Financial Planning for Doctors

Sometimes, I get emails from someone who has recently caught the financial independence bug.  The question they usually ask is, “How do I get on the same page as my spouse?” It often goes something like this:

Hey, I recently came across your site after discovering the financial independence movement.  I am a bit obsessed with it now, but cannot get my spouse/partner on the same page with this stuff.  What do I do?!?!?

I usually give people in this situation the same tools and advice that I give to my residents. You help others care about money by NOT talking about money.

This might seem counter-intuitive.  However, the truth is that you are never going to get someone to care about finances and number crunching – if it’s not their thing – by talking more about it.

In personal finance, sticking to our goals (or getting someone on the same page) requires us to focus on the big picture.  Where are we going? Why are we doing this? What’s the point to all of these decisions?

Here is a 4 step process to get on the same financial page as your partner.  Once you get on the same page, it’ll help you stay there, too.

1. My Favorite Life Planning Tool

Many long-time readers know that my favorite tool to bring the big picture into perspective is a set of questions created by George Kinder.  They are appropriately named The Three Kinder Questions.

The purpose of these questions is to help people figure out what is truly important to them in life.  This is important for obvious reasons. However, the practical nature of going through the questions proves more important than many realize.

As humans, we are hard-wired to tackle the obstacles that are put in front of us.  This is often done at the expense of thinking about the long-term goal.

For example, many doctors in our country work in a job that they hate, work hours that they don’t want to work, and feel burned out and trapped by life decisions and debt.  If you ask many of these burned out doctors what their big goals are in life, many of them cannot answer.  The reason is that they are stuck in the forest staring at individual trees called electronic medical records, insurance company pre-authorizations, and administrators.

Enter here The Three Kinder questions, which help us remove the blinders that keep us from seeing the big picture.

The three questions are not only helpful, but they are also easy and enjoyable to discuss (preferably over your favorite beverage at a restaurant).  And none of the questions require you to know anything about money.  They are a sure-fire way to help your spouse get on the same page with you.

2. Applying Some Numbers

At this point, you might find that your partner – the one who previously cared nothing about money or personal finance – now cares a lot more. If they aren’t on the same page, they should at least be in the same book at this point. Going through The Three Kinder questions has that effect.

Now that they care, it becomes possible to put some numbers to our goals.

For example, say you realize that you don’t want to be stuck in your job for the next 30 years.  Instead, you want to be financially independent in 15 years.  Well, that is going to require two simultaneous pursuits. First, you’ll have to live a relatively frugal life where you spend less than you make.  Then, you’ll need to save enough to get to your goal in 15 years.

You could employ a backwards budget (because I otherwise detest, loathe, and abhor a line-by-line budget) to determine how much money you need to be saving each month to get to your goal.

Then, go through the same process for dealing with your student loans (possibly by using a student loan refinance ladder), saving for any college education for children, paying off your mortgage, and deciding on other important financial decisions.

You should notice that all of this came after we got on the same page as our partner through the Three Kinder Questions.  Understanding the “why” is infinitely important than figuring out the “how to”.

3. Know Thy Enemy, Then Defeat Thy Enemy

Okay.  So, we have discussed our big picture life goals through the three questions.  We have discussed putting some numbers to those goals, and employing a backwards budget to get to those goals.

The next part is the hard part: staying the course.

Those that are new to personal finance might not realize that time spent in the market and sticking to the plan are probably the two most important parts of personal finance.  It might seem easy to stick to these really important goals at first, but then you face your first bear market when the market drops 20% and you watch your hard earned saving dwindle.

Or what about when you see a big purchase that you “need” right now, which has designed to sabotage your savings plans!  We humans are really good at reasoning our way to bad financial decisions.

This is why it is important to know thy enemy, and the enemy is us!  The answer to this problem is to understand just a little bit about behavioral finance (you can follow along with the behavioral finance series to learn more about this fascinating topic).

Primer on Behavioral Finance for Partners

Here are the two important aspects of behavioral finance that belong in this post:

First, make sure that once you have labeled monthly backwards budget goals that you make them automatic.  If you need to be saving $5,000 per month to get to your goals, then make sure that $5,000 comes out before you ever see it.  This is called “paying yourself first“. This simplifies making you commit to those choices you made above without giving yourself an opportunity to sabotage your own plan.

Second, make sure you understand the importance of sticking to the plan.  If you need help with that, I’ve got a sports analogy post that can both help you out and make you laugh (…or cringe). The takeaway is to know that the market is going to drop.  Expect it.  And then stay the course.  Do not sell.

If you focus on those two keys to behavioral finance, you will successful identify your financial enemy – and you’ll be well on your way to success.

After all, getting on the same page with your spouse is only the first step.  Staying on the same page will be the focus for the rest of your lives. If this all seems to complicated and you need help making a financial plan to get you started, I highly recommend the Fire Your Financial Advisor Course to get you started.

4. Follow Your Progress

Okay.  So, now we have determined the big picture, put some numbers to paper to get there, and made the intentional decision to automatically build wealth & stay the course.

Now, we will need a little motivation to keep us going in this long road to building wealth.  Enter here the quarterly or monthly net worth updates.  A net worth update is simply looking at the big picture of your finances from a numbers perspective to determine if you are accomplishing your goals.

This is most easily done by using an excel sheet where you simply track your assets and debts.  Your net worth = assets – debts.  For example, you might add up all of your assets (your 401K, backdoor roth IRA, high-yield savings account, cash, home value, etc) and subtract out your debts (mortgage, car payments, student loans, etc).  This will be your net worth.

Alternatively – if you are lazy like me – you can depend on some personal finance technology to make this job easier!  The tool that we use is personal capital, which will track your net worth automatically after you plug in all of your accounts.  It is a simple and easy way to keep a good eye on how you are doing as you march towards your goals!

Take Home: How do I get on the same page as my spouse?

Hopefully, this post has helped you answer that original question about getting on the same page as your partner or spouse.  It isn’t always easy.  But, hopefully this post made it easier.

The take home is this.  Figure out the big picture.  Put some numbers to those goals.  Don’t sabotage your own plan.  And, then, follow along to make sure you are achieving your goals.

It really can be that simple.  It takes some upfront work, but the rest takes care of itself, if you just stay the course!

Have you ever gone through the Three Kinder Questions with your spouse or partner? Did you find them helpful?  How did you determine your and name your goals? Leave a comment below.

TPP

I use Personal Capital to track the TPP Portfolio and Net Worth!  You should, too.  Check it out: 

Personal Capital

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