Today’s post comes from my WCI Network partner Passive Income MD. I think he’s pretty good with money, but he begs to differ. At least in some respects.
He makes a great point in that just because we’ve seen success with money, it doesn’t mean we have all the answers or do everything right. I’ve weighed in on five money mistakes I choose to make and I’m sure there are more I have yet to discover.
Dr. Peter Kim’s not perfect, either. As I read through this article again, a scene from Forgetting Sarah Marshall popped into my head. If you avoid strong language, avoid the video. If not, enjoy this clip and you’ll understand why I thought of it.
This post was originally published on Passive Income MD.
Seven Money Matters I’m Horrible with and How I Deal with Them
I write fairly frequently about my own financial and investment experiences, and I’ve been fortunate enough to achieve some success in my ventures. Because of this, people tend to think I have everything figured out.
It’s human nature to want to appear perfect, to seem like we have it all together. This is especially true in medicine, where we’re afraid to show the cracks in our perfect image. Maybe this is because we feel like we’ll lose respect, and it’ll take away from our ability to have some control in the workplace.
But if there’s anything recent events have taught us, it’s that while we may achieve success in some areas and appear perfect on the outside, we all have underlying flaws. The more comfortable we become with sharing our deficiencies, the better we can address them and improve.
Personally, I have enough flaws to fill a book’s worth of pages, but I can’t say I’m quite ready to bare them all here yet. When it comes to financial matters, however, I’m happy to share them even at the risk of looking like an idiot. There are plenty of things I definitely could improve on, and though I try to offer advice the best I can, I’m still figuring out most of the answers for myself along with the readers of this site.
Thanks to numerous doctor blogs and podcasts (like the well-named Dr. Money Matters), physicians have reminders and ways of addressing some of these issues. However, here are some of my own money matters I’m working on improving at the moment.
When it comes to financial matters, keeping detailed records of your money is vital. I’ve touted the benefits of tracking your net worth and knowing how to use the tax code legally to benefit you. Although I know these things are extremely important, I find it all extremely difficult to keep track of.
When it used to come to tax time, I dreaded the idea of tallying everything up. Because of this, I let everything build up until I’m forced to take care of it. Every spring became a humongous ordeal with paperwork seemingly flying all over the place.
My way around this is to now pay for bookkeeping. A good CPA can be of great benefit in this regard. I’ve started with a new CPA and it’s like I didn’t know what I was missing, until now.
Honestly, he’s made my life much easier. I put all of my spending on specific credit cards, especially for my various businesses. My CPA has access to my credit card statements and is able to separate out the spending into categories. He helps me figure out what is an appropriate deductible expense and what isn’t. All I have to do is review his bookkeeping statements every so often to make sure they’re accurate. I’ll be honest, that’s a chore itself, but it’s much better than having to create the spreadsheets myself.
I’ve found it’s definitely worth the cost and time and energy to do it. Plus, it’s tax deductible for my businesses, so that makes me feel better about it.
In complete honesty, I’m horrible at keeping a tight budget. It’s important to know where your money is going every month, and I know some people are great at it. People have found great success with Dave Ramsey’s envelope method where you pay using cash, for example, or simply by checking their accounts daily to keep track of any overspending.
My wife and I have talked about budgeting to the dollar, and we’ve decided against it. It’s difficult for us, so we’ve decided to just be conscious of what we need in the beginning of the month for all of our bills and for our investments, and then to be smart with our purchases the rest of the month.
If you look at our credit card spending month-to-month, barring any huge one-time expenses such as a large trip, our balance tends to be very consistent on a month-to-month basis, even without trying very hard to make that happen. It also helps that Empower sends us a little reminder a few times a month comparing our spending to the previous month.
We’re also fortunate enough to receive decent monthly incomes from our day jobs as physicians as well as increasing income from all of our side hustles. So these days we’re never really close to overspending and are able to save what we need to make smart investments that create additional passive income.
But I know that this line of thought can be dangerous. If your personality leads you to keep up with the Joneses, or if lifestyle inflation has taken such a hold of you that your spending is out of control, then you probably need a tight budget.
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3) Paying the Bills
Bills, bills, bills. They come from everywhere these days. Student loans, preschool tuition, mortgage payments, utilities, insurance, AAA, cell phone, etc… it’s hard to keep track of everything. I’ll be honest, before online payments, I spent a lot of money paying off late fees. I always had the best of intentions, but somehow I tended to lose track of bills as those letters would get swept into piles on my kitchen table.
Now, with the advent of online and automated payments, I don’t struggle with it quite as much. I’ve set it all to automated payments as early in the month as possible and now forget about it. Every quarter I take a look to see exactly how much is being spent and see if there have been any changes. If it weren’t for modern technology, however, I’d probably still be racking up those late fees.
4) Being an Unemotional Investor
I’ve participated in two economic crashes: one in the early 2000s and the one in 2008. I’ve learned that when it comes to the stock market, I tend to get caught up emotionally. In the early 2000s, I was an investor riding the bubble investing in things like Nortel and QQQ along with everyone else before things came to a screeching halt. In the years leading up to 2008, I was investing in whatever the hot stocks were at the time as well.
When things were crashing around me, I oftentimes couldn’t resist the urge to sell, which sealed those losses. Fortunately, those losses were before I became an attending and they were with significantly lower stakes than I’m playing with now.
However, those situations taught me a lot about my emotional makeup. Ultimately, this drove me to find a trusted financial advisor. Sometimes it helps to have that layer of separation from your stock portfolio, especially when you can buy and sell with a simple click of the mouse, and it definitely does in my case. It may sound weak to say that when bad times come I can’t control my own emotions–but I’ve learned that I’m far from being the only one.
The people I truly give the most credit to today are the ones who have been through it firsthand, the ones who have seen 25-50% of their net worth disappear in a short period and yet managed to stay the course. It’s easy for everyone to say how they’d react in a downturn when they’ve only been investing during one of the greatest bull runs in history. At least I know myself and when it comes to the stock market, I know I’ll be ready for the next crash.
5) Keeping Track of Frequent Flyer Miles & Using Credit Card Points
The idea that you can use points from travel or credit cards and redeem them for free flights and hotel stays is fantastic. However, I’m horrible at keeping track of and actually using these points. I know I have to redeem them and convert them to certain airlines to use them, but I seemingly forget to do them every time I travel. I have certain credit card points that are just piling up.
I have friends who are extremely adept at utilizing them and at times I’m a bit jealous when I hear of all the upgrades they get to business class or nice suites at hotels. Physician on FIRE created a great spreadsheet to track his various credit cards and their various travel rewards and perks.
So, what I do now is simply to use cards mostly with cash back rewards. It makes it easier for me to not have to think about tracking points and what’s easier than receiving cash back. If I do use credit cards that give reward points, I make sure I use one with great perks.
6) Keeping Track of Paperwork
I’ve noticed something strange about my kitchen table. It seems to be a black hole that sucks in any paperwork, mail, or bills that come near it, some of it lost forever. I’ve made so much extra work for myself having to have things re-printed and re-issued because of the abyss at the center of my dining room.
So what do I do? I now scan almost every bit of important mail I get immediately. I use an app on my phone, like TurboScan or Google Drive, to digitally file every bit of paperwork away, safe inside the cloud. If I think it’ll come in handy later, up it goes, and I can easily search and retrieve it any time I want.
7) Canceling Memberships
I’m a sucker for a free trial period. Apps, memberships, subscriptions–I love signing up for them but always seem to forget to cancel before the trial is finished. I’m sure those companies bank on people like me. Every time I see a charge for a month of a subscription I forgot to cancel, I die a little inside and resolve to change my ways.
I am getting a little better, though. Now, I either don’t sign up for trial memberships without mentally committing to the actual thing I’m paying for, or I do go ahead and sign up for the trial and make double and triplicate reminders immediately to cancel these things at a certain date. So far, this has been working. Most of the time.
Obviously, there are certain things we all excel at. If that weren’t the case, none of us would be where we’re at. However, sometimes it’s more helpful to know what your weaknesses are so you can avoid making big mistakes. So, yes, both strengths and weaknesses exist, and the most important thing is to diagnose them.
I have plenty of flaws when it comes to financial matters but they haven’t stopped me from achieving financial independence from medicine. So I completely believe it’s achievable for everyone.
Double down on your strengths and get help with your weaknesses. That’s been my strategy and it’s definitely helped me get where I am.
How well do you know yourself? How about you, what are some of your strengths and weaknesses?
6 thoughts on “Seven Money Matters I’m Horrible with and How I Deal with Them”
Two comments from me. First, and most important, Forgetting Sarah Marshall is arguably the greatest comedy of all time. Great clip, hilarious scene!
Second, couldn’t agree more with the paperwork comment. In a world getting more and more digital, it’s hard for me to justify continuing to stockpile old files that “might come in handy one day.” It’s a great tip to scan things in and save them.. will have to start implementing that soon.
I’m totally guilty of letting business transactions pile up unaccounted for until it’s time to prepare my taxes. I’m loathe to use a CPA service for the 10-30 transactions a month that I incur, so I guess I’ve locked myself into this purgatory until such time as I learn to discipline myself to keep up with the work… or get rid of the farm.
I vote that the farm will be gone before I change my bad habits.
I hear ya. I am guilty of a few of those as well. With regard to free trial periods, I use a prepaid Visa card with $25 on it. So when you sign up for the free trial, you input the cc number from the prepaid visa. They run the card for $1 or so to verify. In 30 days or a year when the automatic renewal is billed it will generally be declined because it is more than the $25. A notice will get sent and I then cancel the renewal. It’s better than having to call and ask for a refund of the renewal fee (which not all vendors honor.) I learned this when I had an extra visa gift card from the stash I hand out to employees, teachers and such during the holiday season last tear.
I use Mint to track spending and export my data to Excel for convenient massage. The budget tightens itself once you understand it and actually attend to it. I use PC as a portfolio aggregator. As vital as the aorta is to staying alive, an aggregator is to keeping alive financially. A “job” is #1 and an aggregator is #2. 3. I also use the cloud, OneDrive works for me since it’s integrated into Windows. I was getting all of my tax stuff set up in H&R block and my office computer died. No problemo. I turned on my backup computer (a tiny $239 Kodlix GN41, which sits next to my front up computer), loaded HR block, changed the monitor input to the Kodlix port and continued on using the file saved to the cloud. This happened to me yesterday. Had it been April 14th it would have been the same result. Speaking of H&R block I had an accountant for my business but I always did my own taxes using the same program and it’s predecessor since 1991. I was preparing a 8606 for Roth conversions and needed to figure out the pro rata to estimate my tax bill and send in some dough to cover the tax. Since I used the same program it picked up some pro rata money I had forgotten was pro rata and saved me a load in taxes. It completely changed my Roth conversion sequencing strategy. Had I not used the same program 100% of those years and just relied on an accountant this likely would have been missed. Had I switched programs mid stream it likely also would have been missed. I also use an adviser. Just the money I’ve saved by tax loss harvesting efficiently and streamlining my tax picture on my portfolio way more than pays for the expense of the consultant. If I die he’ll be there to advise my wife. A different kind of portfolio insurance.
Those free trial subscriptions are really designed to get people who lose track of the end dates. That is why they always require you to sign up with your credit card information so that they can “conveniently bill you” when the trial period is over. Nowadays when I do a free trial, the first thing I do is put a reminder on my smart phone calender giving me a few days leeway to call and cancel it. Companies give away free trials because it ends up being a quite profitable adventure.
I’m a big fan of billpay or other online payment service that banks offer for free. It also is a great way to document that you indeed did schedule the payment on time and if something does happen, the bank will typically eat the late fee cost if any (has happened to me one time and taken care of completely by my bank).
Like you I have never really been a budgeter. I have a normal low spend lifestyle (although when I do spend it tends to be something major in the 5-6 figure range). Because of this budgeting really is a low yield activity for me and to squeeze out potentially a few extra dollars here or there is not worth the time for me at this level and stage in my life.
It is good that you recognize your weakness with regards to market volatility and in that case a financial advisor is worth his or her weight in gold preventing you from making rash decisions and locking in losses. Like you I haven’t had real money in play until now but have gone through similar market crashes before. I fee that my risk tolerance is quite high even now when small drops result in absolute losses that far exceed what I had invested in totally in the 2009 crash.
The ups and downs of the last few months (mostly downs, but we’re actually up about 10% from Christmas Eve lows!) have been something to see. PIMD apparently doesn’t handle them all that well, but it honestly didn’t phase me to see a year’s worth of spending disappear in a day. I figured I’d get it back before I actually needed to spend it.