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Nobody’s perfect.
Even folks who seem to have All of Their Stuff Together will admit, if you perhaps ask them in a weak moment, that they’ve made their fair share of mistakes.
Many of us stand on the piles of bad ideas, mistimed investments, and ill-informed purchasing decisions, and it hasn’t brought us down yet.
This post, originally published by Wealthy Doc, walks through a variety of financial mistakes and shows that one can come out the other side – successful, wealthy, and happy.
These are my money mistakes: the adventures of a tax-ignorant, overconfident, fickle financial fool.
Despite what some of my audience thinks, I don’t have all the answers. Nor did I do everything right. I have made dozens of blunders along the way. Here I’m airing some dirty laundry and revealing some of my money mistakes.
Debt, Leverage, and Credit
- I used credit cards irresponsibly.
- I borrowed an above-average amount of student debt.
- I went into over $500,000 of debt.
- In residency, I ran up credit card debt. It was so bad that I needed a credit card counseling service to help structure my debt.
- My credit card misbehavior trashed my credit. That ruined my credit rating for many years due to the “charge-offs” on my report. I couldn’t get a credit card, car loan, or mortgage for many years.
- I took out a car loan.
Inaction
I created a business model for a profitable physician finance business. But I failed to put it in place. I started a new medical clinic for my employer instead. This was before Jim Dahle created his White Coat Investor empire.
Delay
- I took a gap year after college. That year of minimum-wage work delayed the start of my six-figure income later.
- I deferred my MBA. That decision postponed the start of my better business and investing decisions.
“False Positive”
I learned this term from Matt Manero. It implies letting your foot off the gas pedal too soon.
- I cut back to part-time work at age 50. I decreased my hours even further at age 55. Each change required pay cuts.
- I left a private practice, at which I earned a top 1% income, to join academia. This required an initial 80% pay cut that later leveled out to about a 60% cut. This came with a loss of investment and equity ownership.
- I stopped my lucrative medico-legal work.
- I dropped a spasticity clinic directorship.
- I dropped multiple medical directorships.
- I cut back to even fewer hours.
- I didn’t use free time or days off to make money.
- I spent money helping relatives.
- I paid rent for my adult brother for two years.
- I set up a REIT to pay my father instead of me, or reinvesting.
- I paid living expenses for my aging parent.
- I cut out high-paying work-comp.
Not Boosting Income
- I was accepted into an interventional fellowship after residency, but I declined it. That would have boosted my annual income for the following two decades. After a few years, the country’s most competitive fellowship program accepted me. Again, I declined. This angered the fellowship director, burned bridges, and reduced my future earning opportunities.
- I spent time teaching and writing.
- I haven’t monetized my blog.
- I declined profitable private practice in Chicago.
- I encouraged the spouse to stay home.
- I didn’t lease equipment to an employer.
Overinsurance
- I continued life and disability insurance long past when I reached financial independence. Even the insurance salesman recommended I drop the coverage.
- I continued paying for many disability policies after reaching FI.
- I continued to max life insurance policies after FI.
Underinsurance
I didn’t buy life insurance when I was healthy in my early 30s. This put my family’s finances in jeopardy, especially since I became uninsurable after being diagnosed with cancer at age 34.
Risk Aversion
- I have owned a large portion of bonds in my portfolio my entire investing career. I owned conservative government bonds in the 1980s and 1990s when I was young and stocks were booming.
- I have invested too conservatively. I would be much richer now if I had owned more equity than bonds, especially from 2009-2022 when I invested 40% to 50% in bonds.
- I have had too much cash drag.
Poor Timing
- I sold all my gold and precious metals in 2001. That was immediately before 9/11/2001, after which gold prices began their upward ascent.
- I sold stocks after market declines in 2008. I sold individual stocks. I also reduced my allocation to stocks at exactly the wrong time. In 2009 my business school economics professor recommended I buy stocks immediately. I ignored his excellent advice.
- I avoided Microsoft, Amazon, and Tesla.
- I bought real estate in 2007.
- I listed my house for sale in 2009.
- I sold cash-flow-positive rental houses.
- I bought Bitcoin late.
- I didn’t buy commodities.
- I sold stocks at the wrong time and then paid a capital gains tax.
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Oversimplification
I didn’t buy I-bonds for family members.
Underleverage
I paid off all debt at the first opportunity, even my mortgage, and real estate debt. I would have many more millions with even a tiny amount of prudent leverage.
Overconfidence
- I bought and sold countless individual stocks over the years. Some went bankrupt. I sold some at a loss. Others returned a profit that lagged their low-cost index.
- I stopped buying I-bonds.
- I declined to purchase Bitcoin.
- I signed worse contracts.
- I agreed to yet another pay cut.
- I didn’t insist on a raise, bonus, or even a cost-of-living adjustment.
- I owned equipment but allowed employers to bill the facility fee.
- I accepted all payers for decades.
Investing Emotionally
- I was fearful and anxious in the market crashes of 1987, 2000, 2008, and 2020. I let my emotions get out of control. It made me grumpy, anxious, and fearful. I acted on emotions and tried to time the market at the wrong time.
- I avoided real estate in 2009. I experienced declines in value and was afraid of further losses.
Overcomplicating
I created complicated and suboptimal portfolios and asset allocation. They satisfied my complex theoretical thinking but prevented me from simple, effective investing.
Too Fickle
- I have not been steadfast in my investing. Successful investors like Warren Buffett Jack Bogle exhibit that trait in spades. Instead, I moved in and out of funds.
- I have not followed my plan.
- I change investments after reading almost every finance book.
- I changed asset allocation often.
Poor Planning and Lack of Discipline
- I lacked a written plan.
- I never had a budget.
- I don’t track expenses.
- I didn’t apply for the Medicaid waiver.
- I used too many financial advisors.
- I didn’t get, and follow, enough solid professional advice.
Naivete
I chose a low-paying specialty.
Tax Ignorance
- I put bonds in Taxable accounts.
- I put stocks in retirement accounts.
- I didn’t take advantage of tax loss harvesting.
- I used a SEP IRA and then needed to convert to a Roth IRA.
- I avoided a solo 401(k).
Overspending
- I bought a new car.
- I paid over $80,000 for school for my daughter.
20 thoughts on “The Many Money Mistakes of a Wealthy Doctor”
“. I owned conservative government bonds in the 1980s and 1990s “ — early 1980s were the peak years for government long term treasurys so that might not have been a terrible decision.
True.
I was young with much human capital but fearful of equity losses. Equities outpaced bonds significantly past 1995. Not terrible, but suboptimal.
True.
I was young with much human capital but fearful of equity losses. Equities outpaced bonds significantly past 1995. Not terrible, but suboptimal.
Hey man, you did a dominant job still achieving financial independence and it looks like many not really mistakes but just really hindsight bias. many of the decisions you had no idea you the type of return you would get such as your decision about the MBA (would it really have boosted income) or taking a gap year (might have helped get into med school). also, selling individual stocks in the great financial crisis. That’s probably an awesome idea as it minimized any cap gains to get out of those positions. Not sure if you actually invested that money though into individual index funds. you not buying bitcoin is definitely not a mistake and exemplifies hindsight bias!
Well done man again on reaching FI and winning the game. Given you still feel some emotional wrangling even as recent as 2020 I recommend you take bill Bernstein’s advice and “stop playing”.
Good points. I sold the individual small-value stocks after the downturn. I was opening a new clinic and didn’t have time to monitor the individual companies. I did buy a broad index fund with the proceeds that eventually showed a return. In retrospect, I would have been better off either not buying individual stocks or holding on to them until the market recovered.
I did “stop playing” by avoiding individual securities which carry unsystematic risk.
Hey man, you did a dominant job still achieving financial independence and it looks like many not really mistakes but just really hindsight bias. many of the decisions you had no idea you the type of return you would get such as your decision about the MBA (would it really have boosted income) or taking a gap year (might have helped get into med school). also, selling individual stocks in the great financial crisis. That’s probably an awesome idea as it minimized any cap gains to get out of those positions. Not sure if you actually invested that money though into individual index funds. you not buying bitcoin is definitely not a mistake and exemplifies hindsight bias!
Well done man again on reaching FI and winning the game. Given you still feel some emotional wrangling even as recent as 2020 I recommend you take bill Bernstein’s advice and “stop playing”.
Good points. I sold the individual small-value stocks after the downturn. I was opening a new clinic and didn’t have time to monitor the individual companies. I did buy a broad index fund with the proceeds that eventually showed a return. In retrospect, I would have been better off either not buying individual stocks or holding on to them until the market recovered.
I did “stop playing” by avoiding individual securities which carry unsystematic risk.
Helping your family isn’t a mistake, it’s a mitzvah!
I agree.
I have no regrets at all. Some choices would be bad for a pure “profit maximizer.” Money is essential but never my primary driver. Using money to help others is one of the best uses of money when seen as a tool that it is.
I agree.
I have no regrets at all. Some choices would be bad for a pure “profit maximizer.” Money is essential but never my primary driver. Using money to help others is one of the best uses of money when seen as a tool that it is.
These are not just a few “mistakes,” but rather an overall lack of direction and education. Although not a fan of financial advisors, you may benefit from one (fee only). It seems that some long range help and guidance would help.
Not trying to generate negative reader comments, but some of the mistakes are pretty serious.
HA!
I see your point. I would have had a smoother and better financial course if I had been more disciplined and focused.
I intentionally chose the decisions which ended up suboptimal from a purely financial standpoint.
A simple, straightforward, written financial plan early on (as Dr. Dahle/WCI recommends) would have been good – in retrospect.
But I have no regrets. I enjoyed my entire clinical career and still do. I worked four days a week or less for most of my career. Since age 50, I have worked three days a week. I enjoy my job even more now that I have more than enough money.
These are not just a few “mistakes,” but rather an overall lack of direction and education. Although not a fan of financial advisors, you may benefit from one (fee only). It seems that some long range help and guidance would help.
Not trying to generate negative reader comments, but some of the mistakes are pretty serious.
It appears you missed the entire point of the article.
Perhaps it would be beneficial for you to re-read, at the very least, the first sentence of the last paragraph, and then re-evaluate your advice that WealthyDoc needs a financial advisor.
I didn’t miss the point. You are very lucky considering some of the mistakes you made.
It is not negative to suggest you need some advice and education.
I did enjoy the post and related to the ways you helped your family.
Have a great day.
I didn’t miss the point. You are very lucky considering some of the mistakes you made.
It is not negative to suggest you need some advice and education.
I did enjoy the post and related to the ways you helped your family.
Have a great day.
HA!
I see your point. I would have had a smoother and better financial course if I had been more disciplined and focused.
I intentionally chose the decisions which ended up suboptimal from a purely financial standpoint.
A simple, straightforward, written financial plan early on (as Dr. Dahle/WCI recommends) would have been good – in retrospect.
But I have no regrets. I enjoyed my entire clinical career and still do. I worked four days a week or less for most of my career. Since age 50, I have worked three days a week. I enjoy my job even more now that I have more than enough money.
Damn, with all of those mistakes, what did you do correctly to overcome them and get FI in your forties??
IKR.
Isn’t it amazing?
That was the point I was trying to make. Some doctors get discouraged when they don’t have $500K by age 39 or whatever. Don’t. You can make rapid progress when focused.
We can make up for most of our missteps due to our high salary and income potential.
I did a few things right, and it doesn’t take many.
Negotiated upside income.
Married a financially responsible spouse.
Spending < Earning.
Max out retirement accounts.
Invested mainly in broad-based, low-cost index funds.
I used Roth whenever I could.
Paid off debt ASAP
I derived more enjoyment from watching the "miracle of compounding" rather than "keeping up with the Dr. Joneses."
IKR.
Isn’t it amazing?
That was the point I was trying to make. Some doctors get discouraged when they don’t have $500K by age 39 or whatever. Don’t. You can make rapid progress when focused.
We can make up for most of our missteps due to our high salary and income potential.
I did a few things right, and it doesn’t take many.
Negotiated upside income.
Married a financially responsible spouse.
Spending < Earning.
Max out retirement accounts.
Invested mainly in broad-based, low-cost index funds.
I used Roth whenever I could.
Paid off debt ASAP
I derived more enjoyment from watching the "miracle of compounding" rather than "keeping up with the Dr. Joneses."