Physicians Want Financial Freedom
You’ve made it—you are finally out of residency—maybe?! And you have a family? If yes to both of those circumstances, does it seem like you are about to embark on a journey that is both daunting and exhilarating when it comes to your finances? You are! However, it might be anti-climactic if you find yourself floundering during the first important stages of achieving your level of financial freedom.
So, let’s walk through this together.
Who better to help us do that than Andy Hill from Marriage, Kids, and Money!
Andy shares a few pointers to help us head in the right financial freedom direction, including:
- Budgeting with your spouse;
- Communication and finances with your spouse; and,
- Teaching your children to value money.
See a theme here?
Best get on with it.
What You Will Learn
Really? A Budget is Freedom?
What is your first thought when you hear the word “budget”? Do you think that you need money left over from your paycheck? That all fun comes to a grinding halt?
Do you think that only people with low incomes budget?
That your budget is a onetime event—something set in stone forever more?
Some people may feel a sense of sadness or loss. Andy insists that a budget is not a restriction. It is a method for giving back—to yourself! It’s easy to stick with your budget if you choose the right reason for creating one.
Picture this: your mountain of student debt sitting on your shoulders. Do you feel the weight?
Now imagine sending in the very last payment. Can you feel the relief? Do you feel the pressure of those debts (and their interest rates) being lifted off your shoulders?
Can you feel that?
What are you going to do with the extra income? I’ll bet it will be something a lot more fun than paying for debt!
How can we make the journey to financial freedom more enjoyable? One way is to stop looking at it as a chore.
Budgeting is not something you have to do, but should.
Shift your attitude and start viewing the process of budgeting in a whole new light.
We want you to plan for your future with a budget party! Or, hey, you know… go on a money date.
These are just ideas to do with your spouse that are about much more than paying bills or managing debt.
They’re about getting you in sync with your household’s financial responsibilities.
Put together some form of strategy where you and your family end up at the other side of the gain. After all, physicians make their money work for them (or should), alongside your partner.
Whatever your strategy, begin it with a discussion revolving around the current state of your finances.
And then discuss how to allocate funds to turn what you have into so much more.
The time spent together will give you and your spouse a chance to make sure the goals you are setting align with your family values.
These discussions are a time to make sure you will have many fun and relaxing occasions to spend with your family, so that outside commitments don’t take over those quality moments.
They provide time to dream and plan together.
A time to move the marital relationship forward and make plans for your family’s future.
Having a successful family life is equally important to having a successful professional life.
Let’s help you succeed in both and show you how to enjoy the process!
Andy, and his wife have a “budget party” at the first of every month.
It may involve a beautiful evening together while their children play nearby, delicious dinner out at a restaurant with great food and wine or ordering some hot pizza and a cold beer.
They take a necessary activity that has the potential to be stressful and they inject some fun.
This time together is not meant to be rushed.
It is a time to build your legacy, savor the future while planning your life so that it is full of beautiful memories.
Andy indicates automation is the key to keeping up with information in a budget.
For them, this means their laptop is along for the ride, err…party.
He recommends Fintech to simplify the process. He and his wife have also used Mint for several years. Automated programs streamline your budget for you. Other good software is Tiller and Personal Capitol.
If you load 100K worth of assets into Personal Capitol they will invite you to enroll in their investment platform. You are under no obligation, just refuse the additional services offered, but don’t let that dissuade you from using their great software.
These suggested budgeting programs pull information from your checking, and credit cards so you don’t have to. Who says having a budget and managing expenses is drudgery?
Planning for a bright future is fun, fun, fun!
Beyond the Kids’ Allowance.
A budget should involve every family member—you are building a legacy, right?
We start with an example of goals and you will be on your way to financial freedom!
Well, OK. Skipping a few steps, but you know what I mean.
Here’s what Andy does.
Andy’s goal is to teach his children the correlation between working and money. He observes that is how the world works. He wants his daughter to understand that there is no reward or wealth without working for them.
When his daughter was five, he and his wife devised a chore and reward system, which he makes into a fun father-daughter bonding time. There are family chores that help contribute to the family, and then there are chores for payment.
Immediately after completing her tasks, she is complemented on contributing to the family, and paid her wages. The amount is divided into decorated mason jars for spending, savings, and an amount for giving. Andy even opened his young daughter a savings account with the online bank, Ally.
He has shown her the app, so she can she how much she is amassing! She can feel the power of having and making choices.
Andy also values giving back to the community.
He admits it is hard sometimes to prioritize being charitable, while being involved in a busy practice and raising a family. However, he feels it is important to set an example. So, in this aspect of learning to budget, she contributes to her giving jar, then they partner in an altruistic project.
To further her understanding of money, she has started paying for her purchases at a local store.
This is a wonderful way to engage her in lessons of communication, math skills by counting out change, and most importantly— confidence!
Breakout the sash!
He has also introduced her to the value of used objects and profitability. When there are toys she no longer plays with, he places them for sale on Facebook Marketplace or Craigslist.
She learns that the item still has value for someone else—and she makes a profit!
Another great tip is to introduce the idea of making interest. Ask your child, “I can pay you $5 now, or you wait a week, and I’ll give you $6”. See what happens there?
When you help children understand the benefits of receiving interest, and the downside of borrowing and then having to pay inflated interest back, you are helping them avoid the recurring treadmill of debt. A trap that most people learn the hard way!
Another fun way of learning about the value of money is playing board games. This has a twofold purpose: an engaging game that will strengthen early math skills and reinforcement of financial lessons for young children. Andy suggested CashCrunch Junior whose aim is learning the value of money and helping children make better money decisions in a non-threatening way.
Also, learning about the entrepreneurial hustle, Andy’s daughter created and operated a lemonade stand. It would be interesting to hear about the experience in her own words. Inquiring minds want to know what she liked best about the experience? What did she like the least?
You might have older children. How does that affect the system? Chores might evolve as the child gets older—especially when being able to handle unpleasant tasks.
As a youngster, I was required to care for the family dog, including cleaning up after it. It was a task my mother gave away “real early”! In my family, finances were an open topic, and I was given an allowance.
My mother believed that a child’s job was to attend school and get good grades, and she wanted it to be fun for me. So, she paid me for the good grades, and charged me for the less desirable ones.
I joke that I probably wouldn’t be able to live in her house if I had brought home D’s and F’s. It must have worked, as I was the first one in my family to graduate from college!
The earliest influences regarding money for Andy.
Andy states he was also required to contribute to the family by doing chores. His initiation into the world of finance began as he observed his mother saving money, when given an allowance, and opening a savings account early on. He quickly learned that how much he saved correlated to what cool stuff he could afford to buy. He also saw his father working hard in the automotive business in Metro Detroit. He noticed the financial reward it brought, which inspired him to follow in his father’s footsteps.
If you examine the saying “monkey see, monkey do,” you’ll recognize the truth that children:
- Learn from your example
- Handle their own money and make their own choices
- Benefit from open communication regarding finances
- Benefit from learning about the cost of items and services
- Benefit from learning the realities of your household finances
- Benefit from participating in conversations about life events and how much they cost
In addressing this list, Fintech, who already has software for tracking finances, is also working on programs to teach children money, and increase communication. Important aspects of getting your children on the road to being financially literate!
Celebrate your gains.
A new attending doctor reports that his fixed income makes up a large portion of his fixed expenses. He says it is depressing and hard to budget, even though he knows he should. Is there a way to make it more fun?
Andy’s suggestion? You guessed it…budgeting.
It enables you to make goals and see improvement.
A visual plan gives you clarity of what you have coming in and what is going out. He stated that he and his wife had written the total of their debt on a white board. Each month they crossed out the old number and wrote the new lower number. They could feel the load lifting from their shoulders with this visual aid.
When they reached a milestone of paying a debt off—they celebrated!
What if you have a huge load of student loans? Find us!
You celebrate your gains when you get the debt to the five-digit range, but if you need help, send an email to me at email@example.com and let me know about your successes, I will celebrate you during the show. Or, you can join the Facebook group at Financialresidency.com/community to celebrate with likeminded people!
Andy’s business investing podcast is in the Top 50, and it consists of conversations like the ones you hear on Financial Residency.
It involves couples trying to figure out the best thing for their marriage, their children, and learning how to create wealth for their family.
You can check the podcast, Marriage, Kids and Money out at marriagekidsandmoney.com. During the show you will hear the seven steps that Andy has learned from the millionaire entrepreneurs, financially independent rock stars, and debt free people that he has interviewed on his podcast.
Hopefully, you learned about the few things you can control on your journey to becoming money-conscious and gaining financial freedom. We learned that communication is the top priority for your marriage, family and finances. We expanded on the idea that family is the foundation for taking control of your future wealth. And last, but not least, we broached the topic of teaching your children the value of money and introduced some fun and practical ways to get them started on their own journey to financial success! Now where does this leave you? Better than you came in, I hope!
This Week’s Journal Club: Dads Making Cents
Dads Making Cents has an awesome article online called The Real Estate Deal Napkin. I’m a huge fan of simplicity and as we have discussed real estate quite a bit on the podcast, I wanted to highlight a great article on how to quickly review a real estate deal for those interested in investing in single family homes (or SFR’s).
So they are looking at a $200k – 2Bed, 2Bath Condo. I’m not a fan of buying condos for various reasons, but they are analyzing a condo. Looking at the 1% rule, which is you want the property to rent out for at least 1% of the total purchase price. In this scenario, that would be $2,000/mo. in rent.
They then detail out some of the expenses and they don’t just assume a 50% expense, they put some thought and detail into the expenses. Items like property taxes, insurance, HOA and they even estimate repairs and vacancy (which is critical to your underwriting criteria of an investment property).
Now we have to add in the mortgage, using their numbers is an 80% loan, meaning they put 20% down, 30 year fixed at 4.5%, this is a bit low looking at current market rates, but not by much. The example shows a positive net cash flow per month of $289 which is a good start.
To quote: While cash flow positive always sounds great, there are plenty of deals that are cash flow positive but bad investments. The goal of every investment is to make the same or more money relative to alternatives (stock market, bonds, CDs). While there are benefits to investing in real estate that can be outside the % return, it is always important to know your numbers so you know that your money is parked in the best place. Cap Rate and Cash-on-Cash return are the 2 big numbers for real estate investments.”
Well said! I commonly see most physician investors stop at the cash flow without going a bit further to figure out cap rate and the cash on cash return. This is a simple, back of the napkin, way to evaluate a potential real estate investment. This isn’t exhaustive and you will need to do much more research than this, but its a great start.
We have invested in many SFR’s and now venturing into multi family. Please do your research before purchasing any real estate investment. They provide lots of great benefits but if you don’t fully understand what you are doing, you could be left holding a bad investment for quite some time. Aside from the information presented in the podcast and on financial residency.com, which i have provided a guide to understanding buying a home and the ultimate guide to multi family investing, check out other resources that are free, like bigger pockets.com and their best book titled, The book on rental property investing.
Great article dadsmakingcents, well done. I’ll make sure to link to this in the show notes as well as a few other resources that you should check out if you are looking to invest in real estate.