Things Med School Did Not Teach You
Training to become a doctor can take more than a decade of an aspiring physician’s life.
First, there are the four years of undergrad and four years of medical school, then 2-7 years of residency depending on the specialty and for some two more years of fellowship for even more specialized training.
The medical school covers a vast spectrum of medical and scientific subjects designed to prepare you to become a good and competent doctor. Biology, Chemistry, Physics, Physiology, are some of the common subjects covered in med school.
There is one subject missing in every med school curriculum that should be added immediately: Financial Literacy and Investing.
Because it’s not a stretch to say that most young physicians who pass through med school and serve out residencies have as their ultimate goal to become remarkable doctors, but something stands in the way of achieving this goal – financial literacy.
Finances are a huge source of stress for many doctors.
The average doctor finishing up their residencies and starting their practices start behind the financial eight-ball with an average of $230,000 in student debt. Combine this debt with starting a family, buying a home, and working 80 hours a week. You can begin to appreciate the tremendous amount of pressure doctors find themselves under that can have an adverse effect on their professional and personal lives.
For some doctors, the way to deal with this pressure is to spend it away.
Look at it from the doctor’s perspective. They’ve spent more than ten years of training and toiling to start practicing medicine finally. Many start to feel entitled. It’s time to start rewarding themselves and their families. They’ve been eating mac n’ cheese in a studio apartment for years. All of a sudden, they’re making $160k+ a year. To hell with it! It’s time to splurge.
The problem is, they go into more debt to prop up a lifestyle they think fits a doctor. They buy big homes, fancy cars, send their kids to private schools, join country clubs, eat at high-end restaurants, take extravagant trips, etc.
Many doctors dig themselves into a hole that many never climb out of. That hole of trading time for money will ensure they will always be bound to their job. Unless they find another source of income – one that will make them money even as they’re sleeping – they will work until they can’t work anymore, and it’s not because they don’t want to work anymore.
Financial literacy and financial responsibility have reached a tipping point for doctors.
There are articles upon articles, numerous blogs, and even books on the subject. For many doctors, incoming salaries barely meet their outgoing expenses. The problem is doctors spend so much time working that there is little time to educate themselves on financial matters. There’s no doubt that they have the intelligence to grasp simple financial concepts; they just don’t have the time to do it.
Doctors make high incomes, but many will never stop trading time for money because their income barely meets their expenses.
Unless they come up with another stream of income, once they retire, their finances will be on a downward spiral because their expenses will stay the same, but their income will go way down. Many doctors are caught in a vicious cycle because they spend so much time working they have little time to educate themselves on financial matters.
Due to time constraints, many doctors will default to what’s comfortable and what everyone else is doing – relying on financial planners – many of whom are either incompetent or dishonest.
Financial planners know doctors are natural targets because they’re time-crunched, so they pitch what’s simple and easy. Financial planners love to pitch doctors annuities because they’re easy to understand and promise a fixed income for life. For a doctor, that sounds perfect. The problem is by the time doctors start collecting their annuities; the income is nothing to write home about.
With the average rate of return for annuities at around 3%, that doesn’t even cover the long-term average inflation rate of 3.15%. Doctors are better off putting their money under a mattress than entrusting them to a financial planner.
Instead of turning to financial planners for investment advice, doctors should look to another group that is far more successful and wealthy than the typical Wall Street guru.
What is the group that I’m referring to? The .1%, the ultra-wealthy.
If doctors dug deep enough, they’d discover that the ultra-wealthy don’t have supercomputers in their basements directing their investment choices. They keep it very simple – a strategy even time-constrained physicians can follow.
They follow these simple rules:
Passive income is critical –
Look to investments that generate a passive income that will allow you to generate cash flow that is not dependent on the hours in the day. Only through passive income will you be able to step away from your day job one day to pursue your true passions. Without passive income, you will always be trading time for money, and that time will eventually run out.
Forget Wall Street –
Look to private markets for opportunities that are immune from market volatility. Private investments – whether directly or indirectly through private funds, private debt or equity, partnerships, or the like have consistently provided investors with income and appreciation but at reduced risk.
Invest in something you know –
Before investing, make sure you fully understand how the underlying business or investment operates, how it makes money and the future sustainability of the business model and profitability. Don’t invest in anything you don’t understand. You’re less likely to be taken advantage of by unscrupulous sponsors.
Don’t let somebody else control your money –
This is not to say that you shouldn’t ever invest your money indirectly. This speaks more to having control over how your money is used. This comes from proper due diligence.
Don’t blindly give your money to strangers. Know the experience of the managers handling your funds, understand their business, and know-how your money is going to be used precisely.
Don’t limit yourself to local opportunities –
To find ground-floor and off-market opportunities with high upside, you’ll need to look beyond your backyard. If you don’t, you may miss out on high growth emerging markets that offer more upside potential than more mature and saturated markets.
Have a savings strategy and avoid keeping up with the Joneses –
Save more and spend less sounds simple, but it’s easier said than done. In today’s social media society and the pressures to keep up with the Joneses, it’s harder and harder for Americans to save and reduce expenses. But, if they can, they can allocate more and more of their investment capital towards passive income, generating tangible assets across multiple markets to build diversified, recession-resistant wealth shielded from Wall Street volatility.
Leverage the expertise of others to solve the number of hours in the day problem. First, understand the business and the relevant financial, demographic, geographic, and market elements and decide whether the sponsors steering a particular opportunity can execute their business plan and strategy.
If your investment philosophy aligns with theirs, it’s time to put your trust in them to generate the type of passive income needed to gain financial independence without the headaches.
My advice to all doctors is it’s never too late to adjust your financial ship.
Just like the .1% who leverage the expertise of others to steer their financial futures, doctors can also lean on experts in their asset class and geographic locations to achieve the same financial independence as the .1%.