Pause, Plan, Pivot to Overcome Financial Mistakes with Dr. Bill Yount

Pause, Plan, Pivot to Overcome Financial Mistakes

Leave Past Financial Mistakes Behind

If there is one thing I know for sure, everyone has made financial mistakes. 

Sure those financial mistakes cost you money, but they can also teach you important lessons!

They can if you use them wisely. Hindsight will give you a clear view, and time to acknowledge your missteps. That is when you have an opportunity to right the course!

The question is where to begin?

There are so many ways to think about money management

There are multiple components in the creation of a working and successful financial plan. 

Subscribe to the Financial Residency PodcastThe mindset and systems behind our money are evolving all the time, but today I want to write about some of the big financial mistakes that you could potentially be making, and how the idea of pivoting will help you overcome your financial mistakes. 

You must pause, plan and unwind to overcome financial mistakes.

You can’t just put your head in the sand and pretend that it didn’t happen!

Celebrate Your Good Decisions

First…Let’s acknowledge the good decisions you are making (or you’ve made). 

One of the best decisions you can make is going to a state school. There you will find that medical school tuition is substantially less than at a private institution. 

Are you applying for grants or writing for scholarships? The savings are more than worth the effort. 

Are you keeping the endgame in mind? That is keeping the amount that you will have to pay back at the forefront of your mind?

Are you controlling financial mistakes in the form of consumer debt racked up during residency? 

The problem with debt is that it breeds anxiety, dissatisfaction and in some cases suicide. 

Let me just say it has a negative impact, but there is a psychology around deciding to kick debt to the curb! 

One method of getting having control of your debt is to reduce the amount that you borrow. Take only the very minimum that you need for living and education-related expenses.

When you are ready to pay off your debt one of the methods you might choose is the snowball method.  

You start with your smallest balance (while paying the minimum on your other debt). Once your smallest balance is paid off you work on the next smallest amount. 

There will come a time when all of the money you were putting toward the other debts is focused on the largest debt!

You are looking at debt freedom. There will be a huge weight lifted off your shoulders!

When the average in student loan debt is nearing $300,000 you’ll be glad of all steps you are taking to crush debt before it starts.

Keeping the end in sight will save you a hefty amount of cash and stress.

First Steps

I need a reward.

When you are a resident working untold hours during a single week, it’s easy to get caught up in using credit to pay for things your future self can’t afford. 

There are too many revolving credit card deals to cement any impulsive shopping sprees you might indulge in. 

At this stage of the game, there is probably a lot you need to learn about debt management and delayed gratification.

As you are finisThe Dreaded B-Wordhing residency, you might be considering marriage. Being newlywed may lead to thoughts of buying a house.

Hold it right there!

You might want to consider the impact of adding new house debt on top of student loan debt. A house has debt-equity and doesn’t grow for you. 

Then there is the added fact that because this is your first job, you could easily decide that you want to move in another direction. 

It’s better to ease into your first job without the ties that bind (in the form of a mortgage). Renting is an option until you are sure that you are in a position to make long-term plans.

This frees you to focus on crushing your consumer and student loan debt.

Fees, Fees, and More Fees!

You’ve just come out of years of a grueling schedule of medical education

You feel like you are done with being deprived. Without a plan, you could succumb to lifestyle inflation. That might feel good in the short term, but in the long-term, it can be devastating to your future. 

  • Do you want to avoid the hand to mouth, paycheck to paycheck existence?
  • Are you coming out of residency with a plan for your first paycheck?
  • Are you trusting your money to an investment banker?
  • Do you prioritize putting money into savings?
  • Do you have a mentor?

I’m going to put the dreaded “B” word (budget) out there, which is especially important when you are dealing with a smaller income and working to pay down debt. Having a plan in place creates parameters around your finances. A budget is you telling your money where it’s going to work for you.

You’ll see the benefit of the “B” word when your pre-funded accounts for trips or major appliances are needed!

As your debts are paid down, and your income and investments increase you move into another realm of cash flow handling and planning. 

This is when you might reach out for help!

Are you throwing some of that hardwon money into an investment advisor or financial planner?

Instead of making the financial mistakes of misunderstanding costs, high expense ratios, advisory fees, and embedded fees. The fees add up. You’ll be paying them more than you know, so it’s a good idea to learn the language of finance. 

It’s an even better idea to understand their plan for your money. That might include finding a trusted mentor who is experienced in navigating finances and will help you avoid financial mistakes. 

You don’t want your money siphoned out of your pocket.

You do want your money to work for you and compound.

You could use a fee-only fiduciary advisor, preferably one who likes to educate clients along the way, who will charge a reasonable and equitable fee for their services.

Remediate Your Financial Life

What if you’ve already made financial mistakes?

There is still a way to come out financially free and fit.

How?

Living The Good Life with Deferred GratificationFirst, you pause, and ask yourself: In which direction do I want to go?

Second, you create a detailed plan: Where do I want to be in 5, 10, 20 or 30 years?

Lastly, you pivot in that direction and take action (which is not always as easy as it sounds)!

One idea is using geographic arbitrage. Essentially you move to an area that has a low cost of living. 

Because there is a demand for physicians even in remote places, you’ll still have a great salary. The difference between your salary and the lower cost of living is where the benefit is.

You can increase in the areas of investing and savings.

It can give you a leg-up on building your wealth

Skip the Bad Advice and Salesmanship

There is a sea of financial advisors hanging out their shingle and offering advice for a dime, and there are a lot of slick sales people giving out poor advice. 

That might lead you to DIY. 

DIY might work if you enjoy research and want to spend your free-time pulling a plan together. 

Afterwhich, some people may want to hire a good fee-only financial planner who can answer questions, such as do I have what I need to retire? There is always a bit of comfort in having someone verify the work you’ve done!

However, another option is financial planning tailored to your life. 

Let’s look at how that works!

Financial Planning Done Right

Where do you want to go?

What dreams do you have?

How do you plan to reach your goals?

Do you know what type of life you want to live? Why?

As a fee-only financial planner and registered life planner, I believe financial future done right is all about answering those questions. It isn’t all about how much you make and what your investments are. 

Most financial planners have don’t usually talk about what you want out of life. What will make you happy and how to reach your goals. We’re not truly trained that way. That is the reason why I look at this and do it this way, is because of George Kinder and his training. 

He poses three in-depth questions that I ask my clients and there are other exercises that he created that I do with clients. 

I want everyone to think about their life and money differently. There is an emotional and behavioral piece that affects people when they deal with their finances. That includes the financial mistakes they make!

Physician Wealth ServicesThere is an emotional and behavioral piece to finance that needs to be acknowledged. 

Money is one of those taboo topics–on the level of sex, drugs, and religion. Financial literacy surrounding how to handle our money is lacking in our country. What people don’t know is hurting them. That leads to a lot of people having money shame.

George Kinder realized that financial advising fits in a much bigger picture. It is intimately intertwined in our hopes and dreams. It is a tool that can take us where we want to go.

While planning for the future, you will make mistakes. One way to avoid future financial mistakes by learning from your previous ones and moving forward. 

Part of moving forward is determining your goals. 

I’ve written about goals before: When are you the happiest? What do you spend your money on that brings you the most joy?

After determining your goals, you’ll need to determine if they can be reached in the short term (six months to a year) or are they long term (two years or more).

Longer-term goals can be broken daily, monthly, quarterly and yearly targets that are easier to hit. 

Another way to create financial independence, flex your creativity and reach goals is to branch out and create a side hustle. Some good ones are real estate, podcasting, writing a book or starting some other type of business. 

While planning for the future is important, so is being happy and satisfied with your life at present. 

The Emotional Bank 

Are you only looking at math as a way to reach happiness?

Are you the person who is spending all hours working? You dreaming of a happy future, while today falls short?

Building your financial future is important. However, how you spend your precious time (time=life) is just as important. 

Besides your bank and retirement accounts, you’ll need to make deposits in your emotional bank account. 

If you are not making regular deposits here, then you won’t have anything to withdraw later.

Emotional intelligence is important right now and allows you to create a satisfying future. It also allows you to know what it will take for you to have a happy and joyful life. 

With emotional intelligence, you’ll be able to participate in the give and take necessary as you deal with the communication surrounding your life planning and money.

That is important when dealing with finances!

I’d also recommend learning about George Kinder’s seven stages of money maturity. It will allow you to get beyond any tunnel vision that is keeping you engaged in scarcity or fear-based mindset.

I like to explore the emotional gap around money, and I’m writing a book about behavioral finance where I do that.

The paycheck to paycheck mentality that people get stuck on is like a hamster wheel. 

Our goal is to help you break out of that narrow way of thinking into growth, abundance, accumulation and charitable mindsets.

While financial mistakes are inevitable, overcoming them is very possible with acknowledgment, (right) attitude, and action. 

Acknowledging the mistake is proactive, positive and forward-thinking attitude will help you get the job done. Taking action starts you on the road to achieving your goal. 

What action is needed?

Remember the steps: pause, plan, and pivot!

Haven’t joined the Physician Finance Community yet? Join close to 6700 other physicians and their spouses as they embark on the personal finance journey. 

Ryan Inman