“It is the task of the enlightened not only to ascend to learning and to see the good but to be willing to descend again to those prisoners and to share their troubles and their honors, whether they are worth having or not. And this they must do, even with the prospect of death.” -Plato
In Plato’s The Republic, the Allegory of the Cave teaches an important lesson. In it, Socrates provides a story of people who have always existed as prisoners who are chained-up and must stare at a blank wall in front of them with their heads transfixed. Behind them sits a fire and as objects pass in front of the fire, they cast a shadow on the wall. To the prisoners these shadows are their reality. They give them names and meanings. At the climax of this allegory, a prisoner is freed and is forced to discover the objects that had been casting the shadows that they had come to know. At first, the prisoner is scared because the fire is blinding to his untrained eyes. Eventually he comes to realize his prior reality was not a reality at all, but simply a reflection of the true reality. He then goes back to the cave to teach those what he has learned. This is the Platonic Creed: Teaching Others.
The allegory ends differently than one might suspect (the other prisoners not yet free want to kill the freed prisoner for fear of being blinded by the same fire), but it teaches us an important point. For those of us who have “seen the light,” we realize that the financial shadows that dance on the wall are created by the industrial machine that wants us to believe that personal finance is too hard to do ourselves. We are seized by talk of technical or fundamental analysis, but then we realize there is an easier way. Once we are freed to realize that we, too, can perform DIY Finance; it is our responsibility to go back and to free the other prisoners. I wouldn’t take it as far as Plato, and encourage you to do this even unto death…but it is extremely important.
This is the Seventh Philosophy: A Responsibility to Teach Personal Finance
Why is it necessary to teach others?
I would place a wager that most people who are going through medical school, PA school, dental school, etc are like I was when I was in training. They are working hard to prepare for exams or learning on clinical rotations. With each day, they are trying to hone their clinical skills and prepare for big exams like the USMLE Step 1 or the NBDE. The problem is that while you are fighting the good fight, interest never leaves you. A very famous quote by J. Reuben Clark, says the following,
Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands nor orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.
The point is this. Most people who are in training are of a single mindset: “Right now, my job is to learn. I’ll focus on the financial stuff later!” I remember thinking when I was in training that any debt that I accrued was simply a “drop in the bucket” of my total debt. Who cared? My future self was going to make enough money to pay it off! Shoot, I am gonna be a doctor [my wife’s friends love to remind her of that; it drives me crazy].
If someone had taught me about how to minimize the impact of student loans, how to refinance student loans during residency, or that forbearance/deferment were a terrible option…I would be in a vastly different place. My debt likely would have been 2/3 of what it was when I finished training.
As an attending academic anesthesiologist, I also must say that I feel it is my responsibility to teach my residents about personal finance. If I left this part of their education out, I would feel like I failed them. Debt can be crushing, and it often is a component of the burnout that health-care providers experience. If you are an attending physician in academics, I would just say what Bill Belicheck says, “Do your job!” Even if you’re not in academics, but you’ve seen the light of personal finance, teaching others about personal finance is now part of that job, too. At least Plato would say that it is, and he was a pretty smart guy.
The problem is not unique to training
I can’t tell you the number of people I work with that are incredibly smart and talented attending physicians, yet know very little about personal finance. Interestingly, this group can be separated into two different groups utilizing the Allegory of the Cave above. 1) The prisoners and 2) The Free.
The Prisoners are those people who even when shown the financial industrial machine and the fact that they are losing money to fee-based advisors via Assets Under Management, commissions/fees, and being placed into actively manged mutual funds… they balk and say, “But I like the shadows on the wall! I don’t want the fire to blind me. I know what I am doing!” This group is extremely frustrating to deal with. Likely you are not going to make any impact on them until they see the light for themselves. I don’t waste much time here. A wise person once said, “Do not cast your pearls before swine.”
The Free group clings to the truth once they hear it. They want to know more, they want you to help them, and they are excited that someone finally told them the truth! This group, while smaller than the Prisoners group, makes these talks worth all the while.
How do we teach them?
Well, I give people the same advice here that I do on my Do-It-Yourself Personal Finance page. This boils down to the following advice:
- Read one or two books. I usually recommend Boglehead’s Guide to Investing or the White Coat Investor Book as first books to read. If you want some more depth into why I advocate for the buy and hold into low cost index funds, you can read A Random Walk Down Wall Street. These books provide a solid base. [I actually give the White Coat Investor book to my resident advisees].
- I recommend people follow a couple personal finance blogs aimed at their personal situation. I hope that one of these is The Physician Philosopher, but there are many other great websites out there, too.
- From these books people will realize that investing is not difficult and will be able to start making smart financial decisions for themselves. Investing in low-cost index funds, insuring themselves properly, minimizing debt, refinancing loans, making wise budgeting decisions, living like a resident after training.
So, take it from someone who wishes they had known what I know sooner! It is imperative to let others see the light. This way they can reach financial independence through the tools that are provided to them. They first must know that they exist. No one needs to keep looking at the dancing shadows on the wall. Instead, I encourage you to teach others. If you have benefited from learning about personal finance yourself, then free the prisoners that are our friends, loved ones, colleagues, and trainees.
What do you think? Do these conversations often go well for you? Are they challenging? Do you feel any ownership to teach others what you’ve learned? Leave a comment.
1. The first thing to do is open a brokerage account and fund it with some money, even $1000, better $5000 or $10,000. Do that before reading books or anything. It’s time in the market that makes you rich and the real impediment is having a million other things eating up your money. From a brokerage account you can open subsidiary accounts like Roth’s etc. Open one for your wife too. If you have real cajones put your $1000 or $5000 into VTI. That buys you into the future. You can always add and rearrange things later but you can’t go wrong with VTI to get your money machine running.
2. Realize you will need a plan if you’re ever going to retire. Realize owning stocks makes you the owner of businesses, so in some respect you become the owner of the country in a very personal way. In owning stock you are making a bet on the continued successful future of America. If you’re willing to go 1/4 mil in debt to become an american physician PA etc, but you don’t bet positively on the future then you’re a moron. Don’t be a moron. If you already did #1 it’s proof you’re not a moron. Look at a max chart of VTI and see it goes from lower left to upper right. It bobbles around but its climb in value over a long time is relentless. More proof you’re not a moron. You’re not going to use the money for 20-40 years so just let it grow. The longer you are in the more it returns to you. The only way you loose money in this period is to sell prematurely (especially in a market downturn).
3. Read a book or two, but understand reading a book is the beginning of knowledge. There are a lot of approaches but if you’re not in the market you’re out of luck.
4. Add money to your pile as much, as often, as early, as you can. A dollar you put in at 6% return yields $10 in 40 years. 1 dollar is principal 9 dollars are your profit for being a faithful owner. 1 dollar in for 20 years yields only $3.21 of which $2.21 is your profit. 1 dollar in for 10 years $1.79. The lesson is obvious. It’s all about time in.
5. That’s the plan in it’s essence. You can diversify, you can guild the lily as you get smart. I suggest you do gild the lily. So what can this plan yield?
$1000 per month ($12,000/yr) invested in this way for 480 months is $2,000,000. $2K per month is $4 million. 30 years $2k per month is $2 Mil, 20 years and 2K is just under 1M. Imagine you put in $5K per month for 30 years (a normal practice lifetime), $5M. If your making $30K per month it’s not hard to stash $5K. Notice I didn’t say boo about debt and McMansions all that. The first thing you do is pay yourself EVERY MONTH to be an owner. You can retire your debt and manage your lifestyle on the remaining $25K, or $15k or $50K or whatever. This is how you get rich as hell. I’m rich as hell. If you’re willing to live on less you can retire earlier, having money gives you that freedom, but not becoming an owner today assures your failure
I agree with much of what you are saying, and actually plan on writing some primer posts for students, residents, and fresh attendings.
That said the reason this post is laid out this way is because (just like anything else) you want someone to have some buy in to the idea. If I tell them what to do, but don’t tell them why it’s not very helpful. I think those books above, which are pretty short reads, do a good job of explaining why.
I truly agree with what you are saying in getting into the market early and time being extremely important. It’s all about your savings rate early and then time and compounding interest thereafter. Paying yourself every month in order to accomplish this is solid advice, for sure.
I’m not critical of your approach. The problem is inertia. The problem is the energy hump. If you recall the Gibbs free energy equation delta G=delta H-T*delta S, free energy happens when delta G goes negative. delta G goes negative (the energy hump is breached) only when the product of temp and entropy is greater than work.
The buy in is future value. The buy in is compounding. The buy in is free money. In my 30 year 5 million dollar example interest accounts for 64% of the money. Principal accounts for only 36%. That is where -T*delta S overtakes work.
Here is the buy in
The pie graph tells the story. Use months and not years ie 20 years = 240 months and use interest/month ie 6%/yr = 0.5% per month. Put that sucker up on the screen and play with some numbers. Eyes will pop out.
This demonstrates time is wasting if your not engaged and there isn’t a minute to loose. There is no perfect investing method, so just do something that makes sense NOW. The nuts and bolts like a setting up a brokerage is taken care of.
I hear you. In fact, I wish I had heeded that lesson sooner myself. When you really wrap your mind around compound interest and how incredible it is, you don’t want to waste a second more. You just want to get on the compound interest train.