It’s par for the course for every financial blogger to put it out there in the universe what stupid doctor financial mistakes they’ve made. It’s my turn now.
We do this only to emphasize, over and over, that we’ve all been where you may be at this time. And that all is not lost. Maybe you had your head in the sand. Or someone took advantage of you. I’ve been through both. And it’s something you can come out of and put behind you.
Okay, so here goes. I will often refer to situations with “we” instead of “I”- intending to refer to both my husband and me.
1. Financial Illiteracy
This one’s the core of all subsequent problems. If we’d known better, we wouldn’t have made the rest of the problems. End of post.
I know there’s a subset of folks who trip up on the behavioral aspects, not the math. But even they can overcome a lot of it by knowing the evidence behind things. Why market timing doesn’t work. Or why debt is a slippery slope. Maybe calculating how much of a nest egg they need to retire on and how little time is left for compounding, will curb the shopping addiction to some degree.
My husband and I grew up in India and came to this country only after medical school- for residency. So we had no base knowledge level of how finances work in this country.
And those first few years of training and being new attendings took all our time and energy. Then came the years of having babies and raising them. Not any easier than training. This left no time at all to devote to learning about finances.
Not that I wasn’t looking. But I found no resources other than mainstream media for a long time. And in that time, I found nothing but hot stock tips.
And it didn’t help that no one breathed a word about money to us- not our training programs or anyone else. I don’t remember any money conversations going on at all. Let alone about retirement but even about compensation or billing, etc.
2. Buying a house during Training
When I matched into the same residency program as my husband, we thought it was the prudent and responsible thing to do to buy a place. After all, we would be there for a good three or four years, at least. We emptied out our bank account for the downpayment (Emergency fund, what’s that??). What’s worse, we got a horrendous interest rate because we were on visas. And the lender didn’t think to tell us this in time for us to shop around.
We ended up living in the condo for five years and then moved out of state. Bringing us to the next mistake on the list.
3. Unintentional landlords
When we moved out of our condo, it was the depths of the Great Recession. No chance of selling the place. So we hired a property manager (or a string of them over the course of the next several years) and rented it out.
We never got a good return on it. It was a great place to own, not to invest. The numbers didn’t add up- never mind that we didn’t how to crunch them in the first place.
4. Ignoring Retirement Plans in training
For this one, I place a chunk of the blame on the training program. They did not tell us- not loud and clear, at least- that they had an optional 403(b). Not mentioned during orientation or other organized talks. It may have been buried in an employee handbook or something. And the GME office would tell you, if you asked. I didn’t know to ask.
And the word Roth IRA was not part of my vocabulary yet. All in all, we lost a decade and a half of Roth space, either directly or through the Backdoor.
5. Whole Life Insurance
Couldn’t escape this one, could we? They found us within a couple of months of signing on the job.
The only good thing is that it’s a Guaranteed Universal Life Policy, not regular Whole Life Insurance. This means that we paid level premiums for a certain number of years and were done. By the time we found out about term life, we were at the tail end of the ten years of premiums. So, we kept it and added on more term coverage.
This kind of policy is often used for charitable giving and estate planning. Neither of which we needed as brand new attendings with hardly anything to our names.
6. Being Underinsured
Because the life insurance was so expensive, we went a number of years without being adequately insured overall.
Finally, when we got our act together, we added on more term life and disability insurance. And got an umbrella policy for the first time.
7. Lifestyle creep
We did pretty okay with this one, so I’ll call it Lifestyle inch.
We took some nice vacations, and I do not consider them mistakes one bit. We saw some beautiful places and made some great memories before the kids came and tamped down our travel for a good few years.
We leased cars, instead of buying them because everyone around us said they were better deals than buying luxury cars (obviously, our math skills leave a lot to be desired). We made up for this later by driving a modest car for ten years and more than one hundred thousand miles when we wisened up to financial literacy.
Our biggest one in this section may have been wanting to buy the doctor house too early. We wanted to build a house- before we had the means to do so. We would have gotten trapped by a very high mortgage and all the added expenses that come with a place like this.
Fortunately, fate intervened.
We bought a lot to build upon. Before we could finish our architectural plans and apply for a construction loan, my husband quit his job at the time to start his own practice. Not the best time to embark on a project like this. We hit the pause button.
And that decision has saved us from a lifetime of being house poor.
We have been renting now for nearly ten years while working everything out financially. And we’re finally in a position to chase that dream.
We are custom-building a house. But the mortgage will be 1x our gross household income and I suspect we will pay if off in half the time, if not less. We have the cash flow to take care of the added expenses. The property taxes will hurt, though.
8. The Bad Financial Advisor
I’ve written about this one here. We mistook an insurance agent to be a financial advisor. Sufficeth to say, the recommendations of financially unsavvy people doesn’t help. And, one needs to know how someone is getting paid. Always.
9. Investing errors
Not investing early enough.
Investing only in individual stocks, without knowing much about how to do so.
Getting sucked into loaded mutual funds by financial advisor. Getting into high-fee annuities with the same guy. Using an insurance company to house our investments.
Last but definitely not least, selling out at market bottom during the Great Recession to pay off the mortgage.
10. Professional issues
Getting trapped in a predatory private practice situation. Fortunately, we heeded the red flags and got out as soon as we figured the situation was not going to correct itself.
Getting slammed with a non-compete lawsuit. An invalid non-compete. But to prove it’s not valid takes money. A lot of it. Lawyers are the only winners in something like this.
Our saving graces
So you see, we’ve made almost all the mistakes in the book. Yet, we hit Coast FI five years from the time we started on the path to financial literacy.
The following are the saving graces we have to be thankful for:
- Not having student debt. This is a big one and we are grateful.
- Being in high paying specialties.
- Being self employed and not afraid of working hard.
- A frugal mindset. For this, I have my parents to thank. They spent little all along and are now enjoying a comfortable retirement.
- Financially independent families. Our parents have been responsible about saving for their golden years and do not have to depend on us to help them out. Instead, they generously give to the grandkids.
- Being good at delaying gratification. Like most docs. Once we knew what we were doing wrong, we hit reset and went back to living frugally to make up the lost time.
I hope this is helpful. What I’d say to anyone starting out is to get a basic knowledge of finances. Figure out your plan. Because whether you like personal finance or not, you gotta know it!
What can you relate with here? Where are you on this journey? Do you have any other mistakes to share so others can learn from you?
