 hrs a week, and making pitches at steak dinners for residents!
I can also see how patients looked in surprise at me during my younger days when they found out I was the one cutting them open for surgery!
Excellent article, but let me play devil’s advocate.
Let’s focus on doctors, intelligent high earners, and those like them. They do have the ability to gain super powers, but they do not need to do so. My guess is that most docs (excluding those who read your blog) simply do not like dealing with their personal financial planning. So what is the absolute minimum that they need to do to assure themselves of a reasonably comfortable retirement? It might be more helpful to these individuals if you prepare a simple checklist of must dos and don’ts, and widely circulate it.
After seeing the bare minimum that they must do, each such doc could then decide if they could follow this simple checklist (and it would be really simple). If the doc decides he is an uncontrollable spendthrift, or otherwise incapable of following the checklist, he should hire a fixed or hourly fee financial advisor to help him out with monitoring the basics. I suspect that once most docs see how simple the checklist is, they will decide they can DIY.
You mean like WCI post from last month?
https://www.whitecoatinvestor.com/the-bare-minimum/
Yeah, I missed that one. That article covers it all, but I question if the tone and format work for the intended audience.
Tone is always hard to get right on the internet, and a tone that really works for some people doesn’t work for others. I try to vary it a bit for that reason but occasionally figure out a way to offend a bunch of people with tone.
My guess is that if you tried to make your bare minimum advice about 10x less complex, you might have more success at reaching your target audience. Yes, 10x less complex. It’s not that they’re stupid, but a few bullet points, with emphasis, would be more effective at getting their attention; additional detail can be given in an addendum. Obviously, you can better get into the target’s head than I.
That would be awesome if I can do that. Not sure I’m that talented or concise. I’ll think about it.
It’s been done – remember this from a few years ago- Harold Pollack and Helen Olen put all the financial advice you’ll ever need onto a 4×6 index card.
https://www.washingtonpost.com/news/wonk/wp/2013/09/16/this-4×6-index-card-has-all-the-financial-advice-youll-ever-need/?utm_term=.96d1eb7632ee
I do remember that. Not sure it’s 100% complete though.
I disagree, 10x less complicated turns into CNNMoney–clickbait with no substance. This website is (thankfully) better than that, and that’s what keeps people checking here everyday—expert advice that is high yield, but also something you wouldn’t find anywhere else on the internet
John,
Personally, I come to this website to read the complex advice. I can get watered down 10x less complex advice many other places such as Fidelity’s website. WCI has given advice that has astounded my accountant. It is pretty cool teaching my accountant some new tricks from time to time and I’ve learned all of those tricks here. I do have a good accountant but WCI and some of the docs on this website are truly the heros among the superpowered.
jpa and rocdoc
The 10x comment applied to an earlier WCI post discussed above. WCI understands that 10x is for those who refuse to deal with their own personal financial planning, not you guys.
If something I read on WCI astounded my accountant I would have a new accountant in a few months.
My accountant is a good one. WCI knows more than many accountants about certain IRS rules. No offense to the many good accountants in the crowd!
Maybe about a handful of doctor-specific rules. Like most good accountants, I’m still learning too.
John teed that one up for you, didn’t he?
Haha. Great links on this one. way to keep in interesting
Stephanie, you are mistaken about those who purchase lottery tickets. A simple google search will reveal a litany of studies showing higher lottery participation rates amongst the poor compared to upper income folks. Here is one such source:
https://journalistsresource.org/studies/economics/personal-finance/research-review-lotteries-demographics
To add productively to the discussion and to avoid the appearance of being a troll, please check your facts and cite your sources. All of us will greatly appreciate it.
Except for the fact that upper income folks can afford to “play” the lottery for entertainment, the poor play it as a replacement for a retirement plan, ad they can’t afford that. Really its a tax on people that cant do math.
Although I disagree with both of the claims which were made in Stephanie’s post, I do not believe that her comments were “troll-ish”. If all blog posts required literature and source citation, it would be so boring to read. I rather enjoy the occasional counterpoint perspective, if only to keep all the posters from joining hands and singing Kumbaya. In addition, WCI is a big boy. He can take care if himself, as he has aptly demonstrated.
You mention saving 50% throughout ones career. I personally feel that is a bit extreme, but I am just entering the game (30 year 1st year GI fellow). With potential for a future high salary saving 20-25% seems like it would be reasonable and provide enough for a comfortable retirement. I don’t want to retire at the age of 60, I’m bored if I’m not working, but maybe with age, and a family that attitude will drift.
I agree that 20% is reasonable and will provide a comfortable retirement. Without doubt 50% is extreme, especially when the average is 1/10th that.
You may also find that attitude (about not retiring early) drifts with financial independence as it did for PoF who expected to like his job more after becoming financial independent only to find that he liked it less. He found himself wondering what the heck he was doing up at 3 am doing an epidural when he didn’t need the money.
there’s just no way to be sure that you are really going to be wanting to work, especially full time, at 60.
if you need proof, get 3 martinis into a group of 60 year old docs and ask them what their ideal clinical schedule would be. a lot of these docs working full time in their 60s don’t have a choice. anecdotally i would guess 40-60%.
medicine feels different as you progress into attending years. in some ways easier (even nonroutine clinical scenarios start to feel routine), in many ways harder (sleep hygiene, buck stops with you). i’m 5 years out in EM and probably have the best job in the country (academics with incredible residents who do 95% of the work). i love my job and skip into work 90% of days. all that being said, when i’m 60 i want to be at no more than half time.
Good stuff!! I appreacite how you make such compelling arguements on how FI truly is possible for anyone. Having just learned about FI a couple years ago my wife and I now have a plan to work towards. We actually just recently ran our projections and set our early retirement/FI date for October 2022. We will still both be on our 30’s at that time when we transiton out of our offices jobs.
As others have mentioned I really like your point about taking advice from a financial advisor who is not FI! I do think advisors would get more clients by not only meeting the fiduciary standard but also leading by example.
“I find it amazing how many people take advice from financial advisors who are not financially independent. I mean, if they’re 30, fine. But the guy is 50, punishes himself with 60 hour work weeks, and hasn’t had a vacation in years and you want his financial advice? Really?”
Talk about tone! The way a FA becomes financially independent at 50 is by successfully marketing services that require little time and effort, and charging a %AUM fee. I might suggest avoiding FAs who are financially independent at 50.
Why? You don’t think a financial advisor can charge a fair hourly rate or flat annual fee and still earn and save enough to be financially independent after 25-30 years of work? Doesn’t seem like a big ask to me.
In most cases, no. Not everyone earns as much as docs.:)
Would be nice if Johanna Fox could chime in here.
Totally disagree. A good hourly rate FA can charge $200-400/hour. If they can get 20 of those hours a week, that’s at least $4000 a week, $200K a year. A doctor’s salary assuming you can keep your overhead reasonable.
If you can show me you can give solid physician-specific financial advice on a $200/hour basis, I’ll send you 20 hours a week worth of customers. Huge need for this out there. But the siren song of AUM fees (“best passive income there is”) is strong.
A starting FA will not earn anywhere near 200k. Some hourly fee FAs will get to that amount, but very few are likely to be FI by age 50.
Johanna?
Of course the FA is going to have to build up his business, but a really competent one who charges a fair hourly price ought to be able to grow that very quickly given how rare a commodity he is offering. I’ve had a half dozen requests for one this week, and that doesn’t count all the people who just go to my FA page and go to the advisors directly.
How difficult is it to become a fee based FA? Exams? Licenses ?
Fee-based is not the same as fee-only. Are you aware of that? But you can “hang out a shingle” as a “financial advisor” with surprisingly little education and training. The only tests you have to pass are about regulations.
Meant fee only
WCI: There are 200,000 FAs in the US, but you are correct that, “a really competent one who charges a fair hourly price”, is a “rare commodity”. Why do you suppose that is?
Because only a small percentage do a good job and those who do know they can charge a lot for it because they are so rare.
Consider an advisor who started advertising on my site a couple of years. He didn’t renew after a couple of years not because it wasn’t a good value, but because his practice was full. He’s now out of the market for someone looking for an advisor.
Competent physician-specific advice 5%
Fair price 5%
Still with room in the practice 33%
Multiply the three together and then by 200,000 and you’ll see what I mean.
5% * 5% * 33% * 200,000 = 165
They’re out there, but they’re not easy to find with the other 199,835 trying to get your attention all the time.
Of the 190,000 incompetent physician-specific advisors, what percent are generally incompetent and what percent are competent except for not understanding “physician-specific” advice? I’d guess the number of generally incompetent must approach 100% because anyone competent could easily add “physician-specific” if there was a market. Now, why do you suppose that 190,000 incompetent advisors can make a decent living as financial advisors?
Because their clients don’t recognize they are incompetent.
Obviously I haven’t surveyed and tested every “advisor” in the country. Hopefully I’d be pleasantly surprised if I was able to do so.
WCI question for you,
I your opinion fee only advisor so are the best kind? Also what is the highest per hour rate have you seen in your experience ? Oh and how does one get “full” ? I would think that once you got enough advice you’d still go back got eh advisor ? Guess I’m asking how do these fee only advisors retain their clients to keep paying ?
Yes, fee-only. I’ve seen $500 an hour. You get full when you have enough clients that you don’t want more.
Most fee-only advisors are charging AUM fees for investment management. Since investment management doesn’t end, the advisor keeps working and keeps getting paid. Since your assets are also likely climbing, the fees for the same amount of work keep going up.
Respectfully, you are way off base. The finance advice purveyors to whom I listen are those aggressively pursuing or having reached financial independence, early. I have no interest in the financial opinions of senior citizens unless they are in my snack bracket and FI or well beyond. Very important for them to have walked in my shoes.
If the “you” to whom you refer is me, I doubt very much if I’m in your snack bracket. Realizing that this may disqualify me, I will still suggest that when a finance advice purveyor reaches financial independence very early, it is primarily indicative of his marketing proficiency, i.e., con man. Each to his own.
Yes that was directed to you John. I hope the WCI post and comments including those back to you are instructive. I think you have a great deal to learn about how really successful people make decisions about wealth creation and management, and how they might choose where they get their advice.
I suppose you’re right. An international tax attorney, partner in a Big Four international accounting firm, and VP Tax Counsel for a large multinational corporation certainly doesn’t know everything.
I’m still trying to perfect telekinesis, so it’s good to know I’ve got a fallback Super Power.
Luckily, physicians can have this particular Super Power by living a little better than the average household and not making Big money mistakes.
The temptation to be a big spender is a strong one, but we’ve got the salary to overcome many of the minor bad choices that many of us make when we’re too busy learning medicine to focus on personal finance.
Cheers!
-PoF
You don’t have to be super human to make a slight change in your financial trajectory. Even a slight change makes a huge difference in 20 years. You keep making slight changes and pretty soon you are somewhere you never dreamed of being. If you get the right start in the first place and don’t have to make a change, that’s even better. That was the reason I wrote my first book, “The Doctors Guide to Starting Your Practice Right.” If you start right, you don’t need to make a change later. Then everyone will think you have financial super powers.
This is hardly rocket science; that is how to personally invest in stock and bond mutual funds.
READ random walk down wall street-YOU WILL LEARN that Wall St is an UNEVEN playing field
Then read Bogle, Bernstein, and Swedroe to follow modern portfolio theory
2k/month, 40yrs, 7%, RET PLAN=FIVE MILLION US DOLLARS
Although that may be true… I didn’t check the math. 40 years is too long to wait to become FI IMHO.
Since it is so simple, it obviously isn’t the intellectual challenge keeping people from being rich. So what is it? Behavioral. You can lead a horse to water…
Until it is taught in high school, most Americans will be forever financially illiterate
There actually is some financial stuff taught in some high schools, but the behavioral thing is a lot harder to teach.
I don’t know about the American public in general, but I strongly believe doctors are becoming more financially savvy.
The staggering debt loads alone are pushing a lot of people to realize they need to make more money and spend less and better understand where there money is coming from. The internet has democratized much of the information that people used to go to an advisor to obtain. WCI leads the way but there are other sources as well.
I spend part of my time at work teaching personal finance to trainees, and I can tell you just in the past few years there is a shift in attitudes and awareness (and I don’t credit myself for that, I credit the things above).
WCI always says that 80% of doctors want/need a FA. I’ve always disagreed, partly with combining that. I think only 10-15% of doctors NEED one (max, and that’s for the very high earner with money spread multiple different ways). Everyone else could do just fine on their own, it’s just a matter of whether they are given the right catalyst to realize they don’t actually need one.
You may be right that of the 80% who need/want a FA, only 10% may need and 70% want. It is a very different thing to suggest that the 70% SHOULD do their own financial planning. I want to have someone mow my lawn; I can do it myself, but I want to have someone else do it. For many people, if financial planning can be obtained at a fair price, there is no problem in hiring a FA; thereby avoiding what they might consider an unpleasant task, and freeing up their time for other things.
The rub is that it can be difficult to find these services at a fair price. A fair price is when the effective hourly fee amount is worth it to avoid the task and free up spare time. Most would agree that paying a FA a fee at an effective hourly rate of $5000 or more is not worth it, but that is what often happens to an UHNWI if the fee is based on a percentage of assets under management. Wanting and choosing to hire a FA is appropriate for some people, but only at a fair price, i.e., a reasonable hourly fee or fixed fee, and not a fee based on %AUM.
Thank you for your great website. I just bought your book and look forward to reading it! I would really appreciate it if you could (if you want, you can email me privately) forward me a name (or a few names) of a fee for service financial adviser who could look at my finances and give me his/her recommendations. If you don’t feel comfortable doing this, I completely understand. Again, thank you for everything!
Here’s my list of recommended advisors: https://www.whitecoatinvestor.com/financial-advisors/
If you take a look at the applications, it’ll give you a good idea of what you’re looking for if you want to try to find someone local instead.
I will read the article but I first have to say that the picture is hands down the best picture you’ve ever posted. Bonus for making it look like tiny Jesus is sitting on his shoulder, like a good angel, telling him to make good choices.
Wearing his sister’s underwear makes him a true courageous superhero!
Yea, Captain Underpants cracks me up. It was especially funny when his sister realized it was her underpants he was wearing outside his shorts.