Thank you guys for coming to our session to learn more about personal finance from an expert and also a physician. Please silence your cell phones and we're going to be recording this, both audio and video, so no one wants the ringer going off. There's going to be evaluation forms for all of the sessions, which can be completed on the mobile app and the online agenda on the eventscribe.net website. Please remember to visit the PM&R Pavilion, which offers interactive resources and educational opportunities, including the AAPM&R Learning Center with complimentary hands-on education throughout the assembly on multiple topics, sponsored educational theaters, and the Cadaver Lab as well as an expanded Career Center session. Be sure to check out these new opportunities that are free to all attendees. Without further ado, I'm going to hand things over to Dr. Kent Hagen, who is a private practice physician in Arkansas. He was part of the team of physicians taking care of the Arkansas Razorbacks, not Arizona. Before that, he did his sports medicine fellowship and residency at the University of Pennsylvania in Philadelphia. During that time, he decided to go back to school and earned a Master's of Business Administration and Master's of Finance from Auburn University, and now he's going to talk to us about some of his knowledge. Thanks. All right. Thanks, Anne. So I've given this talk probably five or six times to the residents at Penn, and they always ask me back, so we decided to try and take it to a bigger audience. There's a lot more people here than I thought there'd be, but hopefully that's a good thing. So about me and introduce me, kind of bottom line, I'm private practice now in Arkansas. I used to be the Razorback team physician during prime COVID, which was kind of fun and kind of a nightmare, and now I'm happy just doing private practice sports and spine, but I do have a passion for finance, particularly personal finance and ensuring good financial education for everyone, but particularly physicians and medical students and early career people, or late career people. So our topics today, this talk is normally a two to three hour talk that we've kind of smushed down into about 45 minutes. So we're talking about investing in securities and what that means, student loans and some different student loan repayment strategies, and then touching quickly on life and disability insurance. So what are the basics of kind of finance and accounting? So I like to start with this quote from Robert Kiyosaki, if anyone's read Rich Dad Poor Dad, that is Robert Kiyosaki, and his whole mindset around things is rich people, and this isn't like a socioeconomic class, like judgment system. His whole mindset is rich people, whatever that means to you, acquire assets, meaning that they build wealth for that individual, whereas poor people acquire liabilities that they think are assets. And how do we think about assets and liabilities? How do we think about income and expenses? That really comes down to income statements and balance sheets, and you'll hear this in financial news, and a lot of people kind of just wave their hands, and like, yeah, I kind of understand income statements and balance sheets, but what is it? Income statements are really tracking the revenue and the expenses that either an individual has or a company has, and hopefully you end up with more income than you have expenses. A balance sheet, on the other hand, is tracking your assets and your liabilities, and in the name, a balance sheet must balance. So what are, at least in the Rich Dad Poor Dad example, which I think is useful for a lot of people, what do assets do? Assets create income for you, so people argue about, is a job an asset? I think for most people it's probably okay to think of your job as an asset, and that will produce revenue for you, whereas your expenses are, you know, your rent, your mortgage, utilities, student loans, if you still have them, all that sort of stuff. When we think about someone's personal balance sheet compared to a business, you know, your house, just like a job, people argue about, is that an asset? Is that a liability? Well, it's kind of both. Your retirement accounts, investing accounts, anything that creates passive income for you, so maybe you're one of these people who has a, you know, fancy TikTok or Instagram or whatever and you get money from that, you know, that can be passive income. Liabilities are anything that you've got to pay for, and in order to make that balance, you will have equity. So if your assets and liabilities don't match, it means that you have equity in something, so people talk about having equity in their house, that will help, or that makes the balance sheet balance out to zero. If you have even a moderate understanding of this, you essentially have a graduate degree in corporate accounting. So congratulations. Wow. All right, so investing and wealth management. They mean the same things. So this talk is littered with different quotes that I think are helpful for people. Morgan Housel, we'll talk a little bit about him later, has what I think is an excellent quote. A lot of people really get fired up about finances. Money is kind of a taboo subject, especially with physicians and just kind of in general. But a lot of debates actually don't reflect people disagreeing, but people playing different games trying to talk over each other. So the time value of money. This is the backbone of finance. I'll typically ask residents or ask people what's the most powerful number in this formula. And for the sake of time, it is actually time. So the number of compounding periods. Einstein, I'm sure people have heard this, the most powerful force in nature is compounding interest. And the more times that you can compound interest or compound returns, the higher that number will be. The second most important is typically your interest rate or your rate of return. But if you copy down this formula, that is the backbone of finance and you can solve roughly 90% of any sort of financial problem by plugging in variables to this formula. So more on that later. So investing, you'll hear a lot about people saying, oh, investing is dangerous, the stock market is a casino, and yeah, some parts of the stock market is definitely a casino. But when we talk about investing, or at least I talk about investing, I'm talking about buying something that you think will go up in value. And this chart has not been updated. We're kind of waiting for things to settle out with whatever's going on with the market now to get a better understanding. But essentially, if you invest in the total U.S. stock market, so that's generally accepted as the S&P 500, and just sit there for 20 years, 100% of the time you will make money. A lot of things that you see in the financial news, they're talking about, oh, what will happen in the next quarter, which is three months, so 61% of the time you might make money. In the last couple quarters, you definitely have lost money in the stock market, I certainly have. So with those two things, kind of personal wealth management, personal finances, the rest of this talk, or really all of this talk, is a mix of facts and opinions. Some may not apply to you. This is not individual financial advice, the SEC says that I have to say that. In general, the market will fluctuate, but generally goes from the bottom left to the top right, as we kind of showed in our last chart there. So investing is an effort which should be successful to prevent a lot of money from becoming a little. So risk, risk is another thing that you'll hear a lot with finance, and I think is something that is greatly misunderstood, both with financial problems, with medical problems, and from kind of the academic finance side of things, you think about risk, really it's just mathematical, in mathematical terms. So is risk bad? A lot of people answer that question, yes, but in my opinion, and kind of in the financial sense, risk itself is not inherently bad, but the inability to manage that risk is bad. So one example I'll say is, we take a risk any time I do an epidural injection. There's a one in whatever chance that something can happen, and I want to do everything I can to prevent that risk. So if I accidentally poke the cord, that's not good, but if I poke the cord, I'm certainly not going to inject medicine into the cord, I would not be able to manage that risk. So Christopher Cole, they write some kind of deep dive financial white papers, and this is a quote that really drives a lot of the way that I think about risk, if you try to take complete control of risk and say, I'm not going to take any risk with my money, any risk with what I do clinically or in my life, you will become enslaved. There's no such thing as control of risk, there's only probabilities. So what are the components of risk? There's a couple ways we can think about it, so the thing that's most common, that most people think about is downside risk, and this is the odds you will get hit by whatever the bad outcome is. In finance, that's generally losing money on whatever you invest in. But when we go deeper than that, there are two sub-components of that, really the average consequences of getting hit, so if I invest my money in the stock market, going back to our bar chart earlier, over the course of X number of years, what's the likelihood that I will not make money? But then also, what's the tail-end consequences of getting hit, meaning what is the worst possible thing that can happen if a bad thing happens to me? So if we're thinking about, I'm just going to buy the stock market for a day, there's a 52% chance that you will make money just investing in the stock market in one day, but the tail-end consequence could be like the 1980s where the stock market dropped 25% in one day all by itself. So understanding these components is very helpful. So the other thing that people don't think about is upside risk. So a lot of times, the biggest risk people take is never taking any risks at all, and you will see this a lot with people who say, well, I don't really know a lot about finance, I don't really know about investing, so I've kind of just been afraid and I've just kept my money in a savings account for 10 years or 20 years or whatever, and that power of that money has eroded substantially due to inflation. So when I talk to residents or talk to medical students or just talk to people in general about trying to understand or come up with a plan for their finances, I steal some from the QI people and tell them some is not a number, soon is not a time. You can't just say, well, I'd like to have more money 30 years from now so I can stop practicing or stop working, doing whatever they do. I find it's very, very helpful to say, I want X amount of money by whatever month and year. That way, going back to our time value of money formula, you can plug it in, you can figure out, well, I've got to save this much money every month or every year, or if I only can save this much money, what do my returns need to be and how can I set up my risk to do that? So especially for our medical students, residents, younger people here like myself, I really recommend setting up numbers and times that are hard and say, this is what I'm going for. All right? Of course, things can change, but you want to set kind of firm goals for yourself. Another part of this is that with investing or with retirement accounts, you're not trying to just not lose money. You're not focusing just on 0% returns. Generally, when we talk about safe investments or good investments, we're trying to equal or beat the market, which is also synonymous with the S&P 500 in the United States with an acceptable amount of risk. All right? So typically, that is going to be somewhere between 6% and 10% based on what data set you're looking at and what period of time you're looking at in terms of average return to the S&P 500. Inflation has generally been 2% to 3% a year the last decade or so, but obviously that has exploded recently, so that is a...the last six months has kind of shown us the importance of having some sort of return on your money. Yeah, you could have sat around the last 10 years and it wouldn't have really mattered that much because inflation is very minimal, but now that inflation is really taking off, your money doesn't go as far if you're not earning some sort of return on it. The third point of this goes back to the time value of money formula and understanding some basic to intermediate concepts and instruments. And the more that you can manage a portfolio yourself, and some people aren't managing it completely on their own, and we'll talk a little bit about that later, but as much as you can do yourself and do it somewhat competently, you have the ability to save hundreds of thousands of dollars over your lifetime. So beyond this talk were three sources or three things that I think everyone in this room should read. First, Psychology of Money was released in the last year-ish by Morgan Housel. It is not a talk...his book is not a talk like this where we're talking about financial instruments and investments and what a stock is. His is, kind of like the title says, all about psychology, behavioral finance, and how do you have a healthy relationship with money and investing and risk, and how do you figure that out for yourself so you can make the best decisions possible. White Coat Investor, I think a lot of people have probably heard of that, I think is a very good book to start with, especially if you're coming into this session having no idea what a stock is. You've heard of it, but you don't quite understand what a stock is. White Coat Investor is very good for that. I think he is probably a little bit overly frugal in terms of some of his savings recommendations, but maybe you could argue I'm just more aggressive than you should be. A Random Walk Down Wall Street is starting to get into more intermediate level finance, but it is still a very good book for beginners in terms of trying to make that next step once you kind of understand what some of these instruments are. Another tool, I think I've mentioned this a bunch of times already, but understanding what a financial calculator is, this website, along with dozens of other ones, have a free financial calculator, and like I mentioned before, your mortgage, your investing accounts, basically everything that you are going to be doing outside of some financial engineering stuff can be done with a financial calculator. Just putting in these basic things, you really can solve a lot of problems for yourself. So let's get to the real boring stuff, retirement accounts. A lot of people hear this gobbledygook of numbers and acronyms and all these different things, so what are they, which one's for me, and a lot of that kind of depends. So this is an old slide, but it'll still work. So a lot of people here have heard of IRAs, so IRA stands for Individual Retirement Account, and there are traditional and Roth IRAs. Traditional IRAs are funded with pre-tax dollars, meaning that you can deduct those contributions from your taxes, but when you take out this money in retirement, then the money is taxed. This is versus a Roth IRA, if you contribute after-tax dollars, and once the money is in the Roth IRA, the money is never taxed again, which is nice. Please ignore that $137,000. This is an IRA slide from a few years ago. That number has increased a little bit, but typically a Roth IRA is something that you're going to be able to utilize as a resident and a fellow and potentially an early career physician, but if you are married and you and your spouse or significant other both work, especially if one of you is a physician, you very quickly move out of the ability to do a Roth IRA. There is a way to do a backdoor Roth IRA, but Congress has off and on kind of threatened shutting that down. Both of these have advantages and disadvantages. Myself, my pendulum swings back and forth as to whether the traditional or the backdoor Roth is more useful, but this is certainly a backbone to a lot of people's retirement accounts, and I highly recommend that you utilize one of these. You also need earned income during the year, so you cannot set up an IRA for your children. You can set it up for a spouse who does not have earned income. It is a little tricky, but in general you need earned income as an individual to set this up. I wish I could set one up for a two-year-old, but we cannot. Other investment accounts, taxable accounts, that's going to Robin Hood, going to Charles Schwab, going to whatever, and just putting money in it and starting to invest in stuff. They were taxed based on your income and leaked some investments with the taxable account, so it's long-term versus short-term. The rules are a little bit beyond time that we have in keeping people awake, so that is where a lot of people, especially as physicians with higher incomes, you will have at least some money in a taxable account. 401Ks, 403Bs, these are accounts that are typically set up through a workplace, and whether it's a 401K or a 403B depends on the type of institution that you work for, for-profit, non-profit. Again, some rules beyond what we have time for today. 401Ks, 403Bs are extremely powerful, they are extremely nice, because generally your employer will match a certain percentage or a certain dollar amount of what you put in. That means you have a 100% return on your investment, which is almost impossible to beat or is impossible to beat anywhere else. So if you have access to a 401K or a 403B and your employer matches anything, and certainly if you're a resident or a fellow, those rules will change. Where I trained, I don't think they matched anything, so I didn't really worry about it, but if you have access to that, do it. It's hard to beat 100% return on investment. The biggest downside of 401Ks is that you typically will have a limited number of options of what you can invest in, so we'll get to some of that later, but generally you'll have a list of 8 to 10 ETFs or mutual funds that you can invest in, and you don't have the ability to use this money and invest in individual stocks or do some other fancy stuff if you're so inclined. This is a my opinion slide, so the most efficient pathway for funding these accounts and saving for retirement really shouldn't be 1 and 2, but 1A, 1B is the Roth or individual IRAs and the 401K, 403Bs. It really should be your goal to maximize both of these things. Anything beyond that goes typically first into a 529, which is a college saving instruments for your children if you have that, or a health savings account if you have an eligible insurance plan, and then finally, whatever's left, if you still have money to save, save it, put it in a taxable account, put it somewhere that we'll talk about here in a second. Another commercial break for some quotes, again from Rich Dad Poor Dad, profits are made when you buy, not when you sell, so you don't want to buy at the top of a bubble. You don't want to buy at the top of the market. No one's perfect in terms of timing, but profits are made when you buy, not when you sell. The one in blue is a quote I certainly live by. Stocks always go down faster than they go up, see, the last six months, but they always go up more than they go down, all right? At least this is true in America, certainly other places around the world. Those individuals have not been as lucky, but in America, this has held true since the stock market has been a thing. Portfolio construction, a lot of my masters has been focused on that or was focused on that and how do we do this most efficiently with the best balance of risk. There are really six main categories, so equities, that's what everyone hears about, so individual stocks and ETFs, and we'll define those here in a minute, bonds, the other four things are much less common, so you have commodities. I do warn you, if you're not super familiar with this, don't go trading a lot of commodities. I did have a friend in business school who had to take delivery of five barrels of oil, so they will call you and say, here's your oil, where should we drop it off? Then you're stuck with barrels of crude oil in your backyard, so be careful if you want to go down that road. Generally, buy commodity ETFs, there's ones for oil and soybeans and all sorts of nonsense out there, so if you want to do it, do it that route. Precious metals, so gold, silver, platinum, you see commercials for buying gold coins and all this sort of stuff, again, there's ETFs for that too, so cash, it's typically recommended that you hold at least some cash, some liquidity in your account, and then crypto, I am not a huge fan of crypto, maybe I'm too old to understand crypto, I think it has a place potentially as a store of value, but we will not really, certainly if people ask questions, I'm certainly happy to try and answer them, but we will not really be touching on crypto that much. So what is a stock or what is a share? For this talk, I'll just use them interchangeably. So a stock or a share of a company is a small ownership stake of that company. So at the making of this talk, if you buy one share of Apple, you now own 1.16.3 trillionth of Apple, so you're not just kind of buying some nebulous thing, it's actually one share of Apple. So the other thing a lot of people get confused about or don't really understand is that the dollar amount per share of a company has no bearing on the goodness or badness of that company. So the share price is purely a mathematical thing of the market value of that company, generally defined as the discounted future cash flows of that company, which again is beyond the level of this talk, divided by the shares outstanding. So take Apple, for example, a trillion dollar company, say Apple had a billion shares outstanding, that'd be $1,000 per share. Say we had a much smaller company, $10 million in market value, but they only had 10,000 shares that were available for trading, that would also be $1,000 per share trading price. Doesn't mean that the $10 million company is a bad company, or that the trillion dollar company is a good one, but it's just purely a function of this formula, all right? There are a lot of rumors about, oh, this price is that, and all these other things. Companies manipulate their stock price all the time. For example, Amazon split their stock earlier this summer. There's some academic evidence that it helps bump the share price for a little bit because it lets smaller investors buy those shares. So if you don't have $3,000 to buy a share of Amazon, but they split the stock and it goes down to $100 a share, then hey, it's a whole lot easier to buy those shares now. So in general, if you're going to go the individual stock route with your portfolio, then we recommend having, or at least I recommend, holding at least 25 high quality companies, which means don't go buy a bunch of penny stocks, don't go buy 25 different software companies. Buy some old boring companies like 3M and Johnson & Johnson and Nike or Amazon or whatever and then yeah, maybe have five or six or eight kind of high flyer companies like Snowflake or CrowdStrike or Roku or those sorts of things. What is a bond? So this is something that a lot of people really don't know about. The bond market is tremendously large, somewhere in the magnitude of like 100 times bigger than the stock market. So a bond, you basically give a company or a government a certain amount of money, typically sold in $1,000 increments, and they pay you a certain percentage of that money every year. Sometimes they'll pay you every quarter, sometimes they'll pay you every six months, but typically at least once a year you're going to be getting some payment on that. So if you buy a 10-year treasury bond, the interest, I didn't change these slides since the interest rate went up here very recently, but say it pays 1%, you're going to get $10 a year from the government. And then at the end of that period, you get your $1,000 back, all right? And you earned $100 along the way. Generally, it is recommended that you invest in AAA, AA plus, or AA bonds. These are considered extremely safe, meaning that it is very, very unlikely or mathematically impossible that the company or government will go bankrupt during the lifetime of that loan. This essentially allows for a guaranteed return, and bonds are typically used as a risk hedging device or mechanism during market downturns. However, for various reasons, the bond market and stock market are synonymous with each other right now, so everyone's kind of losing money. Big disadvantages with bonds, there's something called interest rate risk, which is really hurting the bond market right now. So for example, you bought a bond at 1% and they're paying you $10 a year. And guess what? A couple months later, those interest rates are 5% and they're paying you 50 bucks a year, no one is going to be interested in buying your 1% bond. Bond markets, or bond prices, are variable, so eventually the market kind of evens out a discount for your 1% bond. But if you are trying to trade these things, there's significant interest rate risk, and then there is time risk. That's kind of for some more complicated instruments. If there are bonds that cannot be traded easily, you end up tying up a bunch of your money in this bond, and you can't get your money back until the bond runs out. So portfolio construction, how do we put these things together? So typically, like I mentioned before, the stock market returns, the best data sets I look at, 8 to 10% since 1930. Bonds have typically yielded 1 to 4% over the last decade, really even kind of before that, really since the really high interest rates in the 80s. Typically, the portfolio ratio of stocks to bonds that you'll hear about, again, my opinion, bullet point, if you're under the age of 40, your investment in stocks and your investment portfolio should be somewhere between 80 to 100%. Bonds should be 0 to 10%, and then gold or cash or some other precious metal that's fairly liquid should be, again, 0 to 10%. So ETFs, I don't think I defined that earlier, but ETFs are exchange-traded funds, meaning that someone is doing the hard work of mimicking some benchmark. So at the bottom there in blue, SPY, that is, I believe, the largest ETF that's out there. It mimics the S&P 500. So the people at SPY buy and sell stocks all day trying to make a perfect mimic to the S&P 500. By buying the ETF, SPY, you will basically mimic that with a very minimal management fee that they put on, typically less than 0.1%. Some of them have even gone to free. I think Fidelity has a few totally free ETFs. And if you're getting something that's, like, pretty basic, like just mirroring the S&P 500 or mirroring the NASDAQ, which is typically tech-related stocks, then that's perfectly fine to have something that is free. If anything, that's probably better. BND, that is a bond ETF. That is a little bit more complicated for them to manage, but in your standpoint, you will get dividend payments typically every month from a bond ETF. So that's kind of nice if you're interested in trying to have a little bit of a payment to yourself every month if you need that at some point. So in my opinion, 2022 is the best time ever to be an individual investor. While a lot of people are hurting and there is a potential for things financially to get much worse, we have the tools now that the individual investor can be very, very powerful in what they do and do things very, very cheaply. So mini-brokerages, you can trade for free now. It used to be $50 a trade. So if you're starting your investing journey and you only have $200, $500 to invest, and you pay $50, that's 10% whack right off the top. It takes a lot to build that 10% back. Some of these even allow trading of partial shares, which is nice. So why free? Typically, it's free because you are the product. Your trades are typically sold to high-frequency traders that either take the other side of your trade or act as middlemen, drive up the price a penny or two, and do that millions or billions of times a day, make a lot of money off of you. But what you see is that the price goes up a penny or two. Some people get really fired up about it. I say, what are you going to do about it? It's not illegal, at least not right now, the way they do these things. So you're not going to be able to fight it that well. So say all this is really complicated and you don't really want to mess with it. So you want a financial advisor or you want someone who's good or knows what they're talking about. There are three things that I would recommend you asking a financial advisor, and I would recommend them having a long-term measure of especially the first two things. So one is alpha. Higher the better when we're talking about alpha. And alpha is a measure of excess return given the risk of the portfolio beyond the market and risk-free returns. So alpha is pretty easy to measure. You can look up how to calculate it yourself, and you could do it in probably 30 seconds. The Sharpe ratio is a little bit more complicated. The Sharpe ratio alpha, excuse me going back to that one more time, is measured in percentage. So if your alpha is 6%, that means you're, given the rate of risk that you're taking, you're outperforming by 6% what the expected return would be on that portfolio. The Sharpe ratio, on the other hand, is a unitless measure unless you can understand percentages per standard deviation. It's something the finance world just kind of came up with, or more specifically Sharpe came up with. And anything over 1 is very good. Anything over 2 essentially is non-existent outside of maybe 3 or 4 individuals. And then you also want to find their advising fees and any sort of expenses. If they can't give you these numbers or they are very hesitant to give you these numbers, either they, I would question how good they are at their job, or question are they kind of, are they scamming you a little bit. So Fred Schwed, real name, real person, I couldn't believe it either, but, you know, figures. It's like the similar quote, you know, there's lies, damn lies, and statistics. Same thing with finance. This quote's pretty long, but at the end says, look at all this, look those are all the bankers and brokers yachts, where the customers yachts, ask the naive visitor. So be careful who your advisor is if you're going to go down that road. All right, so there are multiple ways to pay for the privilege of being advised. So the old-school way, percentage of assets. Again, old-school way was 1% of all assets under management. Now if you're starting off with, you know, $10,000, $20,000, not that much, but if you're getting towards the end of your career and they're charging you 1% on $10 million, that's quite a lot of money. And just because there's more zeros and more commas doesn't really make your life that much harder to make those trades. I mean, if you get into billions of dollars, then yeah, it takes a lot of work to move some of those blocks of shares, but unless anyone here is a billionaire, you probably are never gonna have to worry about that in your lifetime. This causes a significant drag on overall returns, and we'll show that here in a slide or two. The more new-age way or way that individuals are kind of driving asset management fees is a flat fee. This is what I recommend. Meet with someone every two, three, five years. Make sure you're on track. Make sure you're not doing anything real stupid, but it is steep up front, but it is something that, get a good plan, get your specific numbers and timing and everything else, and if you have a good flat fee advisor, someone that you have on retainer that you can meet with them, you know, two hours a year for, you know, $1,000 a year, then that is something that is going to be much more valuable in the long run, even though it's expensive up front, than something that's going to be 1% assets under management. So, going back to our good old formula there, our two examples, so we have a young physician, places $10,000 in retirement, adds $10,000 per year over the course of a 40-year career, earns 7% on his or her investment activity, gonna end up with $2.1 million at the end of that. Not bad for investing $400,000, all right? Co-resident has the same savings, but it's too busy, doesn't want to deal with it, pays 1% annual fee on the same returns, ends up with basically a $500,000 difference on investing just $10,000 a year over the course of a career, all right? So, there's a lot of stuff you can buy for $500,000, you know, so, you know, think about it, you could buy a MIG and, you know, go fight for Ukraine or Russia, whichever side you're on for that. So, should you trust anything I say? My, I don't know, returns are good, not trying to brag, but I don't know, I feel like I know what I'm doing, so maybe you got something useful out of this. So, how do I get rich quickly? You don't, unless you take extreme risks or you have superior knowledge, which is called insider trading and is generally illegal, unless you are a congressman. So, excess returns equals excess risk. There's really not any way around it, the financial world is trying to be doing, or they've been trying to find alchemy for, you know, hundreds of years and we've still not come up with it. So, especially for early career people, it's very difficult as a medical student, that's certainly, I think, it's a reasonable goal as a resident to try and start saving some percentage of your income per month, whether it's 5% or 10% or 1%. If it's, I'm just going to put 50 bucks in a savings account, you know, I'd recommend investing that as much, as best as you can, but setting up the habit is a very powerful thing. And if you're just used to paying yourself first, then in the long run, when you start getting more commas or more zeros at the end of your paycheck, once you are not a resident or a fellow, it will be much easier to continue doing that. The awesome thing that you have as physicians, that a lot of other people do not have access to, is that since you're physicians and you typically are going to be in the upper 10%, 5%, whatever it is, of income earners in the world or in the country, the ability just to save larger sums of money than other people can make up for a lot of mistakes that people do. And it's something that can be very, very powerful, not only for yourself, and we'll touch on it later, but for other people. Last thing on here, banks, financial advisors, they make all their money on fees, so the more you can reduce your exposure to fees, the better off you're going to be, all right? As our previous example, you know, 1% a year can really get you, all right? So some of this is a personal soliloquy, but medicine versus finance, very different kind of mindsets, at least in my experience, in my training. In medicine, we want to be a hundred percent accurate. We want to be a hundred percent accurate with both diagnosis and treatment. We do a good job at tearing each other down, in my opinion. You, you know, we're getting rid of a lot of malignancy, but being wrong in medicine can be painful, not only on a personal level, but you certainly can hurt people also with medicine. In finance, the best investors of all time are accurate 60% of the time. So I see a lot of physicians who are, oh, I got to be 100% accurate, I got to do it right. If I lose money, I must have done something stupid, or I messed up. No, it's fine, like, you're gonna lose money 40% of the time, and that's, if you're in the Hall of Fame, you know, that's like Warren Buffett level investing. So, you know, it's okay that you're only 50% accurate, because unless you're using leverage or doing something really wacky, the most you can lose on some, or the most you can lose on an investment is what you invested, but the most an investment can go to is, who knows, infinity dollars, if that exists. You know, if you bought Amazon when it was four dollars a share, and now it's split a whole bunch of times, and it's $300, you know, there's a lot of folks who bought $50,000 and are now millionaires or billionaires because they had small investments in Amazon and just sat there and held on to it. So life insurance, some of these last ones I'll zoom through a little bit. My opinion, whole life is a poor investment. Term life, I think, is much more useful, especially if you have dependents, so if you have a spouse or children. I have a laddered policy, so if I die before the year 2030 or 31, my family will get six million dollars because I have a 10, 20, and 30 year term life, and then that kind of goes down each decade. I went through insuringincome.com. This isn't necessarily a, you know, advocating for them, but it was pretty easy. All right, student loan repayment. Again, this is more my opinion. I do not really like the FIRE movement. I think it is a bit fatalistic. I think we have duty as physicians to care for patients, and if we have the skills and knowledge to do that, I think we should do that for as long as we were able and willing to do that. So I do agree with the FI part of this. I think financial independence is very, very important, and I define financial independence as doing what you want, when you want, with whom you want. So if you get to the point where you say, yeah, I don't have to work five days a week. I can just work three, and I'm financially independent and can handle that, then awesome. But I am not a huge fan of the hardcore FIRE movement. Student loans, the point I want to make here is learning to live with debt is something that can help you in the long run. So a lot of this comes down, at least in the finance or finance mathematics, comes back to inflation and the power of a dollar. So if you buy a new car in 1970, it's $5,000. Now that same car is $30,000 or $35,000. So you're using less powerful dollars to pay off older debt, and ultimately, as long as you are getting cost of living increases at your job and or becoming more busy or more efficient or making more income through whatever means you have, then you are having a lower and lower percentage of debt to income and paying off more powerful dollars with less powerful dollars, which is more good for you and less good for the government or the bank. But we're looking out for ourselves with this one. So we'll skip kind of to the end. In my opinion, it's best on the individual level to keep or find a way to reduce your payment per month to be as low as possible, keep your interest rate as low as possible, and then basically pay extra on the loan if you see fit. Some people really like the Dave Ramsey method in terms of like the snowball method where you pay off the easiest thing to pay off first and you feel good about that, so then you get inspired to go pay off more debt. I think that's perfectly fine, but in the purely finance mathematics way of doing this, kind of keeping the lowest possible interest rate in payment, as long as you have somewhat of a guarantee that your income is going to go up and up, is the more mathematically accurate way to do this. So let's see, this is a little bit beyond what I wanted to talk about today and is there for the residents. If they have interest, the one part of this I did want to touch on, which really helped me coming out of fellowship, was get specifics no matter what. So part of my contract was they'll consider me to be partner, they'll consider this, and the lawyer that I had read over it was, you know, what is considered? What does that mean? You know, your partners can consider, nah, we're not going to make you partner, and like, what are you going to do? But I considered it. So make your contract as specific as possible, especially if you have the flexibility to do that. I know some big health systems are like, this contract, take it or leave it, and you may not have much wiggle room there. The other thing, like I mentioned, get a lawyer. I'm in Arkansas, things are generally cheaper there. I paid about $500 for a lawyer to read or review the contract, so we went through kind of two or three iterations of it. I didn't get any more salary out of it, but it did certainly protect me with one or two, one or two situations that came up my first years in practice, and was well worth the $500. Other early career advice that I have for our medical students, residents, I'm certainly still early career, so by all means I'm not a master at anything, but our practice kind of runs on this motto, availability, affability, ability. If you can master these things, then you will be well-liked and well-respected and very busy in your community or in your health system. Being in private practice, it's really easy that if a PCP or an athletic trainer or whoever texts me and say, hey, this kid, you know, tours ACL or, you know, I think someone has acute radiculopathy, I'm just like, yeah, sure, come on over right now, we'll see him, or we'll see him tomorrow. I know that's a lot harder in some bigger health systems, but if you can find a way to make yourself very, very available and double book here and there and get people in, your referral sources will be very happy with you. Affability, just be nice to people. It's hard sometimes, but just be nice, like patients don't sue doctors that they like and are nice to them, you know, we all mess up sometimes, things go bad sometimes, but just be nice to people. And finally, like your ability, like we all want to be rock stars, we all want to be, at least in my institution, as good as Adrian Popescu in terms of our needle skills and injection ability and everything, but if you're available and you're really nice and you're at least an average doctor, like they're gonna send people to you and you're gonna be able to help people and when you admit, like, hey, this is beyond my skills or I don't have this or I don't feel comfortable with this, but you can offer them someone that you trust for a second opinion, you're doing very, very well for yourself, in my opinion. I don't do stimulators, I try and help people if I don't think I can help them anymore and I think a stent would be a good option, I send them to one of my colleagues in a different practice down the road and vice versa. I do some things he doesn't and it works out. So this last slide, in my opinion, you've done the hard part. If you can graduate medical school or you're hopefully almost graduating medical school and you're a resident and you're doing all these things, you've certainly done the hard part. Don't squander your financial potential. Even if you don't want to be personally wealthy, having money that you can give to causes that you care about, whatever that cause might be, they would greatly appreciate that support and you have the ability with your skill set, your knowledge, if you do things somewhat correctly with your finances, that you can make tremendous benefit in people's lives and I think that's the driving factor that I have for my passion for finance is high earner physicians can make tremendous impacts, not on individual levels with patients, but you have the ability to be somewhat wealthy and then use that money for good and that's why I hope all of you have learned something and have some little more healthy financial livelihoods down the road. Any questions? Can I ask a question? Oh yeah, of course. My name is Vincent Ma. Nice to meet you. Do you have any thoughts on prioritizing a financial advisor versus an accountant or should you expect any overlap between those two? Sure. In my opinion, if you're, if the only thing that's bringing you income is your paycheck or your salary at your job and you don't have rental income or you don't have anything else, hiring an accountant, probably not necessary. I'd focus more on saying, all right, let me find a flat-fee financial advisor that I trust or that would do a good job for me. Now, if you do have a lot of rental income or you have other kind of passive income streams coming around that you have to keep organized, you own a small business, then yeah, I would lean more towards an accountant helping you with things compared to a financial advisor because you certainly can screw up your taxes really easily. The more complicated things get beyond just having a paycheck and that's it. All right, very good. Let's go have fun tonight.

session introduction

personal finance

investing

wealth management

investment accounts

portfolio construction

life insurance

financial independence

medical practice