My First Four Financial Follies
The first was a realtor (that I thought was a friend) that talked me into overpaying for a property at a time I shouldn’t have bought it that turned out to be difficult to sell later. The second was a brand-new insurance agent (and also a good friend), with just enough knowledge to be dangerous, who sold me a small whole life insurance policy when he should have sold me a big 30 year level-term life insurance policy. Third was a mortgage professional who refinanced me into a new mortgage that was “no-cash” when I thought I was getting a “no-cost” mortgage. It was also well above market rate and at the last minute he tried to slip in an early-repayment penalty. The straw that broke the camel’s back was the physician-focused financial adviser I hired as an intern. I thought I was hiring a fee-only adviser, not realizing that “fee-based” and “fee-only” were not the same thing. I read my first real financial book, Mutual Funds For Dummies, during my vacation week as an intern and quickly discovered that not only was I paying an annual fee, but I was also being directed into high-load, high-expense ratio funds and being sold as much high-cost, high-commission insurance as I would buy. I’m apparently a slow learner, but I finally realized that if I didn’t acquire at least a basic understanding of personal finance and investing that I would continue to be the target of unethical financial professionals for the rest of my life, and perhaps never reach my financial goals.
The Resources Are Out There
If nothing else, my 24 years of formal education taught me how to teach myself new things. I searched the internet, participated in forums, and visited the library and used book store across the street from my home. I talked to everyone I knew who knew anything about money. I read book after book, some good, many bad. Eventually I realized this financial stuff is far simpler than practicing any medical specialty. Unlike medicine, however, there is no one out there willing to teach it to you without sending you through the school of hard knocks. As a general rule, those who know even a little of this stuff use their superior knowledge to take advantage of you to make a buck.
The Hippocratic Oath Of The Financial Adviser?
Most finance people don’t choose their field for the same reasons as kindergarten teachers, social workers, and nurses. When they apply to school (if they went to school at all) they most definitely do not put in their essay that they “just really want to help people.” They are in it for the money, and as a general rule, their training is in sales, not finance. When they graduate they do not stand and recite their version of the Hippocratic Oath. Physicians, accountants, and yes, even attorneys, have a duty to their clients that few financial advisers and asset managers even consider. As professionals, they have a duty to put their client’s needs first. I’m not saying that attorneys or even doctors always have impeccable ethics. You know as well as I do that they don’t. But the ethical bar for financial advisers is so low, most of them wouldn’t trip over it by stealing from their own grandmother. Now there are a few “good guys” out there in the financial world, but they are so vastly outnumbered that if you begin with the assumption that the main goal of any stock broker, insurance agent, financial adviser, wealth manager, mortgage broker, lender, realtor etc that you meet is to separate you from your hard-earned money, you won’t end up far from the truth.
A High Income Does Not Automatically Equal Wealth
Being a physician is far too hard to be poor while doing it. The required IQ and work ethic, the late start caused by 10-15 years of low (or even negative) income, the constant liability concerns, and the large amount of care that is simply donated out of the goodness of your heart merit a reasonably high income, which most physicians eventually obtain. Earning a high income, however, is not the same as being wealthy, which relates to your net worth. The public perception is that doctors are rich, i.e. have a high net worth. They deserve to be, but the truth is that far too many of them are not. This website will help you turn your high income into a high net worth. It won’t happen quickly. There are no get-rich-quick schemes here. But if you manage your financial affairs prudently, you will have a robust lifestyle now free from financial stress, the option to retire or cut back early if you so desire, the ability to help others financially, and a comfortable retirement.
You Have A Second Job, Whether You Like It Or Not
Now that pension plans (AKA defined benefit plans) are being phased out by corporate America and even the public sector in favor of 401Ks and other defined contribution plans, more and more Americans are being handed a second job, one which they are little qualified to do. Doctors have been in this situation for a little longer, but too few of them realize that they have a second job as their own personal pension fund manager. It is your job to determine how much income to save in any given year. It is your job to decide how to allocate your assets to reduce risk of loss and maximize rate of return. It is your job to negotiate the salaries of those who perform financial tasks for you. And it will be your job to deal with the consequences of any financial catastrophes caused by your own bad decisions or ill luck. Yet you have received almost no training to assist you in this. No one will teach you this. You must teach yourself. The good news is that you can learn all you need to know to do this yourself in less time than you spent on dermatology as a second year medical student. Even if you don’t want to do this stuff yourself, it is important to know at least a little about it so you can evaluate what your adviser(s) is telling you. So let’s get started.