Money Meets Medicine Podcast
MMM 82: Free Steak Dinners & Physician Financial Mistakes
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Have you ever been invited to a free steak dinner with a financial group? Or to coffee? Or lunch? A free talk?
We don’t want you getting free steak dinners, but making horrible decisions for your long-term investments. There is a lot of misinformation out there for physicians when it comes to personal finances. We don’t want you to make the mistakes that most physicians do simply because you didn’t know any better.
So today we are going to talk about the mistakes that many doctors make, and how there is always a way out.
Why Doctors Make Financial Mistakes Unknowingly
True story. I’ve had free Mexican and steak dinners. I have even had free talks in medical school provided by a group whose CEO later got thrown in jail for fraud. If you don’t believe me, just Google “GL Advisors.” It’s a real thing.
Now, don’t get me wrong. Not all financial advisors are out to hoodwink you. I host this weekly podcast, Money Meets Medicine, with one of the good ones right now.
But even the Consumer Finance Protection Bureau has done research to show that most money in the financial industry is spent on advertising products to doctors and a small fraction is spent on actually educating people about personal finance.
In fact, the CFPB found that the financial services industry spent $54 per person on marketing products. Only $2 per person on education.
The fact is they are trying to sell you stuff, not educate you. But we don’t want you to lose hope. So, we are going to go through the top mistakes that many doctors make simply because they don’t know any better, and how there is always a way out.
Financial Mistakes Doctors Make
There are about seven main mistakes doctors make when it comes to finances that we want to discuss today. And with every mistake, we will talk about a way out, just in case you might have fallen victim to that steak dinner.
Getting “Free” Financial Advice
Nothing is free in life. There is a cost somewhere and the key is to find out where the cost is coming from. People are selling products when they are giving you “free” advice. People are generally pushing other products on you when they are giving you this “free” advice.
In the financial space, it is really important to look at how that person giving you free advice is making money. Is it off your policy? How much? What is the difference in commission based on what they are selling you?
It is always interesting when people don’t understand how their financial advisor gets paid. The financial advisor is giving you advice based on the products they are trying to sell. Just be clear you understand this ratio before you start a relationship with this advisor.
Don’t worry about hurting someone’s feelings if you realize that you need a new financial advisor. It is a really important part of your life and your future. Don’t stay within a financial plan and planner that isn’t right for you just because you have a hard time saying no.
Upgrading Their Lifestyle
We see physicians living paycheck to paycheck, even if they are making a couple hundred thousand dollars a year. They spend their days helping others live a healthy life, but their financial health is really poor.
What happens is that they finish training and want to upgrade everything they have. Cars, houses, trips, etc. And before they know it they are trying to keep up with this lifestyle they created. At some point these possessions own the physician. And they keep thinking that if they work harder or work more than they can catch up with their lifestyle. But a lot of these things are optional.
You can still change this, right now.
Now, don’t get us wrong. If there are things you really love we advocate to keep them. But you need to prioritize things. What can you cut that is not as important as what you want to keep? This is what we encourage you to look at.
Rollover IRA When Changing Employers
The more they manage for you, the more they make. Therefore this idea of rolling over your IRA into a Roth IRA instead of your employer’s is not good advice.
When you change employers you have a couple options:
- Keep it where it was
- Move it to your new employer or
- Move it to an account in between (usually a rollover IRA)
Prevents you from doing the backdoor Roth, which is really important for when you go to retire.
The way out of this one is to move that money somewhere else before the end of December.
We want to end with the reminder that if something is free think about why and who is paying the cost. It is really important to understand that even when you are given advice, you need to make sure it is in your best interest. Be careful of the steak dinner.
Bonus: Your Physician Financial Questions Answered
We had this question come in and wanted to be sure we answered it this week:
“Mr. Inman! I just want to say I love your and Dr. Turner’s podcast. Thank you both! I listen weekly. Would you all care to re-address refinancing fed loans again close to the end of the 0% interest rate. I just want to make sure that I do that 1-2 months prior to the end of the low-interest period. Thanks again!”
We don’t know what they are going to do as of right now. We believe that as of October 1st payments will be due. And we still endorse that you should be ready to pay as of October 1st.
If you know you are not going to be doing forgiveness, then it is worth it to refinance now when the rates are better rather than two months from now when everyone is trying to refinance. We don’t have a crystal ball, so we encourage you to just take an educated guess.
You might also be interested in…
Show Me the Money (In the Financial Industry)
The personal finance industry is meant to help you manage your assets, but particularly for doctors, many questions remain around what that kind of support actually means.
Does your financial advisor have your best interest at heart? Do you know how they get paid? Are they transparent in their disclosures about how their company actually works? Where are the conflicts of interest?
Because you can rest assured there are conflicts of interest. It’s just a matter of how they show up. And once you can say “Show me the money” and find them, that’s when you can make intentional, informed decisions regarding your personal finance.
In tackling this topic, we wanted to acknowledge the two main reasons you may be considering your options for charitable giving, especially as a high-earning physician.
One is that you may have religious convictions that make you feel more inclined to give. Even if you don’t hold to the same belief system that we do – specifically around tithing and the historical background of that concept – giving to your community is very valuable. Not just for the recipient, but for you, the giver.
This leads us into reason two, which is that giving money (or other valuable resources) and helping others has been shown to increase long-term satisfaction and fulfillment in your life.
There’s also a practical side of financial charitable giving to consider, which are the tax advantages you can use to create the most bang for your buck – literally.
Charitable Giving for Physicians
Does tithing or charitable giving play a part in your personal finances? Should it? As usual, we’re not shying away from taking a deep dive into a very personal topic. Personal finance is personal, maybe never more so than when it comes to deciding how you want to give back.
In tackling this topic, we wanted to acknowledge the two main reasons you may be considering your options for charitable giving, especially as a high-earning physician.
One is that you may have religious convictions that make you feel more inclined to give. Even if you don’t hold to the same belief system that we do – specifically around tithing and the historical background of that concept – giving to your community is very valuable. Not just for the recipient, but for you, the giver.
This leads us into reason two, which is that giving money (or other valuable resources) and helping others has been shown to increase long-term satisfaction and fulfillment in your life.
There’s also a practical side of financial charitable giving to consider, which are the tax advantages you can use to create the most bang for your buck – literally.
Making the Most of Your Paycheck
You’ve done it – your training is complete and now you’re finally getting a paycheck fit for an attending physician. You think, “I’ve arrived! I’m going to start making so much more money.”
Famous last words. If you’re not prepared, that is.
Seemingly unassuming, everyday expenses still have the potential to wreck your new paycheck and your budget. I’ve seen it many times over the years: you try to be careful, but you (understandably) want to enjoy your hard-earned money. Costs creep up on you, things snowball. Suddenly, your post-tax paycheck is no different than it was in residency.
You thought you knew how to spend money wisely, but now you wonder, “What was the point of all my hard work to get here?”
Don’t worry. You can still enjoy the money you make while being aware of five main money traps that a high-income earner like you could be susceptible to if you’re not paying attention.
Are you ready to live a life you love?
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