We are taught it early and often in medical training: First, do no harm. The premise is that medical diagnostics and treatment can and do cause harm. So, your first job in medicine is to not cause further harm to patients. Interestingly, this is no different in personal finance (or physician finance). The first job is to avoid causing yourself harm. Today, we will discuss three causes of harm in medicine and their corollary in personal finance.
So, how can you “First, do no harm?” I’ll tell you three ways.
Let’s dig in.
1)The Incindentaloma in Medicine
I often hear people say, “man, if I could just get a full-body CT scan to make sure everything is fine…” The problem is that this may not be helpful at all. Random findings on CT scans can and do cause harm.
They even have a name (“incindentalomas”). In other words, they are incidental findings that would not have been found if a test was not ordered. They may or may not have significance to your health.
For example, let’s say we order a chest x-ray for a person’s cough and find a “spot” on the plain film.
This doesn’t sound like a big deal until the person has a random enlargement in their lung, they get a biopsy, and then get a pneumothorax and chest tube… all to find out that the growth was benign. In this case, the incindentaloma caused harm and no harm would have occurred without our interference.
The Incidentaloma in Personal Finance
When you run across someone who has new information in personal finance, just be weary. If you don’t understand it, then you probably should not be investing in it.
For example, someone recently told me about aglorithim based investing. It sounds like a great idea, but I just don’t understand it. If my current investing plan, which involves low-cost index funds, is going to get me to my goals, why take the risk on something I don’t understand to get me there faster?
The same goes for whole-life insurance (a.k.a. cash-value life insurance, annuities, etc). It’s complicated stuff and, honestly, you likely shouldn’t be dabbling in it for you or your family.
The same can be said for cryptocurrency or any other kind of speculation. Just because someone incidentally told you about this new “great” idea doesn’t mean you should make a change.
Just stick to the easy, low-cost, “set it and forget it” plan that you started with. You can thank me later.
2) Prevent Badness: Make a Contingency Plan
An apple a day keeps the doctor away!
This idea has been here for ages. Preventative medicine is usually the best kind of medicine. It goes something like this: Eat well, exercise, and take care of yourself (sleep hygiene, don’t smoke, moderate alcohol consumption, etc). This can prevent a lot of bad health.
The basic premise here is that an ounce of prevention is more than a pound of cure. Doing all of the above after you sustain a massive stroke is going to be too little, too late. Prevent the badness and have a plan for it before it happens.
That’s how you can “first, do no harm” to yourself.
The Personal Finance Contingency Plan
It turns out the same advice is applicable to personal finance, too. You need to make sure you protect yourself and prevent badness.
Make sure you know what you’ll do before a bear market happens. Have a plan, and stick to it. If you don’t have a financial plan, then make one. Or get someone to help you make one (fee-only flat hourly rate advisors are best here; I can recommend some, if you need).
Get asset protection. If you have a spouse or children, get life insurance. If you are a resident or attending physician, get disability insurance and umbrella insurance. Have a plan before the badness happens.
If you need advice on where to seek disability insurance, just shoot me an email and I can make a couple of recommendations to you. The important part is for them to be independent disability insurance agents.
3) Advocate for yourself
The best person to look out for yourself interest is you. Smart patients realize they need to advocate for themselves. Insurance companies and big hospitals rarely perform this function.
When I was a fourth year med student (a bad year in some ways as you’ll find out below) I took a charge in the championship intramural game. I got knocked down and my elbow hit the ground causing a large laceration that would require a couple of stitches.
Doing the responsible thing, I figured I’d save the hospital system and my insurance the emergency department bill. Instead, I put a dressing on it and lined up an appointment at my family practice doctor the next day.
A couple of stitches later it was fixed. $20 co-pay. Sweet. Well, that’s what I thought. A couple of months later I received a $450 bill for surgery. For stitches. Naturally, I called the insurance company and pointed out to them that stitches aren’t surgery.
“Well, sir, when anything that is sharp goes under your skin is sharp that is considered surgery.”
My quick response pointed out the ridiculousness of that definition. “Ma’am, if I get a vaccination with a needle would you consider that to be surgery? I had two stitches and could have paid a $100 emergency department co-pay, but decided to save you and the system money and am getting screwed for it.”
Guess what happened? Nothing. I had to pay the $450. The insurance company was not advocating for their customer. I should not have been surprised.
The Need for Personal Finance Self-Advocate
Just like that insurance company above, the financial industry can often hurt you just as much as it can help. We have all had our situations where people who we thought were there to help us or give advice did just the opposite.
My first rude awakening occurred when I was told to apply for personal disability insurance as a 4th year medical student. I just had a baby girl, and all I wanted was life insurance. I was trying to be a good dad.
We all know how that story ended. I can’t get personal disability insurance now. The same can be found in the financial advising industry where there can certainly be massive conflicts of interest.
So, learn to do a little Do-It-Yourself personal finance. It’s not that complicated. Seriously. If you still need help, then consult a fee-only hourly financial advisor who will not give you conflicted in their advice.
Above all else, advocate for yourself. Do some research. Ask the tough questions. Take responsibility for your future.
People are rarely going to be looking out for your self interest.
First, Do No Harm. Make a plan and stick to it. Ignore the random pieces of financial information that people often want to drop on you that doesn’t line up with your plan. Don’t speculate. And advocate for yourself.
What are some of your examples where you got harmed? How could you have prevented this? Leave a comment below!