“[Money] it’s the root of all evil, the sum of your blessings”.
-Jimmy Buffett in “Spending Money”
Basically, when you get to my age, you’ll really measure your success in life by how many of the people you want to have love you actually do love you.
Regardless of what my kids want to name our next dog (sorry Godiva), I (Richard) am going to name it Buffett, as Warren Buffett and Jimmy Buffett are two of my heroes. I (Christy) would like to add that as Jimmy Buffett says, “Math Sucks.”
This is our 100th post (!!!) and we want to devote it to a topic that is important to both of us. We see so much relational strife over money, in real life and the blogosphere, that we want to address it from the perspective of the female physician. There is a tendency for women to not feel confident enough or capable of obtaining sufficient financial knowledge (I’m not stereotyping). This is especially the case with female physicians, who are balancing their extremely demanding work, the desire to spend quality time with their families and the need to share in the home duties. I, Christy, struggle with this. I feel overwhelmed by everything else there is to know and do, and I excuse myself by being married to a very qualified individual who can manage our finances. But financial knowledge is crucial for everyone, especially female physicians, who are often providing most or all of the family’s income. This is important even if the husband/partner manages your finances and seems to understand it well. One big mistake, or multiple small mistakes, can cost hundreds of thousands of dollars, whether it is because of poor tax planning among your investments, poor choices between debt repayment, emergency fund or investing, poor spending/saving habits or poor investing choices (such as falling victim to adviser fraud). These hundreds of thousands of dollars can result in delaying retirement, not having your envisioned comfortable retirement or not being able to work part-time when desired. Two sets of eyes are better than one to catch these errrors (Richard: I see what you did there). If we female physicians work so hard to achieve what we have and provide for our families, why would we blindly trust someone else with our investments? By investments, I don’t just mean money. I mean then investment of time, emotion, work we put into medicine, as well as our paycheck. Basically, you, as the female physician, cannot really know how competent your spouse or adviser is in handling your finances and investments until you become knowledgeable yourself. Further, there is always the unfortunate risk of divorce, disability or death of the husband/partner, leaving you solely in charge of making sure everything is handled correctly.
Fortunately, there are some relatively easy paths to gaining enough financial knowledge to know what are good and bad financial and investing practices, if not handle it all yourself. The other good news is that while no one can come close to mastering either topic in even a few years, you can become sufficiently knowledgeable in just a few weeks, spending a few minutes here and there accumulating knowledge.
The following is a list of financial planning and investing concepts that I believe are part of the basic needed knowledge set. I will update this article as I come up with new ideas or as others let me know what needs to be added.
- How should excess monthly cash flow be prioritized between debt payments, emergency fund building, and investing?
- When should IRAs, Roth IRAs, backdoor IRAs, HSAs, 529s and 401(k)s be used?
- When is financial independence achieved and what savings rate is required to get there?
- What is the role of an emergency fund and how much is needed?
- What is the role of life and disability insurance and how much is needed?
- What are the different student loan repayment options?
- How can a budget help make better planning decisions?
- Why are whole life insurance and annuities usually a bad idea?
- What are stocks, bonds, mutual funds, exchange traded funds, MLPs, REITs, and BDCs?
- How does compound interest work?
- How much do investment fees harm wealth accumulation?
- What is buy-and-hold investing?
- What is dividend growth investing?
- What are some other simple, legitimate investing strategies?
- What investment strategies need to be avoided?
- How do emotions hurt investment performance and how to overcome them?
- What is dollar cost averaging, tax-loss harvesting, and rebalancing?
- How do I identify a good or bad investment adviser and when do I need one?
So bookmark this article. Start with a topic above and read the linked article or google some articles on the topic. Also, spend time on White Coat Investor’s website, as he masterfully covers most of these topics as well.
Most physicians spend well over 2,000 hours each year, year after year, in medical school, residency, fellowship and practice, partially in an effort to earn salary measuring in the hundreds of thousands of dollars each year. That money will add up to millions over a physician’s career, yet it is difficult for many physicians, especially female physicians, to devote any time to what they have earned. This needs to change, and we want to help you. Don’t be the sixty year old, recently divorced physician who has no clue what has been going on with her finances over the course of her career and is now starting from scratch. Don’t be the young physician getting swindled by a salesperson into buying unneeded insurance or annuity products that have huge penalties to cancel. Start reading articles on investing and financial planning, even if it is just one a week. Compile some notes (we love OneNote- syncs between your phone, home and office computers) to gather your thoughts. Ask questions. Avoid gimmicks. Get second opinions. Be empowered. You are worth this investment too.
-Richard and Christy