Developing a Financial Plan and Considerations About Using a Financial Advisor

00:58:55
https://www.youtube.com/watch?v=SFsQpMFn4iE

概要

TLDRDavid Chu presents a comprehensive overview of financial planning specifically tailored for medical professionals. He emphasizes the importance of personal finance management, setting specific financial goals, and the necessity of creating a budget that reflects one's priorities. Chu discusses the implications of increased income upon becoming an attending physician, cautioning against immediate lifestyle inflation to avoid hampering long-term financial stability. He addresses debt management, the need for an emergency fund, and strategizing for retirement savings. Furthermore, he provides insights into the selection of financial advisors, highlighting the importance of understanding fee structures and ensuring that advisors act in the best interest of their clients. Overall, the talk equips attendees with practical tools and knowledge to make informed financial decisions throughout their careers in medicine.

収穫

  • 💡 Financial planning is personal and goal-oriented.
  • 📊 Understanding your budget is crucial for financial success.
  • 🚫 Avoid lifestyle inflation after income increases.
  • 💼 Consider the fee structure when selecting a financial advisor.
  • 🏦 An emergency fund is essential for unexpected expenses.
  • 📈 Start saving for retirement as early as possible.
  • 💳 Spending intentionally leads to greater satisfaction over material purchases.
  • 💻 Robo-advisors can be a cost-effective investment option.
  • 📝 Write down specific financial goals for clarity.
  • 🚀 The earlier you start investing, the better your long-term outcomes.

タイムライン

  • 00:00:00 - 00:05:00

    David Chu introduces himself and emphasizes the importance of personal finance discussions in medicine, noting that most financial talks can be motivated by profit rather than education. He stresses that personal finance is personal and varies by individual circumstances.

  • 00:05:00 - 00:10:00

    He outlines key financial topics such as student loans, insurance, retirement planning, and investing, encouraging individuals to create a budget while ensuring that savings and investments fit within their financial goals and plans.

  • 00:10:00 - 00:15:00

    Many new attending physicians face the temptation to lavishly spend their increased salary. David warns against excessive spending on luxury items, urging to prioritize financial goals over lifestyle inflation to secure long-term financial health.

  • 00:15:00 - 00:20:00

    David refers to the book 'The Millionaire Next Door' which teaches that building wealth is often about spending less rather than just earning more. He shares his approach to spending, which includes setting specific financial goals and delaying gratification for long-term benefits.

  • 00:20:00 - 00:25:00

    He discusses the necessity of having specific financial goals and the importance of documenting them to track progress, emphasizing that writing down one's strategies keeps financial plans aligned with personal goals.

  • 00:25:00 - 00:30:00

    David explains the process of budgeting and highlights the need for tracking expenses carefully to avoid ending the month without savings. He provides a sample budget to illustrate how salaries can be allocated toward essential financial commitments.

  • 00:30:00 - 00:35:00

    He introduces the concept of saving for emergencies before making investments and advises on prioritizing student loans along with investments in retirement plans, emphasizing the importance of a structured approach to these financial decisions.

  • 00:35:00 - 00:40:00

    On the subject of home ownership, David suggests waiting at least a year after starting a new job before buying a house and outlines the costs associated, urging potential homeowners to factor in all hidden expenses related to property ownership.

  • 00:40:00 - 00:45:00

    He dissuades attendees from buying new cars due to their depreciating value, reinforcing that substantial loans should be avoided especially when student debts are present, and that there is no need to match income growth with an equivalent spending increase.

  • 00:45:00 - 00:50:00

    He highlights that financial advisors can be helpful but urges individuals to be cautious in selecting one, emphasizing that individuals should understand financial structures, advisor compensation, and to look for trustworthy qualifications and credentials.

  • 00:50:00 - 00:58:55

    Lastly, David discusses robo-advisors, presenting their benefits and drawbacks, and suggests thoughtful approaches to achieving financial literacy and making informed decisions about spending, saving, and investing.

もっと見る

マインドマップ

ビデオQ&A

  • Why is it important to understand personal finance in medicine?

    Understanding personal finance is crucial for medical professionals to manage their income effectively, set and achieve financial goals, and plan for retirement.

  • What are some key aspects of financial planning discussed?

    Key aspects include budgeting, managing student loans, saving for retirement, and spending intentionally.

  • How should I approach selecting a financial advisor?

    Look for fee-only advisors, check their credentials, understand their fee structure, and ensure they have a solid investment philosophy.

  • What is the significance of having an emergency fund?

    An emergency fund provides a cushion for unexpected expenses and prevents financial stress during emergencies.

  • Why should I avoid lifestyle inflation after becoming an attending?

    Avoiding lifestyle inflation helps you allocate more towards savings and debt repayment, ensuring long-term financial stability.

  • What should I consider when creating a budget?

    Consider your fixed expenses, savings goals, debt obligations, and ensure that your large purchases align with your financial plan.

  • What is a backdoor Roth IRA?

    A backdoor Roth IRA refers to a method for high-income earners to fund a Roth IRA indirectly by first contributing to a traditional IRA.

  • How can spending on experiences impact happiness?

    Research indicates that spending on experiences typically leads to greater happiness than spending on material goods.

  • What are robo-advisors and how do they work?

    Robo-advisors manage your investments automatically based on algorithms and may charge lower fees than traditional advisors.

  • When is it advisable to seek a financial advisor?

    Consider seeking a financial advisor if you need help with complex financial decisions or prefer someone to check your work.

ビデオをもっと見る

AIを活用したYouTubeの無料動画要約に即アクセス！
字幕
en
オートスクロール:
  • 00:00:01
    so hi my name is David Chu I'm one of
  • 00:00:05
    the uh uh I'm an assistant program
  • 00:00:07
    director in the department of medicine
  • 00:00:09
    and in the division of pulmonary
  • 00:00:10
    critical care and today we're going to
  • 00:00:12
    talk a little bit about trying to put
  • 00:00:14
    all the stuff that we've talked about in
  • 00:00:15
    some of the other uh talks
  • 00:00:18
    um
  • 00:00:19
    uh how to develop a plan and for those
  • 00:00:22
    of you who are interested and I know
  • 00:00:24
    this comes up a lot how to think about
  • 00:00:26
    like selecting a financial advisor and
  • 00:00:28
    deciding if you really need one
  • 00:00:29
    depending on sort of what your needs are
  • 00:00:32
    so I always start these by saying I have
  • 00:00:35
    no Financial disclosures
  • 00:00:37
    um and I always think that's really
  • 00:00:38
    important uh you always have to ask what
  • 00:00:40
    are the motivations of someone giving
  • 00:00:41
    talks on this on this stuff because the
  • 00:00:44
    vast majority of them are doing it
  • 00:00:46
    because they want to make money at the
  • 00:00:47
    end of the day and they want to get your
  • 00:00:49
    business
  • 00:00:50
    um I am not a financial advisor I'm
  • 00:00:52
    talking about all this based on my own
  • 00:00:54
    experience in reading and so this is all
  • 00:00:56
    purely for education I would strongly
  • 00:00:58
    encourage you all to kind of do your own
  • 00:01:00
    reading on this subject but
  • 00:01:02
    um
  • 00:01:03
    I think you just similar to if you're
  • 00:01:05
    reading a study you want to know where
  • 00:01:07
    their uh funding came from right you
  • 00:01:08
    want to know why they're doing this
  • 00:01:10
    I do this because I think it's really
  • 00:01:12
    important um I think it's something we
  • 00:01:14
    don't talk about enough in the medical
  • 00:01:15
    field and sometimes people feel like
  • 00:01:17
    it's a taboo subject but you really
  • 00:01:19
    shouldn't be
  • 00:01:20
    um but I also admit that I guess this is
  • 00:01:23
    a line I get to put on my CV when I go
  • 00:01:25
    up for promotion and so that's helped to
  • 00:01:27
    me in a career sort of way
  • 00:01:28
    um but that's really all I kind of get
  • 00:01:30
    out of us so
  • 00:01:32
    um I think it's only fair that you
  • 00:01:33
    understand where I'm standing
  • 00:01:36
    um and again when I when I talk about
  • 00:01:38
    stuff here you know personal finance
  • 00:01:40
    really is personal
  • 00:01:42
    um like we can talk about what the most
  • 00:01:44
    optimal situation is given sort of uh
  • 00:01:47
    talking about student loans or investing
  • 00:01:48
    but and how to manage your money but you
  • 00:01:51
    know it really depends on the specifics
  • 00:01:53
    of your own situation whether you're
  • 00:01:55
    supporting a family on your own income
  • 00:01:57
    or if you have a or if you're in a dual
  • 00:01:58
    income situation
  • 00:02:00
    um whether you have like other loans
  • 00:02:02
    that you're trying to deal with or not
  • 00:02:04
    like if you're trying to support other
  • 00:02:05
    people like that's these are all
  • 00:02:07
    considerations that you have to take
  • 00:02:08
    into account when you're deciding how to
  • 00:02:10
    best sort of manage your finances and so
  • 00:02:12
    all this should be taken in the context
  • 00:02:14
    of like your own life and what your
  • 00:02:15
    goals are
  • 00:02:17
    planning your finances by definition is
  • 00:02:19
    a very very personal topic
  • 00:02:22
    um because it's really you determining
  • 00:02:23
    what your goals are and how to use the
  • 00:02:25
    money you have to achieve them
  • 00:02:27
    um as a reminder you know a lot of the
  • 00:02:29
    talks that I've done before have been on
  • 00:02:30
    student loans
  • 00:02:32
    um Insurance protecting yourself against
  • 00:02:34
    catastrophes and retirement planning and
  • 00:02:36
    investing so I think these are kind of
  • 00:02:38
    the big things that a lot of us in
  • 00:02:39
    medicine have to think about student
  • 00:02:40
    loans are kind of the big one that is
  • 00:02:43
    maybe a little bit different but I think
  • 00:02:45
    the other the other topics are relevant
  • 00:02:47
    to most people
  • 00:02:49
    um and so hopefully that provides you
  • 00:02:50
    with kind of a toolbox to start with and
  • 00:02:52
    sort of an understanding of like some of
  • 00:02:54
    those subjects so I know we're not going
  • 00:02:56
    to talk too much about it just more
  • 00:02:58
    about like well how do you fit all these
  • 00:02:59
    things into your budget right so
  • 00:03:01
    hopefully with those talks you get the
  • 00:03:03
    tools about you're the things you need
  • 00:03:04
    to think about and how to go about
  • 00:03:06
    purchasing Insurance dealing with your
  • 00:03:08
    student loans making a plan for
  • 00:03:10
    investing for retirement but how do you
  • 00:03:12
    actually Implement all of that and
  • 00:03:14
    that's what we're really going to focus
  • 00:03:15
    on today
  • 00:03:16
    so you know I think the big thing here
  • 00:03:18
    is that when you become an attending
  • 00:03:20
    you're gonna your salary is going to go
  • 00:03:22
    up and I think a lot of people look at
  • 00:03:24
    that number that's like four or five
  • 00:03:26
    times or more of their resident salary
  • 00:03:27
    are like okay I'm gonna buy myself a
  • 00:03:30
    fancy car I'm gonna get like a super
  • 00:03:32
    nice house
  • 00:03:34
    um I'm gonna send my kids to private
  • 00:03:35
    school like I'm gonna have the ability
  • 00:03:37
    to kind of get all these things I'm not
  • 00:03:38
    going to have to really ever worry about
  • 00:03:39
    money
  • 00:03:40
    um because I'm going to have more than I
  • 00:03:42
    know what to do with
  • 00:03:43
    and the problem is is that
  • 00:03:46
    you know the more you kind of spend up
  • 00:03:48
    front the less you have to actually
  • 00:03:51
    Implement sort of other more specific
  • 00:03:53
    goals like you know if you if you're
  • 00:03:55
    spending four thousand dollars a month
  • 00:03:57
    on if you're spending like two thousand
  • 00:03:58
    dollars a month on a ridiculous car
  • 00:04:00
    payment that's less money that you have
  • 00:04:02
    to put towards student loans to pay them
  • 00:04:04
    down faster to save before retirement
  • 00:04:06
    like you have to think about the effects
  • 00:04:08
    of not only what you know what's
  • 00:04:10
    happening in the moment but also like
  • 00:04:12
    the the downstream effects of if you're
  • 00:04:15
    not putting money toward retirement
  • 00:04:16
    earlier on like that comes to bite you
  • 00:04:19
    um many many years down the road it's
  • 00:04:20
    not something that you sort of get that
  • 00:04:22
    immediate feedback on until you're like
  • 00:04:24
    20 years later on and you're you find
  • 00:04:26
    that you're nowhere near sort of the
  • 00:04:27
    goals that you need to meet so you have
  • 00:04:29
    to really think I think long and hard
  • 00:04:30
    about what are the specific goals you
  • 00:04:32
    want to achieve from a financial
  • 00:04:33
    standpoint and prioritizing those before
  • 00:04:36
    you start talking about like large
  • 00:04:37
    purchases or anything like that making
  • 00:04:39
    sure that that would actually fit into
  • 00:04:41
    your budget after you account for sort
  • 00:04:42
    of the the big things
  • 00:04:44
    I think it's important that when we talk
  • 00:04:47
    about like how to develop a plan that
  • 00:04:49
    you also understand my perspective on it
  • 00:04:51
    and I'll admit like in part it was
  • 00:04:52
    shaped by
  • 00:04:54
    um how my dad sort of gave money which
  • 00:04:56
    it was very conservatively
  • 00:04:58
    um and also books like this one if
  • 00:05:00
    you've heard of The Millionaire Next
  • 00:05:01
    Door you know I think the central theme
  • 00:05:04
    here that you know the way that you
  • 00:05:06
    build wealth is by spending less it's
  • 00:05:09
    really not always just about making more
  • 00:05:11
    money that helps but if you're just
  • 00:05:13
    going to continue to spend up to however
  • 00:05:15
    much you make you're never actually
  • 00:05:16
    going to to you're never actually going
  • 00:05:18
    to grow your wealth and so Concepts like
  • 00:05:21
    you're not what you wear or you're not
  • 00:05:23
    the car you drive and that happiness
  • 00:05:25
    really isn't derived by buying more
  • 00:05:27
    things but like spending intentionally
  • 00:05:29
    like these are all things that I've
  • 00:05:30
    taken to heart when I think about how to
  • 00:05:32
    manage my finances and so that color is
  • 00:05:34
    sort of how I talk about all these
  • 00:05:36
    things and so again I think that's
  • 00:05:38
    really important to keep in mind as we
  • 00:05:40
    talk about topics like this
  • 00:05:43
    so my values I try to set very specific
  • 00:05:46
    goals like I know that I would like to
  • 00:05:48
    be financially independent within 10 to
  • 00:05:50
    15 years and so with that in mind it
  • 00:05:53
    makes it very easy to start to run
  • 00:05:55
    calculations about what is it what will
  • 00:05:56
    it take to achieve that
  • 00:05:59
    um I tend to be very diverse and pay
  • 00:06:01
    cash whenever possible for things I
  • 00:06:03
    don't like taking out loans however from
  • 00:06:05
    a pure numbers standpoint
  • 00:06:07
    um given the high inflationary
  • 00:06:09
    environment we are currently in and if
  • 00:06:10
    you get a loan at a really low interest
  • 00:06:12
    rate you will come out ahead by taking
  • 00:06:14
    out the loan rather than paying for
  • 00:06:16
    something in cash up front but
  • 00:06:18
    personally I really hate doing that so I
  • 00:06:20
    have a hard time doing it even though I
  • 00:06:22
    know the numbers work out
  • 00:06:24
    um so again these are things that are
  • 00:06:26
    sort of personal decisions my general
  • 00:06:29
    tendency is to try to work hard now to
  • 00:06:31
    reap the benefits later I'm willing to
  • 00:06:33
    delay gratification I think anyone in
  • 00:06:35
    who's decided to take a career in
  • 00:06:37
    medicine at least believes in that to
  • 00:06:39
    some degree
  • 00:06:40
    um but I'm willing to continue that a
  • 00:06:43
    little little bit longer to try to
  • 00:06:45
    achieve some to try to achieve some more
  • 00:06:47
    aggressive goals in the long term and
  • 00:06:49
    then when I as I mentioned I believe in
  • 00:06:51
    spending intentionally and all the data
  • 00:06:53
    suggests that happiness comes from
  • 00:06:55
    spending on experiences rather than just
  • 00:06:57
    buying more stuff so I tend to be more
  • 00:06:59
    willing to spend on like a nice vacation
  • 00:07:01
    with my family rather than just like you
  • 00:07:04
    know a nicer car that I drive every day
  • 00:07:05
    or things like that like how do I that's
  • 00:07:08
    how I sort of think about the best way
  • 00:07:09
    to utilize my money is sort of
  • 00:07:11
    maximizing the utility of it you know am
  • 00:07:13
    I saying that I you know follow this
  • 00:07:15
    strictly no but again this is sort of
  • 00:07:17
    the place that I come from when I talk
  • 00:07:18
    about subjects like how to plan your
  • 00:07:20
    finances and so again important to know
  • 00:07:24
    so I'm not here to say that there's a
  • 00:07:26
    one-size-fits-all solution but
  • 00:07:28
    um I think it's a reasonable place to
  • 00:07:30
    start for a lot of people and you'll
  • 00:07:31
    have to adjust it based on sort of the
  • 00:07:33
    goals you want to achieve
  • 00:07:34
    so the first thing that gets that you
  • 00:07:36
    get to based on that is setting your
  • 00:07:38
    goals right if you don't know what your
  • 00:07:39
    goal is how are you going to know when
  • 00:07:41
    you if you're making progress toward it
  • 00:07:43
    how you're going to achieve it the more
  • 00:07:45
    specific you are the more likely you are
  • 00:07:48
    to be able to figure out if you're
  • 00:07:50
    making progress to it and that you
  • 00:07:52
    actually would be successful at it so
  • 00:07:54
    the first thing is to really set the
  • 00:07:56
    goals that you want to achieve and then
  • 00:07:58
    I do think there's a lot of value in
  • 00:08:00
    writing this down somewhere so when I've
  • 00:08:02
    talked about investing I often talk
  • 00:08:03
    about an investor investing statement
  • 00:08:06
    like what is the strategy you're going
  • 00:08:08
    to use just writing it down because I
  • 00:08:10
    think having it somewhere saying like
  • 00:08:12
    this is what I'm going to follow and
  • 00:08:14
    forcing yourself to like say okay if I'm
  • 00:08:16
    going to make changes to this I have to
  • 00:08:18
    rewrite this I have to do something like
  • 00:08:19
    adding that little bit of extra
  • 00:08:21
    difficulty in terms of like making
  • 00:08:23
    decisions like that I think keeps you
  • 00:08:26
    from sort of like changing from time
  • 00:08:28
    from like just changing over time
  • 00:08:30
    without thinking about it that you have
  • 00:08:31
    something to kind of reference over time
  • 00:08:33
    and anger to
  • 00:08:35
    so what do I mean by this um some
  • 00:08:37
    examples like if you're talking about
  • 00:08:39
    retirement what time frame do you want
  • 00:08:40
    to retire in is it 10 years is it 30
  • 00:08:42
    years if you want to retire like what do
  • 00:08:45
    you mean by retirement how much do you
  • 00:08:46
    want to be able to spend each year
  • 00:08:48
    if you want to buy a house what time
  • 00:08:50
    frame do you want to buy that house in
  • 00:08:51
    what's your budget like how getting very
  • 00:08:53
    specific to this because that's how
  • 00:08:55
    you're going to get the information you
  • 00:08:56
    need to run the numbers to figure out
  • 00:08:58
    whether or not this is a reasonable plan
  • 00:09:00
    or not if you have student loans when
  • 00:09:02
    are you going to pay them off how are
  • 00:09:03
    you going to deal with them
  • 00:09:04
    if you have kids you'd like and you want
  • 00:09:06
    to support them through college how much
  • 00:09:08
    do you want to save for college how much
  • 00:09:09
    time do you have you know that's all the
  • 00:09:12
    information you need to be able to run
  • 00:09:13
    the numbers and actually figure out what
  • 00:09:15
    it's going to take to get there rather
  • 00:09:17
    than a more nebulous well I just want to
  • 00:09:19
    buy I just want to retire in 30 years
  • 00:09:21
    and I'm not sure how much I need but I'm
  • 00:09:22
    just going to save and hope that I get
  • 00:09:24
    there well if you can try to be specific
  • 00:09:26
    about it understanding that some of
  • 00:09:28
    these numbers will evolve over time that
  • 00:09:30
    at least gives you a sense of whether
  • 00:09:32
    you're checking along the way whether or
  • 00:09:34
    long whether or not you're on track
  • 00:09:36
    so specificity here is really key even
  • 00:09:39
    if it's not perfect the first time you
  • 00:09:41
    can always go and revise it but starting
  • 00:09:43
    with something specific again makes it a
  • 00:09:45
    lot easier to figure out are you making
  • 00:09:47
    progress towards your goal
  • 00:09:49
    so how do you actually implement this I
  • 00:09:51
    think that the real answer comes in
  • 00:09:52
    making a budget now I'm not saying that
  • 00:09:55
    you have to use budgeting software and
  • 00:09:57
    that you have to like you know adhere to
  • 00:09:59
    it strictly but I think you have to get
  • 00:10:01
    a sense in the beginning of whether
  • 00:10:03
    everything you want to do and the goals
  • 00:10:05
    you want to achieve actually fit within
  • 00:10:06
    the budget that you actually have
  • 00:10:08
    because if you don't start there you end
  • 00:10:10
    up in the situation that I find a lot of
  • 00:10:12
    people are in is which is that at the
  • 00:10:14
    end of the month they're like I don't
  • 00:10:16
    have any money in my bank account to
  • 00:10:17
    save like I don't understand how I'm
  • 00:10:19
    supposed to save for retirement so my
  • 00:10:21
    next question is well what's your budget
  • 00:10:22
    where's your money going and if you
  • 00:10:24
    can't answer that question then there's
  • 00:10:26
    no way you're going to ever know how to
  • 00:10:28
    save for retirement or how much money
  • 00:10:29
    you have because you've never really
  • 00:10:30
    tracked it in any meaningful way
  • 00:10:33
    so here's like a re here's sort of a
  • 00:10:35
    starting budget just to throw out sort
  • 00:10:37
    of like what I think are the big things
  • 00:10:39
    you need to think of so we'll say as an
  • 00:10:42
    attending you're making 250 000 a year
  • 00:10:44
    after taxes and everything else it comes
  • 00:10:47
    out to about 15
  • 00:10:49
    000 a month which is quite a big right
  • 00:10:52
    um for many residents that's like
  • 00:10:55
    a quarter of their current salary so a
  • 00:10:58
    lot
  • 00:10:59
    um so let's say so you're going to want
  • 00:11:01
    to start saving for retirement right the
  • 00:11:02
    sooner you do that the better compound
  • 00:11:04
    interest and everything so we'll say
  • 00:11:06
    you're going to save about 20 of it
  • 00:11:08
    toward retirement each month um so that
  • 00:11:10
    works out to a little over four thousand
  • 00:11:12
    dollars if you have 200 Grand in student
  • 00:11:15
    loans as I did when I started out um
  • 00:11:17
    you're probably going to be making
  • 00:11:18
    minimum payments of at least twenty one
  • 00:11:20
    hundred dollars a month toward that
  • 00:11:21
    you've bought term life insurance
  • 00:11:23
    because you have dependents that's
  • 00:11:25
    really cheap that's only about 50 bucks
  • 00:11:27
    disability insurance is going to be a
  • 00:11:28
    lot more expensive though maybe on the
  • 00:11:30
    order of four or five hundred dollars
  • 00:11:32
    depending on how much you got
  • 00:11:34
    you're you've decided not to buy a house
  • 00:11:36
    so you're renting and you're renting a
  • 00:11:38
    house for a family of four so we'll say
  • 00:11:40
    it's twenty five hundred dollars a month
  • 00:11:41
    and groceries for a family of four will
  • 00:11:44
    say okay let's say it costs you a
  • 00:11:46
    thousand hopefully it's a little less
  • 00:11:47
    than that I hope it might be more it
  • 00:11:48
    again depends on your situation and then
  • 00:11:50
    of course you're gonna have to pay
  • 00:11:51
    utilities some they're not included in
  • 00:11:53
    your rent so we'll say that's 350 cell
  • 00:11:55
    phone electric things like that
  • 00:11:57
    so your total left over after accounting
  • 00:11:59
    for retirement savings student loans
  • 00:12:01
    Insurance living General living expenses
  • 00:12:05
    is four thousand three hundred forty
  • 00:12:07
    dollars a month and so you've probably
  • 00:12:09
    heard that acknowledge the metaphor of
  • 00:12:12
    the jar and the rocks and that if you
  • 00:12:14
    put the big rocks in first you can get
  • 00:12:16
    everything in there but if you put the
  • 00:12:18
    sand in first you can't get the rocks in
  • 00:12:19
    there I think that is an apt metaphor
  • 00:12:22
    for thinking about your budget if you
  • 00:12:24
    account for in your budget all the
  • 00:12:26
    things that you know you have to account
  • 00:12:27
    for and the things that are really
  • 00:12:28
    important like saving for retirement
  • 00:12:30
    your loans all of that and then figure
  • 00:12:33
    out how much you actually have to spend
  • 00:12:34
    on everything else afterwards then it's
  • 00:12:37
    a lot easier to figure out like can I
  • 00:12:39
    afford taking on a car a car uh note can
  • 00:12:43
    I afford that
  • 00:12:44
    you know can I afford like a really
  • 00:12:46
    large mortgage within my budget and
  • 00:12:48
    still achieve the other things that I
  • 00:12:50
    know I have I'm going to have to deal
  • 00:12:52
    with rather than the other way around
  • 00:12:53
    where you make the large purchase you
  • 00:12:55
    accrue all this debt and you didn't take
  • 00:12:58
    into account well I would I should be
  • 00:13:00
    saving for retirement I should be trying
  • 00:13:02
    to pay off my student loans so you have
  • 00:13:04
    to account for the big things first in
  • 00:13:05
    your budget before you really understand
  • 00:13:07
    how much you have to work with and so
  • 00:13:10
    while that fifteen thousand dollars
  • 00:13:11
    looks like a lot a good chunk is going
  • 00:13:14
    to be taken out by saving for retirement
  • 00:13:15
    and your loans and so you have to
  • 00:13:17
    account for all those big things first
  • 00:13:19
    before you start talking about making
  • 00:13:21
    any large purchases or taking on any
  • 00:13:22
    additional debt
  • 00:13:24
    so do you know where your money goes
  • 00:13:26
    because if the answer is no you really
  • 00:13:27
    need to because that's the only way that
  • 00:13:29
    you're gonna if you're you have any
  • 00:13:31
    chance of figuring out are you going to
  • 00:13:33
    where is where to sort of where there's
  • 00:13:35
    room in your budget to cut back on
  • 00:13:37
    things to save more for retirement or
  • 00:13:39
    how do you sort of what how much you
  • 00:13:41
    have in the way of resources or like if
  • 00:13:42
    you don't understand why you don't have
  • 00:13:44
    money at the end of the month like you
  • 00:13:45
    have to know where it's going there are
  • 00:13:47
    really easy ways to do this I use mint
  • 00:13:49
    personally
  • 00:13:51
    um and just use most of my purchases are
  • 00:13:53
    done through a credit card also because
  • 00:13:55
    of you know purchase protection and
  • 00:13:57
    credit and points and cash back stuff so
  • 00:14:00
    generally there's a lot of reasons to
  • 00:14:02
    make purchases with credit rather than
  • 00:14:04
    with cash as long as you pay off the
  • 00:14:06
    balance each month
  • 00:14:07
    um but there are many other budgeting
  • 00:14:09
    software and sort of tracking software
  • 00:14:11
    out there depending on sort of what you
  • 00:14:12
    prefer but using something that you can
  • 00:14:14
    sort of use on a regular basis that's
  • 00:14:16
    that's sort of the key is that it's
  • 00:14:17
    something that you'll actually keep up
  • 00:14:19
    with
  • 00:14:20
    now the general order of operations so
  • 00:14:22
    say you do have money left over and
  • 00:14:24
    you're not immediately spending it on
  • 00:14:26
    something like what do you do with this
  • 00:14:28
    extra money you've already accounted for
  • 00:14:29
    retirement savings and everything else
  • 00:14:31
    right so everything in that original
  • 00:14:32
    budget so I think if you have money that
  • 00:14:35
    you're not sure of what to do with you
  • 00:14:37
    do the first thing is to make sure that
  • 00:14:39
    you have an emergency fund you're going
  • 00:14:41
    to need ideally three to six months of
  • 00:14:43
    expenses so that you know whenever they
  • 00:14:47
    do surveys of like can Americans afford
  • 00:14:50
    a 400 emergency without going into debt
  • 00:14:52
    you know 40 to 50 percent of respondents
  • 00:14:54
    to that survey say no
  • 00:14:56
    um and I think no physician should ever
  • 00:14:59
    be in that position and I think you know
  • 00:15:02
    with the pandemic and everything else a
  • 00:15:03
    lot of people have learned the value of
  • 00:15:05
    an emergency fund so I feel like I don't
  • 00:15:07
    have to point out this quite so much but
  • 00:15:09
    I still put it on there like that's the
  • 00:15:10
    first thing you want to give yourself
  • 00:15:11
    that buffer just in case those large
  • 00:15:13
    expenses come up so that you're not
  • 00:15:15
    caught off guard that you have a bit of
  • 00:15:16
    a cushion then if you if you have
  • 00:15:19
    retirement accounts with your employer
  • 00:15:21
    and they offer a match always put in
  • 00:15:23
    enough to get that match that is free
  • 00:15:24
    money I consider that as part of your
  • 00:15:27
    um salary you just have to contribute to
  • 00:15:29
    your retirement plan in order to get it
  • 00:15:31
    so if they're offering a 50 percent
  • 00:15:33
    match 100 match on your contributions
  • 00:15:36
    like you always want to take it there's
  • 00:15:37
    no investment that you're going to make
  • 00:15:39
    that's ever going to keep that then if
  • 00:15:41
    you have really high interest debt
  • 00:15:43
    anything above eight percent or above
  • 00:15:45
    that's got to go that's really got to be
  • 00:15:47
    a priority to get rid of because there
  • 00:15:49
    is no investment that you're going to be
  • 00:15:50
    able to make that's going to
  • 00:15:52
    consistently outpace that like that is
  • 00:15:54
    something that's just going to be a drag
  • 00:15:55
    on your finances the longer it exists
  • 00:15:57
    and it accumulates you've got to work on
  • 00:16:00
    taking care of that as soon as possible
  • 00:16:02
    then Roth IRA most attending physicians
  • 00:16:05
    you're not going to be able to make
  • 00:16:07
    direct contributions and you're not
  • 00:16:09
    going to be able to deduct traditional
  • 00:16:10
    contributions to your IRA so you're
  • 00:16:13
    going to want to make a backdoor Roth
  • 00:16:15
    contribution which we've covered in
  • 00:16:16
    Prior talks but if you're not familiar
  • 00:16:18
    it's very easy to look up basically you
  • 00:16:20
    make a tradition a non-deductible
  • 00:16:22
    traditional contribution to your
  • 00:16:23
    traditional IRA and then you convert it
  • 00:16:25
    to a Roth and long story short people
  • 00:16:27
    used to be concerned that maybe this was
  • 00:16:29
    going to be declared illegal but as of
  • 00:16:31
    the tax cuts and tax cuts and jobs Act
  • 00:16:34
    of 2017 this is officially legal to do
  • 00:16:37
    so that park has been taken away and so
  • 00:16:40
    it's extra for a tax advantage space so
  • 00:16:42
    you should use it then you go back to
  • 00:16:44
    your
  • 00:16:45
    401k or 403 b accounts your other tax
  • 00:16:48
    advantage accounts and you fill those up
  • 00:16:50
    and then you have moderate interest
  • 00:16:52
    loans now could you make a decision
  • 00:16:54
    around you know debt that you have
  • 00:16:55
    that's in the four to eight percent
  • 00:16:57
    range and say I'd rather invest it
  • 00:16:59
    rather than paying down my loans or I'd
  • 00:17:01
    rather pay down my loans rather than
  • 00:17:02
    investing it that's a bit of a personal
  • 00:17:04
    decision and depends on how debt adverse
  • 00:17:06
    you are given the general returns of the
  • 00:17:09
    market over long periods of time you
  • 00:17:11
    will much of the time come out ahead if
  • 00:17:13
    your debt is in that range by investing
  • 00:17:15
    and just continuing to make the payment
  • 00:17:17
    regular payments on your loans rather
  • 00:17:19
    than paying off your loans faster but
  • 00:17:21
    again this is where that whole personal
  • 00:17:23
    finances personal thing comes in maybe
  • 00:17:26
    you're really dead averse and having
  • 00:17:27
    that additional debt just keeps you up
  • 00:17:29
    at night and you're just going to sleep
  • 00:17:31
    a lot better if you get rid of it faster
  • 00:17:32
    that's okay there's no problem with
  • 00:17:35
    doing that like at the end of the day
  • 00:17:37
    this has to be a plan that you can
  • 00:17:38
    Implement that you feel comfortable with
  • 00:17:40
    so if it makes you feel better to do it
  • 00:17:42
    I can't tell you that it's clearly wrong
  • 00:17:44
    to do pay off your loans faster that is
  • 00:17:47
    always fine and then finally if you've
  • 00:17:49
    made it up to that point and you still
  • 00:17:51
    have money left over that you're not
  • 00:17:52
    sure what to do with that you don't have
  • 00:17:54
    a specific plan for that's where putting
  • 00:17:56
    in a taxable brokerage account taxable
  • 00:17:58
    just referring to a regular brokerage
  • 00:18:00
    account that doesn't have any tax
  • 00:18:01
    benefits just investing it like with
  • 00:18:03
    Charles Schwab or Vanguard or Fidelity
  • 00:18:05
    or whatever
  • 00:18:07
    um and just investing it so that it can
  • 00:18:09
    also work for you you should always be
  • 00:18:11
    thinking about how you can make your
  • 00:18:12
    money work for you and accrue additional
  • 00:18:15
    money without you having to work right
  • 00:18:16
    so that that sort of happening in the
  • 00:18:19
    background without you having to take
  • 00:18:21
    sort of active measures to continue to
  • 00:18:23
    build your wealth
  • 00:18:24
    so you know the one question I get a lot
  • 00:18:27
    is where should I keep my extra money
  • 00:18:30
    like people are like well if I put it in
  • 00:18:33
    the market then
  • 00:18:36
    I'm going to be able to get much higher
  • 00:18:37
    returns than if I put it in a high yield
  • 00:18:39
    savings account so I know I'm not gonna
  • 00:18:41
    I'm not I know I'm not gonna need the
  • 00:18:42
    money for a year I want to get the
  • 00:18:44
    higher returns in the market so I'm
  • 00:18:45
    going to just put in a stock market
  • 00:18:47
    account well the problem is is that like
  • 00:18:49
    the market in any given year can go all
  • 00:18:53
    it could go up a lot or it could go down
  • 00:18:55
    a lot so this is rolling returns of the
  • 00:18:57
    S P 500 the 500 largest stock so
  • 00:19:00
    probably the index that a lot of one of
  • 00:19:01
    the indices people are very familiar
  • 00:19:03
    with
  • 00:19:05
    um and is usually sort of the the
  • 00:19:06
    surrogate when we when we talk about
  • 00:19:08
    like the U.S stock market and investing
  • 00:19:10
    in it like investing in an index fund
  • 00:19:13
    um you can see that in any given year
  • 00:19:15
    um the the S P 500 has returned either
  • 00:19:18
    60 increase in value or has decreased
  • 00:19:21
    more than 40 in value and you know that
  • 00:19:25
    graph I showed you was well before the
  • 00:19:28
    beginning of this year where the stock
  • 00:19:29
    market has tanked uh 18 19 in value
  • 00:19:32
    since uh January so I think people
  • 00:19:36
    people are a little less comfortable now
  • 00:19:37
    fortunately trying to save their money
  • 00:19:39
    in the market if they're going to be
  • 00:19:41
    using it in the short term because
  • 00:19:43
    there's a real possibility that you lose
  • 00:19:45
    a lot of value on that investment the
  • 00:19:47
    reason that you have to invest for
  • 00:19:49
    long-term for the long term for
  • 00:19:51
    retirement is as you can see when you
  • 00:19:52
    get to the 15 20-year range there are
  • 00:19:55
    basically no 20 Earth even or longer
  • 00:19:57
    year periods where there's a negative
  • 00:19:59
    return that it sort of averages to like
  • 00:20:02
    you know somewhere between like six
  • 00:20:03
    percent per year to 18 per year for
  • 00:20:05
    different 20-year periods so in the long
  • 00:20:09
    run if your money's going to be there
  • 00:20:10
    for a long time you want to put it in
  • 00:20:11
    the market but if you're only going to
  • 00:20:13
    be leaving it there for a year or two
  • 00:20:16
    years five years
  • 00:20:18
    um and you don't and you want to make
  • 00:20:19
    sure that you have it in that time frame
  • 00:20:21
    you know you're better off just putting
  • 00:20:23
    it in a high yield savings account and
  • 00:20:24
    just saying like look I know I'm not
  • 00:20:26
    going to get good Returns on it but I
  • 00:20:27
    know it's also not going to lose value
  • 00:20:29
    so and the other thing is that like if
  • 00:20:31
    you're talking about like a seven or
  • 00:20:33
    eight percent return per year like
  • 00:20:35
    you're really not getting that much over
  • 00:20:37
    a two or three year time frame like
  • 00:20:39
    you're not making that much more money
  • 00:20:41
    in that time frame versus getting like
  • 00:20:43
    point five percent one percent whatever
  • 00:20:45
    so like you're taking on a lot of risk
  • 00:20:48
    for not a lot of benefit and so that's
  • 00:20:50
    why my general advice usually is for
  • 00:20:51
    anything five years or less if you think
  • 00:20:53
    you're going to spend that money just
  • 00:20:55
    put it in a high yield savings account
  • 00:20:56
    if you're going to spend if it's going
  • 00:20:58
    to be much 15 years or longer then I
  • 00:21:01
    would invest it
  • 00:21:03
    people
  • 00:21:06
    and okay another big thing that I
  • 00:21:09
    recommend is don't grow into your income
  • 00:21:11
    all at once
  • 00:21:12
    um so as you saw from the example like
  • 00:21:14
    250 000 a year ends up being fifteen
  • 00:21:17
    thousand dollars a month after taxes so
  • 00:21:19
    like even though the gross amount that
  • 00:21:21
    you're being paid has gone up like you
  • 00:21:23
    know four or five times your actual
  • 00:21:25
    take-home pay probably only went up like
  • 00:21:27
    three at most so it's not like it's a
  • 00:21:30
    it's a dramatic shift it's it's large to
  • 00:21:33
    be fair but it's not it's not often like
  • 00:21:35
    that dramatic and the other thing is
  • 00:21:37
    that like if you're still dealing with
  • 00:21:38
    student loans if you have like other
  • 00:21:40
    large debt that you're trying to get rid
  • 00:21:42
    of like you know you want to be careful
  • 00:21:44
    about suddenly increasing your your cost
  • 00:21:47
    of living you really want to make sure
  • 00:21:49
    that you've dealt with the major things
  • 00:21:51
    first while you're used to living like a
  • 00:21:53
    resident because it is so much easier to
  • 00:21:57
    um avoid inflating your lifestyle versus
  • 00:22:00
    cutting back once you get used to having
  • 00:22:02
    someone cut your grass or clean your
  • 00:22:04
    house all the time or things like that
  • 00:22:06
    like once you're used to those those
  • 00:22:08
    things as a normal part of your life
  • 00:22:10
    you're going to have a much harder time
  • 00:22:11
    taking those away so you can then divert
  • 00:22:14
    that money to something else so the key
  • 00:22:16
    is to try to not suddenly grow into your
  • 00:22:18
    income now am I saying that I lived in
  • 00:22:21
    aesthetic lifestyle like for the first
  • 00:22:23
    four years my first four years as an
  • 00:22:25
    attending no
  • 00:22:27
    um so I think that there is certainly
  • 00:22:28
    value in increasing your spending a
  • 00:22:30
    little bit but say like you know 10 or
  • 00:22:32
    20 percent that's still going to be a
  • 00:22:33
    fair bit you're still going to be able
  • 00:22:35
    to do a lot more than you did as a
  • 00:22:36
    resident but this way it gives you a lot
  • 00:22:39
    more in the way of monetary resources to
  • 00:22:41
    deal with those big rocks that you know
  • 00:22:42
    that you're gonna have to deal with the
  • 00:22:44
    other thing is that
  • 00:22:46
    delaying the time when you start
  • 00:22:48
    investing matters a lot because if
  • 00:22:50
    you're talking about an average return
  • 00:22:51
    of seven or eight percent per year like
  • 00:22:54
    you can't make up time loss so you know
  • 00:22:56
    if you start investing early in your
  • 00:22:58
    career versus delaying five years like
  • 00:23:00
    you have to save a lot more to get to
  • 00:23:03
    where you need to be by losing those
  • 00:23:05
    first five years so you really want to
  • 00:23:07
    make sure that you're prioritizing and
  • 00:23:09
    saving for retirement because those
  • 00:23:11
    first few years as an attending have a
  • 00:23:14
    really outsized effect on how much you
  • 00:23:16
    end up with at the end of your career
  • 00:23:18
    and the other thing to keep track of is
  • 00:23:20
    that you know as you spend more that
  • 00:23:22
    number that you need to retire will go
  • 00:23:24
    up as well as a rule of thumb if you
  • 00:23:27
    expect for a 30-year retirement to be
  • 00:23:28
    able you can withdraw four percent from
  • 00:23:31
    your total portfolio per year well that
  • 00:23:34
    means that you need to save 25 times
  • 00:23:36
    your annual spending to retire so if
  • 00:23:39
    your annual spending goes from 100 000 a
  • 00:23:41
    year to a hundred fifty thousand dollars
  • 00:23:43
    a year that's fifty thousand times 25
  • 00:23:47
    more that you're going to have to save
  • 00:23:49
    in order to be able to retire so another
  • 00:23:52
    really strong reason that you really
  • 00:23:53
    want to avoid sort of getting on the
  • 00:23:55
    hedonic treadmill and just continuing to
  • 00:23:57
    inflate your lifestyle because the more
  • 00:23:59
    you inflate your lifestyle the more you
  • 00:24:00
    spend the further away you're pushing
  • 00:24:03
    retirement and the less and
  • 00:24:04
    paradoxically and additionally the less
  • 00:24:07
    you're saving for retirement which also
  • 00:24:09
    means the further away you're pushing
  • 00:24:10
    retirement so all those things interact
  • 00:24:12
    with each other
  • 00:24:15
    people also ask about home ownership I
  • 00:24:18
    have strong feelings about this I can't
  • 00:24:20
    say that this is totally me that all of
  • 00:24:22
    this is mainstream but this is what I
  • 00:24:25
    this is what I would recommend
  • 00:24:26
    um I would generally recommend waiting a
  • 00:24:28
    year like when you take a new job before
  • 00:24:30
    you buy a house you don't know you don't
  • 00:24:33
    really know the group yet you don't
  • 00:24:35
    really know the area you don't know that
  • 00:24:36
    you're going to be staying there all the
  • 00:24:38
    statistics suggests that most Physicians
  • 00:24:40
    change jobs within the first three years
  • 00:24:42
    of taking their first job so and if you
  • 00:24:46
    buy a house you're going to be stuck
  • 00:24:47
    there for a bit because if you want to
  • 00:24:49
    actually guarantee that you're not going
  • 00:24:51
    to have to sell the house at a loss you
  • 00:24:53
    generally need to own it three to five
  • 00:24:55
    years because recall that not only when
  • 00:24:58
    you buy a house that
  • 00:25:00
    um there's the cost of the house to
  • 00:25:01
    factor in but you have to pay like a
  • 00:25:03
    four percent commission on the way in
  • 00:25:05
    and the six percent commission and fees
  • 00:25:07
    on the way out so like not only do you
  • 00:25:09
    have to hope that the house value goes
  • 00:25:11
    up and not down but you have to help you
  • 00:25:13
    it has to go up more and all the
  • 00:25:15
    transaction fees that are also involved
  • 00:25:17
    in order for you to walk away from that
  • 00:25:19
    with any with being just even net even
  • 00:25:22
    at the end of the day so you have to be
  • 00:25:24
    there for a bit to really reliably be
  • 00:25:26
    able to do that
  • 00:25:27
    I would plan to try to put 20 down if at
  • 00:25:30
    all possible
  • 00:25:31
    um there are physician loans out there
  • 00:25:33
    um that will let you put down five
  • 00:25:34
    percent even zero percent and not have
  • 00:25:37
    to pay private mortgage insurance the
  • 00:25:38
    downside to that is in order to do that
  • 00:25:40
    they Char they mean they offer you a
  • 00:25:42
    higher interest rate so it's not without
  • 00:25:44
    a downside but it is something that you
  • 00:25:47
    can potentially take advantage of if
  • 00:25:48
    you're cash poor but I would argue that
  • 00:25:51
    your would be in a better spot if you
  • 00:25:52
    just save up the down payment and are
  • 00:25:54
    able to get a lower interest rate on
  • 00:25:56
    your loan
  • 00:25:58
    um and the other thing that people talk
  • 00:26:00
    about that renting is throwing away
  • 00:26:01
    money it absolutely is not like everyone
  • 00:26:04
    says like oh well I can get the same
  • 00:26:06
    place and pay a lower mortgage well yeah
  • 00:26:08
    you should because rent has to include
  • 00:26:11
    things like maintenance and property
  • 00:26:13
    taxes and insurance so the mortgage on
  • 00:26:17
    the same property should be less than
  • 00:26:19
    the rent that you pay for a similar
  • 00:26:21
    property because the person who actually
  • 00:26:22
    owns the property that you're renting
  • 00:26:24
    from has to account for all those things
  • 00:26:26
    in addition to the person making a
  • 00:26:29
    profit off of the rent itself so you
  • 00:26:31
    can't sort of compare it because there
  • 00:26:33
    are all these additional costs that you
  • 00:26:34
    have to factor in that you don't have to
  • 00:26:36
    deal with as the renter
  • 00:26:39
    and then as I kind of implied before
  • 00:26:41
    buying a fancy new car I really push
  • 00:26:44
    against this like cars are depreciating
  • 00:26:45
    assets they are not in Investments if
  • 00:26:48
    you have large student loans you
  • 00:26:50
    definitely don't need another loan
  • 00:26:51
    payments
  • 00:26:52
    um and you know to the point where I
  • 00:26:55
    mentioned before that look if you are
  • 00:26:57
    have a choice between taking out a loan
  • 00:26:59
    at a really low interest rate in this in
  • 00:27:01
    the high inflationary environment are
  • 00:27:02
    you going to come out ahead by investing
  • 00:27:04
    that money yes but that's only if you
  • 00:27:07
    actually invest that money I think in
  • 00:27:09
    reality most people just take the car
  • 00:27:10
    loan instead of investing the difference
  • 00:27:12
    what they do with that money is they
  • 00:27:13
    spend it on something else and in that
  • 00:27:15
    case you're just paying an interest rate
  • 00:27:17
    you're not actually coming out ahead on
  • 00:27:18
    anything you have to actually invest the
  • 00:27:20
    difference for it to make sense from a
  • 00:27:22
    mathematical standpoint and from a
  • 00:27:24
    behavioral standpoint I don't know that
  • 00:27:26
    most people actually invest
  • 00:27:28
    um leasing I really push people away
  • 00:27:30
    from it really only makes sense if
  • 00:27:32
    you're going to buy a new car every two
  • 00:27:34
    to three years otherwise which I hope
  • 00:27:36
    most people aren't planning to do so
  • 00:27:39
    most people I think should not be
  • 00:27:41
    leasing the problem right now is that
  • 00:27:43
    you know cars are really expensive it's
  • 00:27:45
    a bad time to kind of buy a car in
  • 00:27:46
    general
  • 00:27:47
    um and if you need a car you're kind of
  • 00:27:49
    stuck but you know you don't need a
  • 00:27:51
    fancy car you're not what you drive like
  • 00:27:53
    again you have to decide for yourself
  • 00:27:55
    what's most important to you and if it's
  • 00:27:57
    really really important to you that you
  • 00:27:58
    drive a fancy car at least go into it
  • 00:28:01
    with your eyes open about what the
  • 00:28:02
    long-term costs of that are and what
  • 00:28:04
    you're having and how that actually
  • 00:28:05
    affects the rest of your budget
  • 00:28:08
    and then as I alluded to before spending
  • 00:28:11
    intentionally again research shows that
  • 00:28:13
    spending on experiences rather than
  • 00:28:15
    buying more things is what actually make
  • 00:28:17
    is what tends to increase happiness so
  • 00:28:20
    think about if you're going to spend on
  • 00:28:22
    like different things like why are you
  • 00:28:23
    doing it like what do you get out of it
  • 00:28:25
    what how does this improve your life how
  • 00:28:27
    are you buying more time are you buying
  • 00:28:29
    help so you can spend more time with
  • 00:28:30
    your family or that you know you're
  • 00:28:32
    working long hours and you just don't
  • 00:28:33
    want to think about something and you
  • 00:28:34
    can fit into your budget I think that's
  • 00:28:36
    very reasonable I certainly do that
  • 00:28:39
    um bites
  • 00:28:40
    um I do that with the knowledge of like
  • 00:28:42
    how that affects the rest of my budget
  • 00:28:44
    so you know I'm not saying that you
  • 00:28:46
    can't get you know someone to help
  • 00:28:48
    someone to clean your house periodically
  • 00:28:50
    or like someone to help like with main
  • 00:28:52
    lawn maintenance and things like that
  • 00:28:54
    but you have to understand how that
  • 00:28:56
    affects your budget how it if it fits in
  • 00:28:58
    your budget and making sure that you're
  • 00:28:59
    it's not at the expense of other larger
  • 00:29:01
    goals that you're trying to achieve
  • 00:29:05
    all right so that's a lot
  • 00:29:08
    um so I'll pause there for questions for
  • 00:29:10
    a second
  • 00:29:24
    all right so
  • 00:29:27
    um so the next part of this really is
  • 00:29:28
    going to focus on financial advisors and
  • 00:29:31
    you know if you're talking about
  • 00:29:32
    planning like a lot of the stuff I think
  • 00:29:33
    I was talking about before and you're
  • 00:29:35
    less familiar with it or you just want
  • 00:29:37
    someone to check your work you know
  • 00:29:39
    people are going to start talking about
  • 00:29:40
    like okay well I know these are the
  • 00:29:42
    things I need to do I would like some
  • 00:29:44
    help in doing them and so I would like
  • 00:29:46
    to find a financial advisor that I can
  • 00:29:47
    trust that's going to walk me through
  • 00:29:49
    this that's really going to have my own
  • 00:29:50
    my best interests at heart the problem
  • 00:29:52
    is is that like without doing any
  • 00:29:54
    research on who you're working with or
  • 00:29:56
    too often like what I find is people get
  • 00:29:58
    referrals from other people you know
  • 00:30:00
    it's hard to know whether the person
  • 00:30:01
    you're working with is going to be the
  • 00:30:03
    next Bernie Madoff or not so you know if
  • 00:30:05
    you're going to use a financial advisor
  • 00:30:07
    I think what I'm what I focus on is like
  • 00:30:09
    the cost of doing so and understanding
  • 00:30:11
    different cost structures and how
  • 00:30:12
    they're paid in addition to doing your
  • 00:30:15
    research on the advisor then self and
  • 00:30:17
    making sure that they are a good fit for
  • 00:30:18
    your needs and that they are reasonably
  • 00:30:21
    trustworthy and should know what they're
  • 00:30:22
    talking about
  • 00:30:24
    you know there's this quote that I love
  • 00:30:25
    from Bill Bernstein he's a former
  • 00:30:27
    neurologist that turned a financial uh
  • 00:30:30
    Guru but basically you're engaged in a
  • 00:30:33
    life and death struggle with the
  • 00:30:34
    financial services industry if you act
  • 00:30:36
    on the assumption that every broker
  • 00:30:38
    insurance salesman and financial advisor
  • 00:30:39
    you encounter is a hardened criminal you
  • 00:30:42
    will do just fine so remember what I
  • 00:30:43
    said at the top of the hour I can't tell
  • 00:30:45
    you how many times I have been
  • 00:30:47
    approached as the program director for
  • 00:30:50
    our fellowship about like hey I'm a
  • 00:30:53
    financial advisor I know you know I know
  • 00:30:55
    your trainees ask a lot about this stuff
  • 00:30:57
    like I'd really like a chance to take
  • 00:30:58
    them out to dinner and talk about it and
  • 00:31:00
    I always say no because I really don't
  • 00:31:03
    certainly don't want to put my stamp of
  • 00:31:05
    approval on any advisor like selling
  • 00:31:07
    their services but like I the reason
  • 00:31:09
    they're doing that is because again they
  • 00:31:11
    have something to gain out of it they're
  • 00:31:12
    trying to bot they're trying to gain
  • 00:31:14
    your trust they're trying to buy your
  • 00:31:16
    business and so you always have to keep
  • 00:31:18
    in mind that that is the their ultimate
  • 00:31:20
    goal like that is what drives them to do
  • 00:31:22
    what they do
  • 00:31:24
    now with that in mind
  • 00:31:27
    um why would you use a financial advisor
  • 00:31:29
    well I think that there are there are
  • 00:31:31
    good reasons and I understand that most
  • 00:31:33
    people are not going to want to do this
  • 00:31:35
    all on their own I think it is possible
  • 00:31:37
    if you were willing to put in a little
  • 00:31:38
    bit of work to do so and that the
  • 00:31:40
    ongoing work on maintaining this really
  • 00:31:42
    is not hard and takes me maybe like an
  • 00:31:45
    hour or two a year at most but I do
  • 00:31:48
    understand as I've tried to talk about
  • 00:31:51
    this that many people don't really want
  • 00:31:53
    to go down that route and that's okay I
  • 00:31:55
    think using a financial advisor then is
  • 00:31:57
    in your best interest is in your best
  • 00:31:59
    interest but you need to ask about why
  • 00:32:01
    and so if you just if you are interested
  • 00:32:04
    in this but you're like hey I'm new to
  • 00:32:06
    this I need someone to double check my
  • 00:32:08
    work that's very reasonable you've done
  • 00:32:10
    your reading you're just looking for
  • 00:32:12
    someone who does this for a living to
  • 00:32:13
    just say like you know sign off on your
  • 00:32:15
    work and just get their input and you
  • 00:32:16
    can decide what to do with that you know
  • 00:32:18
    this is something you don't want to
  • 00:32:20
    spend time on I know I'm weird I know I
  • 00:32:22
    like this stuff and I know most people
  • 00:32:23
    are not like that and and that's okay so
  • 00:32:26
    you know I want people if people want to
  • 00:32:29
    spend less time on this that's fine this
  • 00:32:30
    is not however using a buyer does not
  • 00:32:32
    obviate you of the need to know about
  • 00:32:34
    this you still need to do some reading
  • 00:32:37
    you can't do zero reading on this and
  • 00:32:38
    have them do everything for you
  • 00:32:40
    another big thing which has been
  • 00:32:42
    supported in the data is that they talk
  • 00:32:44
    about how people who have advisors end
  • 00:32:46
    up with a higher net worth than people
  • 00:32:47
    who don't have advisors I think a lot of
  • 00:32:49
    that is born out of the I the fact that
  • 00:32:51
    like a lot of people see the top stock
  • 00:32:53
    market tumble like it did earlier this
  • 00:32:55
    year and sell at the bottom and that's
  • 00:32:57
    how you lose money investing if you can
  • 00:32:59
    actually hold on and not sell and
  • 00:33:01
    continue to buy as the market goes down
  • 00:33:04
    that's how you make money and I think
  • 00:33:06
    having an advisor helping you manage
  • 00:33:08
    that and coaching you through it the
  • 00:33:10
    first time you deal with it and saying
  • 00:33:11
    like don't sell don't sell here's why
  • 00:33:13
    and you trust them yes you're going to
  • 00:33:16
    end up with a higher net worth than the
  • 00:33:17
    guy that sold at the bottom of the
  • 00:33:18
    market so that's another way that they
  • 00:33:21
    can be helpful and then one that I
  • 00:33:23
    honestly have struggled with myself I'll
  • 00:33:25
    admit my wife really has no interest in
  • 00:33:27
    this stuff I've tried to teach her she's
  • 00:33:30
    just not interested in my no that's some
  • 00:33:33
    people just don't want to do this so
  • 00:33:35
    even if you are motivated to do all this
  • 00:33:37
    to learn all this on your own you know
  • 00:33:39
    one of the worries that I have is
  • 00:33:40
    whether
  • 00:33:42
    you know if she's not if I'm not around
  • 00:33:44
    to help how is she going to manage
  • 00:33:45
    everything because she has some
  • 00:33:47
    knowledge but not a lot and she's going
  • 00:33:48
    to need some help and if I can help
  • 00:33:51
    select an advisor that I know will do
  • 00:33:52
    right by her who helps her influence a
  • 00:33:54
    plan that I also had a hand in and I
  • 00:33:57
    trust and we have the same uh
  • 00:33:59
    perspective on things and I can feel a
  • 00:34:01
    lot better in case something happens to
  • 00:34:03
    me so I think that that is a real
  • 00:34:05
    consideration and a reason to consider a
  • 00:34:07
    financial advisor even if you do do all
  • 00:34:09
    this on your own
  • 00:34:10
    so here are the big things I think you
  • 00:34:12
    need to think about when you're talking
  • 00:34:14
    about a financial advisor first off how
  • 00:34:16
    are they paid like you need to figure
  • 00:34:18
    out what are their incentives when they
  • 00:34:21
    talk about
  • 00:34:22
    what things you should purchase and get
  • 00:34:24
    involved in so that you understand are
  • 00:34:26
    is there any conflict of interest what
  • 00:34:28
    credentials should I be looking for you
  • 00:34:30
    know similar to our similar to our
  • 00:34:33
    profession you wouldn't want to go to
  • 00:34:35
    someone who hasn't had adequate training
  • 00:34:38
    you as we'll talk about the term
  • 00:34:40
    financial advisors kind of squishy but
  • 00:34:43
    there are certifications you can look
  • 00:34:44
    for that you can at least have some
  • 00:34:45
    guarantee that they went through like a
  • 00:34:47
    good amount of training and probably
  • 00:34:48
    have some sense of knowing what they're
  • 00:34:50
    talking about how do you find a
  • 00:34:52
    financially advisor and then finally how
  • 00:34:54
    do you choose one so talking about how
  • 00:34:57
    financial advisors are paid there are
  • 00:34:59
    four main models commissions assets
  • 00:35:02
    under management fee an annual retainer
  • 00:35:05
    or an hourly rate or a flat fee model
  • 00:35:09
    so commissions are exactly what they
  • 00:35:11
    sound like that you don't pay them
  • 00:35:13
    directly you don't pay them a fee like
  • 00:35:15
    to talk to them you talk to them for
  • 00:35:17
    free but the way that they make money is
  • 00:35:19
    by what they sell you right so it could
  • 00:35:21
    be an actively managed mutual fund it
  • 00:35:23
    could be an insurance policy but the
  • 00:35:25
    things they're talking to you about and
  • 00:35:27
    selling you are the things that are the
  • 00:35:30
    way that they are going to make their
  • 00:35:31
    money so if you think about it the
  • 00:35:33
    incentive of these advisors is to sell
  • 00:35:35
    you as many things as possible so they
  • 00:35:37
    can really rake in those commissions and
  • 00:35:39
    to specifically have you buy products
  • 00:35:41
    that are going to have the highest
  • 00:35:42
    commissions so if you talk to someone
  • 00:35:45
    who says that they're an advisor and
  • 00:35:47
    they say oh you don't have to pay me
  • 00:35:48
    anything let's just talk about this
  • 00:35:50
    stuff they're not doing it out of the
  • 00:35:52
    goodness of their heart they're doing it
  • 00:35:54
    because they likely get paid on
  • 00:35:55
    commissions and they're going to try to
  • 00:35:57
    steer you toward things where they can
  • 00:35:58
    really make a a high commission off of
  • 00:36:00
    you so my general advice when it comes
  • 00:36:03
    to this is keep your advice and
  • 00:36:04
    purchases separate
  • 00:36:06
    um I really don't advise people to have
  • 00:36:09
    the person that is advising them on
  • 00:36:10
    their finances also be the person that
  • 00:36:13
    is the person they buy their insurance
  • 00:36:14
    or
  • 00:36:16
    um or from or anything like that too
  • 00:36:18
    often I've had residents and fellows
  • 00:36:20
    I've spoken to who say they have an
  • 00:36:22
    advisor and I ask what kind of insurance
  • 00:36:24
    policies they have and they tell me they
  • 00:36:26
    have a whole life policy or a universe
  • 00:36:28
    or a universal life policy and I'm like
  • 00:36:29
    oh who does your advisor work with and
  • 00:36:32
    they tell me it's Northwestern Mutual I
  • 00:36:33
    don't know why it's always them but it
  • 00:36:35
    always seems to be and yeah they're not
  • 00:36:38
    an advisor they're an insurance salesman
  • 00:36:40
    so but they're acting like they're an
  • 00:36:42
    advisor because there's been really no
  • 00:36:43
    regulation of the term so again be very
  • 00:36:46
    very careful you really don't want to be
  • 00:36:48
    working with an advisor that works on
  • 00:36:49
    commissions their incentives are all
  • 00:36:51
    screwed up compared to what in compared
  • 00:36:53
    to making sure that they're doing right
  • 00:36:54
    by you
  • 00:36:56
    and assets under management fee means
  • 00:36:59
    that they you pay them a percentage of
  • 00:37:01
    total Holdings each year so usually on
  • 00:37:03
    the order of 0.3 to two percent most
  • 00:37:04
    commonly one percent per year so what it
  • 00:37:07
    means is that so say they're managing
  • 00:37:09
    your Investments then if you have
  • 00:37:12
    um a thousand dollars invested with them
  • 00:37:14
    usually more they'll require a minimum
  • 00:37:17
    um but if you had a thousand dollars
  • 00:37:19
    invested with them that would mean that
  • 00:37:21
    year you would owe them ten dollars
  • 00:37:22
    right for their management of your money
  • 00:37:24
    now some interests align here right like
  • 00:37:27
    so the more money that you have and the
  • 00:37:30
    better it performs the larger they're
  • 00:37:32
    cut right so they're if the whole pie
  • 00:37:34
    grows that percentage grows
  • 00:37:36
    um and as I mentioned they may require a
  • 00:37:38
    minimum amount you're not going to find
  • 00:37:39
    someone who's willing to put in a few
  • 00:37:41
    hours uh put in the time uh if they're
  • 00:37:43
    only going to get paid ten dollars a
  • 00:37:44
    year obviously so they'll often say like
  • 00:37:46
    oh well we'll manage your assets if you
  • 00:37:49
    have a minimum of 500 000 invested with
  • 00:37:51
    me or a million invested with me or
  • 00:37:52
    something like that
  • 00:37:54
    um the problem is is that when you do
  • 00:37:56
    get to those larger numbers you are
  • 00:37:58
    certainly overpaying uh for their work
  • 00:38:00
    so as I alluded to before like when it
  • 00:38:03
    comes to managing my retirement accounts
  • 00:38:06
    like basically what it boils down to is
  • 00:38:08
    I just have to rebalance to keep my
  • 00:38:10
    allocation the same year to year that
  • 00:38:12
    takes me about an hour or two once a
  • 00:38:15
    year
  • 00:38:16
    um if you have say two million dollars
  • 00:38:18
    in assets and you're paying them a one
  • 00:38:20
    percent management fee we're paying them
  • 00:38:22
    that your twenty thousand dollars to do
  • 00:38:25
    what probably takes them an hour or two
  • 00:38:28
    so you are certainly overpaying for the
  • 00:38:30
    amount of work that they're doing at
  • 00:38:32
    that point
  • 00:38:33
    the other thing is that you need to be
  • 00:38:35
    careful about looking at that one
  • 00:38:37
    percent the fee and thinking about like
  • 00:38:39
    oh this isn't that much like it's not
  • 00:38:41
    going to be not add up the thing is that
  • 00:38:43
    it is because you don't want to think of
  • 00:38:44
    it as like it's as one percent out of
  • 00:38:46
    your overall assets but rather as a one
  • 00:38:49
    percent less that you make on the return
  • 00:38:52
    on your investment for a year so say you
  • 00:38:54
    made eight percent on your Investments
  • 00:38:56
    and you're paying one someone one
  • 00:38:58
    percent per year to manage them it
  • 00:39:00
    actually works out to you making only
  • 00:39:01
    seven percent on your Investments each
  • 00:39:03
    year
  • 00:39:04
    so this is what that looks like so say
  • 00:39:06
    you're paying someone one percent like
  • 00:39:08
    advisor number three to manage your
  • 00:39:09
    Investments you invest 40 000 a year you
  • 00:39:12
    get an annualized return of seven
  • 00:39:13
    percent per year so your return after
  • 00:39:16
    expenses is only six percent and you end
  • 00:39:18
    up with 3.3 million if you had managed
  • 00:39:20
    it on your own and you didn't have an
  • 00:39:22
    assets under management fee you're going
  • 00:39:24
    to end up with 700 000 more at the end
  • 00:39:27
    of thirty years the more you invest per
  • 00:39:29
    year the larger the return the larger
  • 00:39:31
    that difference grows so you can see
  • 00:39:33
    that all these like really small
  • 00:39:35
    percentages really add up in the long
  • 00:39:37
    term and so you need to keep that in
  • 00:39:39
    mind if you're asking someone to manage
  • 00:39:41
    your Investments many of them will
  • 00:39:43
    request an assets under management fee
  • 00:39:45
    but you have to understand that if
  • 00:39:47
    you're doing that it is going to take a
  • 00:39:49
    pretty large chunk out of the amount
  • 00:39:50
    that you're going to end up with at the
  • 00:39:52
    end of the day so you have to decide for
  • 00:39:53
    yourself whether that seven hundred
  • 00:39:55
    thousand dollar difference or more is
  • 00:39:57
    worth it
  • 00:40:00
    another structure that advisors can get
  • 00:40:02
    paid under is an annual retainer
  • 00:40:05
    um so it's a flat fee structure that
  • 00:40:06
    you're paying them on a regular basis so
  • 00:40:08
    like once a year it can avoid conflicts
  • 00:40:11
    of interest right you pay them then at
  • 00:40:13
    that point like they it doesn't matter
  • 00:40:15
    what you buy or don't buy like it
  • 00:40:17
    doesn't change how much they make right
  • 00:40:19
    so it's nice because now in theory
  • 00:40:22
    there's no conflict of interest in terms
  • 00:40:23
    of you know what you purchase and how
  • 00:40:26
    much money they make because you're
  • 00:40:27
    paying them directly for their advice
  • 00:40:29
    the cost revise doesn't change over time
  • 00:40:31
    for an annual retainer usually it's four
  • 00:40:33
    thousand to ten thousand dollars per
  • 00:40:34
    year and oftentimes to entice people to
  • 00:40:37
    work with them they'll have other
  • 00:40:38
    services so they may have a lawyer that
  • 00:40:40
    works with them that you also get access
  • 00:40:41
    to by paying this annual retainer
  • 00:40:44
    so I think again it's one it's one of
  • 00:40:46
    these fixed fee models that I tend to
  • 00:40:47
    prefer
  • 00:40:49
    and it keeps your advices and purchases
  • 00:40:51
    separate but if you it depends on how
  • 00:40:53
    much you need their advice like if
  • 00:40:55
    you're only talking to them once or
  • 00:40:56
    twice a year you are certainly
  • 00:40:57
    overpaying
  • 00:40:59
    um so you really have to ask yourself
  • 00:41:01
    with this model like are you actually
  • 00:41:03
    going to take advantage of their
  • 00:41:04
    services enough to make the fee worth it
  • 00:41:06
    the next one is an hourly rate or flat
  • 00:41:09
    fee model um this is the one that if you
  • 00:41:11
    can find it I would really prefer
  • 00:41:12
    because this is how you pay directly for
  • 00:41:15
    the advice but you also pay as little as
  • 00:41:17
    possible for that advice
  • 00:41:19
    um because you're spend you're paying
  • 00:41:20
    for the time spent for an advisor uh
  • 00:41:23
    with an advisor so the rates are off in
  • 00:41:24
    250 to 450 an hour so it's not cheap but
  • 00:41:27
    you know compared to paying ten thousand
  • 00:41:29
    dollars a year or more you know this is
  • 00:41:32
    relatively cheap so if you want good
  • 00:41:33
    advice you're going to have to pay for
  • 00:41:35
    it like that's just always going to be
  • 00:41:36
    true and they'll have a minimum time so
  • 00:41:39
    they may see for like you know the first
  • 00:41:40
    time you work with them but you have to
  • 00:41:42
    pay for a minimum of three hours
  • 00:41:44
    um just to kind of make it worth their
  • 00:41:45
    while right so the problem is you
  • 00:41:47
    probably won't find that many advisors
  • 00:41:49
    that work under this model because
  • 00:41:51
    they'd make the least amount of money
  • 00:41:53
    typically doing this but this is the one
  • 00:41:55
    where you don't have to pay as much and
  • 00:41:57
    it's clear that you're interested
  • 00:41:58
    there's going to be less conflict of
  • 00:42:00
    interest so this is great for like a
  • 00:42:02
    one-time meeting to set up a plan say
  • 00:42:04
    you've read about this stuff you want to
  • 00:42:05
    manage it but you want to get that
  • 00:42:07
    double check like this is the kind of
  • 00:42:08
    person you really want to go to you pay
  • 00:42:10
    your one-time fee they're aware of your
  • 00:42:12
    stuff you don't really talk to them
  • 00:42:13
    again unless there are questions that
  • 00:42:15
    are pay for their advice again unless
  • 00:42:17
    there are questions that come up down
  • 00:42:18
    the line
  • 00:42:19
    um and so you might you know meet with
  • 00:42:21
    them once a year once or twice a year
  • 00:42:22
    and you just pay for it each time you
  • 00:42:24
    see them and you know how much you're
  • 00:42:25
    paying them and you can track that and
  • 00:42:27
    you're not sort of paying them like more
  • 00:42:29
    than you need to
  • 00:42:31
    the other terminology you may see is fee
  • 00:42:34
    only versus fee based fee only means
  • 00:42:36
    they only make money based on the
  • 00:42:38
    advising fees that you are paying them
  • 00:42:40
    so if they say you're charging them 300
  • 00:42:42
    an hour then and they say their fee only
  • 00:42:45
    then you can't purchase anything from
  • 00:42:47
    them this is the only way that they make
  • 00:42:49
    their money from you and so again fewer
  • 00:42:51
    conflict of interest fee based means
  • 00:42:54
    that they can make money from other
  • 00:42:56
    sources like Commissions in addition to
  • 00:42:58
    advising fees so if they say they're fee
  • 00:43:00
    base you're going to pay them a fee for
  • 00:43:01
    their advice but you also have likely
  • 00:43:04
    have the option of buying things from
  • 00:43:06
    them as well and so they therefore would
  • 00:43:09
    have potentially an incent uh um
  • 00:43:11
    conflict of interest in terms of selling
  • 00:43:13
    you specific things to make a commission
  • 00:43:15
    in addition to the money that you're
  • 00:43:17
    paying them for their advice you know
  • 00:43:18
    can there be good people who are fee
  • 00:43:20
    based and it just is more convenient for
  • 00:43:22
    you yes but you have to understand that
  • 00:43:24
    like there is that inherent conflict of
  • 00:43:26
    interest in that model
  • 00:43:28
    so I mentioned credentials earlier so
  • 00:43:30
    you know the term financial advisor
  • 00:43:33
    there's no legal standing there's no
  • 00:43:34
    specific background to do it if you want
  • 00:43:37
    to be able to sell things like you have
  • 00:43:38
    to take like basically three exams that
  • 00:43:40
    just prove that you know what you're
  • 00:43:42
    talking about when it comes to funds and
  • 00:43:44
    stocks and options and things like that
  • 00:43:46
    it's not hard I've looked into it I
  • 00:43:49
    almost did it just on a lark and I
  • 00:43:51
    decided against it um I just not worth
  • 00:43:53
    it
  • 00:43:54
    um so if someone's just saying they're a
  • 00:43:56
    financial advisor but they don't
  • 00:43:57
    actually have any training or
  • 00:43:58
    credentials behind it like what do you
  • 00:44:01
    have to go on to know that they're act
  • 00:44:02
    they actually know what they're talking
  • 00:44:03
    about so I wouldn't I would really
  • 00:44:06
    advise people against using a financial
  • 00:44:07
    advisor that has no training that has no
  • 00:44:10
    like proof of training certified
  • 00:44:12
    financial planner or cfp probably is the
  • 00:44:15
    most common one that you'll come across
  • 00:44:16
    what it entails is three years of
  • 00:44:18
    personal financial planning experience
  • 00:44:20
    in the real world working with the firm
  • 00:44:22
    and completing coursework in a
  • 00:44:23
    comprehensive exam so you know that
  • 00:44:25
    they've had a fair bit of experience you
  • 00:44:27
    know that they've had to do all this
  • 00:44:28
    stuff to sort of get the certification
  • 00:44:29
    and so it at least tells you that they
  • 00:44:31
    were willing to put in the time to learn
  • 00:44:32
    their craft
  • 00:44:34
    there's also chfc which is a chartered
  • 00:44:37
    Financial Consultant this is more
  • 00:44:39
    involved three years of business
  • 00:44:40
    experience 27 semester hours of course
  • 00:44:42
    work closed book exam and they have to
  • 00:44:44
    do continuing education similar to what
  • 00:44:46
    we do for CME every two years so this is
  • 00:44:49
    a this is a very good credential you
  • 00:44:51
    know that it's backed by the
  • 00:44:52
    requirements to stay up to date on
  • 00:44:54
    things and all of that so again I would
  • 00:44:56
    certainly say that's a reasonable thing
  • 00:44:58
    just that's if someone has that as a
  • 00:45:00
    credential to say they probably know
  • 00:45:01
    what they're talking about
  • 00:45:03
    and then the other one is CPA PFS CPA is
  • 00:45:06
    a certified public accountant those are
  • 00:45:08
    actually people you tend to go to for
  • 00:45:09
    your taxes
  • 00:45:11
    um but they can go for a personal
  • 00:45:12
    financial specialist sub-certification
  • 00:45:15
    and additional coursework after
  • 00:45:17
    completing the CPA training
  • 00:45:19
    um because really your CPA isn't there
  • 00:45:21
    to be your advisor they're usually there
  • 00:45:22
    to be your accountant
  • 00:45:24
    um but some of them do this additional
  • 00:45:25
    training in personal finance to be able
  • 00:45:27
    to provide advisory Services there's
  • 00:45:30
    another one that's less relevant unless
  • 00:45:31
    you have far more wealth than probably
  • 00:45:33
    most Physicians
  • 00:45:35
    um like a chartered chartered financial
  • 00:45:37
    analyst or CFA this is usually for
  • 00:45:40
    people that have like really really
  • 00:45:42
    large amounts of wealth in very very
  • 00:45:44
    specific situations so probably the ones
  • 00:45:46
    that you'd be looking for if you're
  • 00:45:47
    looking for a financial advisor would be
  • 00:45:49
    one of these three designations
  • 00:45:52
    how do you find them well if you're
  • 00:45:54
    looking for people who are fee only
  • 00:45:57
    advisors or fee-based advisors
  • 00:46:00
    um the National Association of personal
  • 00:46:01
    financial advisors is is this website
  • 00:46:04
    you want to go to napa.org
  • 00:46:07
    um and so you will find a listing of
  • 00:46:09
    advisors you can separate it out by you
  • 00:46:12
    know location and things like that
  • 00:46:13
    although with the pandemic I think we've
  • 00:46:15
    all gotten used to using Zoom for a lot
  • 00:46:17
    of things
  • 00:46:18
    um now realize that fee only does
  • 00:46:20
    include the assets under management
  • 00:46:22
    payment model as well which is going to
  • 00:46:24
    cost you more in the long run but there
  • 00:46:26
    are definitely ones on there that are
  • 00:46:28
    annual retainer or hourly rate or flat
  • 00:46:30
    fee based and then if you know while I
  • 00:46:33
    think the white code advisor more
  • 00:46:35
    recently really doesn't have a whole lot
  • 00:46:36
    to talk about because there just isn't a
  • 00:46:38
    ton to talk about in this space sometime
  • 00:46:40
    after a while
  • 00:46:41
    um I do think that there's a lot a lot
  • 00:46:43
    of impetus on him to make sure that the
  • 00:46:45
    people he recommends are people that are
  • 00:46:48
    actually going to adhere to his to the
  • 00:46:50
    policy of doing right by Physicians
  • 00:46:53
    advising them to invest primarily in
  • 00:46:56
    low-cost index funds and sort of doing
  • 00:46:58
    sort of standard like advice because it
  • 00:47:00
    probably would it usually probably would
  • 00:47:02
    get like pretty widely circulated if you
  • 00:47:04
    buy someone that was paid on commission
  • 00:47:05
    and really push someone into like whole
  • 00:47:07
    life insurance and things like that so
  • 00:47:09
    it's another place to potentially look
  • 00:47:11
    um they don't have to be local as I
  • 00:47:13
    mentioned before if you want to do your
  • 00:47:15
    due diligence on these you know you can
  • 00:47:17
    do a background check all of this stuff
  • 00:47:19
    is available uh form ADV which is a
  • 00:47:22
    required disclosure about everything
  • 00:47:23
    related to the advisor's background in
  • 00:47:25
    business and so here's where you get
  • 00:47:26
    into the nitty-gritty of how are they
  • 00:47:28
    how are fees charged what's their
  • 00:47:29
    compensation structure any risk for
  • 00:47:32
    clients interestingly it includes any
  • 00:47:33
    conflicts of interest so say they're
  • 00:47:35
    what's called a captive advisor meaning
  • 00:47:37
    they're employed by say Northwestern
  • 00:47:39
    Mutual and so they can only sell
  • 00:47:40
    Northwestern Mutual products like that
  • 00:47:43
    will be listed on their form ADV and you
  • 00:47:45
    may not discover that unless you decide
  • 00:47:47
    to review that form the other thing
  • 00:47:49
    that's interesting is you can also see
  • 00:47:50
    on there if they've ever been stopped
  • 00:47:52
    with any disciplinary actions for doing
  • 00:47:53
    bad things so they're you know I think
  • 00:47:56
    it's estimated that about 10 or 15
  • 00:47:57
    percent of advisors have had some type
  • 00:47:59
    of disciplinary action against them well
  • 00:48:01
    that leaves 85 to 90 percent of them who
  • 00:48:04
    haven't so there's no real reason to go
  • 00:48:05
    with one who has that on their record
  • 00:48:08
    and then there's the investment advisor
  • 00:48:10
    public disclosure website which I put
  • 00:48:12
    down there again you can bring up a
  • 00:48:15
    potential advisor's disciplinary history
  • 00:48:16
    their certifications registration status
  • 00:48:18
    things like that
  • 00:48:20
    so how do you choose well again my
  • 00:48:23
    recommendation in terms of payment model
  • 00:48:24
    you want an advisor that gets paid that
  • 00:48:26
    you pay as a fee only and ideally a flat
  • 00:48:29
    fear hourly rate to try to make sure
  • 00:48:31
    that you are paying only for the advice
  • 00:48:33
    that you need at a reasonable rate a
  • 00:48:35
    real certification cfp certified
  • 00:48:37
    financial planner chfc or a account in
  • 00:48:41
    CFA who's done the personal finance
  • 00:48:43
    sub-specialization are they good at
  • 00:48:45
    answering questions and explaining
  • 00:48:47
    Concepts right so as I mentioned before
  • 00:48:49
    you're relying on this person for advice
  • 00:48:51
    not to do everything for you and so when
  • 00:48:54
    you talk to them like do they explain
  • 00:48:55
    things well or do you find that they're
  • 00:48:57
    easy to work with are they willing to
  • 00:48:59
    sort of take the time to help you
  • 00:49:00
    understand things because the answer is
  • 00:49:02
    no and they keep pushing to say like
  • 00:49:04
    look I'll just take care of this for you
  • 00:49:05
    you don't really probably want to work
  • 00:49:07
    with them like they should be excited
  • 00:49:09
    about teaching about this stuff like
  • 00:49:11
    this is their life's work and hopefully
  • 00:49:12
    that's something they're still excited
  • 00:49:14
    about helping educate other people on
  • 00:49:16
    what's their investment philosophy are
  • 00:49:18
    they a lifelong Vogel head are they
  • 00:49:20
    pushing you toward passive index mutual
  • 00:49:22
    funds telling you to do a reasonable
  • 00:49:24
    split between U.S International stocks
  • 00:49:27
    and bonds or are they like look I've got
  • 00:49:29
    these really special funds that can beat
  • 00:49:31
    the market routinely and these are the
  • 00:49:33
    only things that you should invest in
  • 00:49:34
    and yes they have a two percent fee per
  • 00:49:36
    year but it's totally worth it like that
  • 00:49:39
    the Lotter is the kind of person you're
  • 00:49:41
    going to want to steer clear from and
  • 00:49:43
    then who's your custodian as I mentioned
  • 00:49:45
    some people are independent but some
  • 00:49:47
    people are are captive advisors meaning
  • 00:49:49
    that they work for someone they're only
  • 00:49:51
    allowed to sell products from that
  • 00:49:53
    company you generally don't want to work
  • 00:49:55
    with someone who is an independent
  • 00:49:58
    and you know we're talking about someone
  • 00:50:00
    that's going to be helping manage your
  • 00:50:01
    money and have a pretty outsized effect
  • 00:50:03
    on your finances I would really
  • 00:50:05
    recommend you take the time and
  • 00:50:06
    interview multiple advisors and compare
  • 00:50:08
    and find the one that works best for you
  • 00:50:10
    and your purposes and that you do your
  • 00:50:12
    due diligence here because no one else
  • 00:50:14
    is going to make sure that that your
  • 00:50:15
    that your money's in the right hands
  • 00:50:17
    like you are the only one that really
  • 00:50:18
    has your best interests at heart here so
  • 00:50:21
    it's worth it if you're going to be
  • 00:50:22
    handing over the reins to your money in
  • 00:50:24
    any way to another person that you are
  • 00:50:27
    comfortable with doing so and you
  • 00:50:29
    understand the consequences for doing so
  • 00:50:31
    the other thing about who to work with
  • 00:50:33
    in the model to work under is what do
  • 00:50:36
    you actually need help with so for
  • 00:50:38
    example if you need advice on what how
  • 00:50:40
    do I figure out what to do with my
  • 00:50:42
    student loans how do I develop a
  • 00:50:43
    retirement investing plan maybe you can
  • 00:50:45
    implement it but you just want someone
  • 00:50:46
    to double check your work or you're like
  • 00:50:48
    I'm trying to figure out what to buy for
  • 00:50:50
    insurance what are my actual insurance
  • 00:50:51
    needs how much do I need you might only
  • 00:50:54
    need advice once right like you get the
  • 00:50:56
    plan you get the advice and then you
  • 00:50:58
    just implement it right student loans
  • 00:51:00
    you have a plan you do it you're done
  • 00:51:01
    Insurance you buy it you're done you
  • 00:51:04
    don't need to continue to talk to an
  • 00:51:05
    advisor about that in the long run
  • 00:51:08
    um and what if you're comfortable with
  • 00:51:10
    implementing your investing plan like
  • 00:51:12
    you may just need someone to look over
  • 00:51:13
    your work and make sure that it's
  • 00:51:14
    reasonable
  • 00:51:15
    if you do want someone to manage your
  • 00:51:18
    investments in the long term okay that's
  • 00:51:21
    going to be ongoing but it's going to be
  • 00:51:23
    brief it really does not take that much
  • 00:51:25
    time to manage your Investments so going
  • 00:51:27
    with someone you can sort of meet with
  • 00:51:28
    on a once a year basis who's willing to
  • 00:51:30
    be paid on an hourly rate or a flat fee
  • 00:51:32
    rate is probably going to cost you at
  • 00:51:34
    least in the long run rather than going
  • 00:51:35
    for an assets under management model
  • 00:51:38
    if you need tax help with your taxes
  • 00:51:40
    that's an accountant um CFA if you need
  • 00:51:43
    estate planning like what trusts Will's
  • 00:51:45
    asset protection like you need someone
  • 00:51:47
    with legal expertise so you really are
  • 00:51:49
    talking about an estate attorney or
  • 00:51:50
    someone like that to make sure that
  • 00:51:52
    things are set up correctly so that's
  • 00:51:53
    not a financial advisor that's an
  • 00:51:55
    attorney so that's different
  • 00:51:57
    so you know I think there's a spectrum
  • 00:52:00
    when it comes to
  • 00:52:01
    um choosing a financial advisor so you
  • 00:52:03
    could have there are the people like me
  • 00:52:05
    who are like you do it yourself
  • 00:52:07
    um and then there are people who really
  • 00:52:08
    want someone to help them all along the
  • 00:52:10
    way now I will I did want to talk
  • 00:52:13
    briefly about this which is sort of the
  • 00:52:15
    rise of Robo advisors um which kind of
  • 00:52:18
    Falls sort of in between more on the DIY
  • 00:52:20
    side but basically you didn't want to
  • 00:52:22
    manage your Investments year to year
  • 00:52:25
    so what are Robo advisors basically you
  • 00:52:28
    open account an account with them and
  • 00:52:30
    you give them your money you give them
  • 00:52:31
    information about your investing
  • 00:52:33
    philosophy or just information about
  • 00:52:35
    your risk tolerance and you open an
  • 00:52:38
    account with them so they can generally
  • 00:52:39
    manage IRAs or taxable brokerage
  • 00:52:41
    accounts they generally can't manage
  • 00:52:43
    workplace plans so if you have a 401K
  • 00:52:45
    403b with your employer you can't they
  • 00:52:48
    aren't going to be able to manage that
  • 00:52:49
    but that's also similar to a regular
  • 00:52:51
    financial advisor where they can
  • 00:52:54
    directly manage IRAs and brokerage
  • 00:52:56
    accounts but they will give you advice
  • 00:52:57
    on what to do with your 401k or 403 b
  • 00:53:00
    they invest your money based on their
  • 00:53:02
    their proprietary algorithm and
  • 00:53:03
    periodically rebalance it for you you
  • 00:53:06
    can ask some of them can do automatic
  • 00:53:07
    task lost harvesting or other tax
  • 00:53:10
    optimizations based on your individual
  • 00:53:12
    situation and so and then you pay them
  • 00:53:15
    in assets under management fee but since
  • 00:53:17
    it's run by algorithm rather than a
  • 00:53:19
    person they charge a lot lower so it
  • 00:53:21
    often is on the order of like point
  • 00:53:23
    three percent per year rather than one
  • 00:53:24
    percent per year and you'll sometimes
  • 00:53:27
    get access to online tools and
  • 00:53:28
    calculators although I will I would
  • 00:53:30
    argue the vast majority of the ones they
  • 00:53:31
    offer you can often find verses of for
  • 00:53:33
    free by just doing a search on Google so
  • 00:53:36
    really the the benefit here is that
  • 00:53:37
    they're managing your Investments for
  • 00:53:39
    you if you really don't want to do that
  • 00:53:40
    you don't want to deal with rebalancing
  • 00:53:42
    you don't want to have to select your
  • 00:53:44
    allocation and adjust it over time
  • 00:53:45
    that's where this potentially becomes
  • 00:53:48
    helpful and so to give you a sense of
  • 00:53:50
    what the assets under management fees
  • 00:53:51
    are for these different companies wealth
  • 00:53:54
    runs 0.25 betterment lvest Vanguard
  • 00:53:57
    recently opened one at 0.15 and you can
  • 00:54:00
    see the account minimums here are pretty
  • 00:54:01
    low because you know it doesn't require
  • 00:54:03
    them to do a lot of work so they're
  • 00:54:04
    willing to not be paid a whole lot in
  • 00:54:06
    the beginning to get your business in
  • 00:54:08
    The Upfront so that they can continue to
  • 00:54:10
    make money off of you as your account
  • 00:54:12
    balances grow
  • 00:54:14
    um so the pros are it's hands-off
  • 00:54:16
    investing you don't have to do anything
  • 00:54:17
    you just put your money into it they
  • 00:54:19
    invest it based on their algorithm most
  • 00:54:21
    of these are going to be based on a
  • 00:54:22
    general consensus of like passive index
  • 00:54:25
    investing so it's not like they're doing
  • 00:54:26
    anything funky most of the time
  • 00:54:28
    um and it's much lower fees than a full
  • 00:54:30
    financial advisor doing it for you the
  • 00:54:32
    cons are again they can't handle all of
  • 00:54:34
    your accounts because most people will
  • 00:54:36
    be using workplace accounts to some
  • 00:54:37
    degree you have to trust their algorithm
  • 00:54:39
    and investment choices so they're going
  • 00:54:41
    to throw their own special sauce in
  • 00:54:42
    there to try to you know beat the market
  • 00:54:44
    or do something different and you have
  • 00:54:47
    to believe that they're doing the right
  • 00:54:48
    thing by doing that and that's not
  • 00:54:50
    always true so just beware that again
  • 00:54:52
    you're putting your money in someone
  • 00:54:53
    else's hands and honestly a lot of this
  • 00:54:56
    if you just wanted a hands-off way of
  • 00:54:58
    investing you could just put all your
  • 00:54:59
    money in a Target date fund which will
  • 00:55:01
    balance it across like a US market total
  • 00:55:04
    Market an international total market and
  • 00:55:06
    a total bond market fund and rebalance
  • 00:55:08
    it for you and you don't have to do a
  • 00:55:10
    thing and you can pay an expense ratio
  • 00:55:12
    of like point one per year so I don't
  • 00:55:15
    know that there's a whole lot of benefit
  • 00:55:16
    above just using a Target date fund if
  • 00:55:18
    you use a robo advisor other than maybe
  • 00:55:20
    some of the tax optimization stuff
  • 00:55:24
    so here's sort of the take home for that
  • 00:55:26
    when you're if you're thinking about
  • 00:55:27
    using an advisor the first thing I
  • 00:55:30
    always recommend thinking about is what
  • 00:55:31
    is the advice you're actually looking
  • 00:55:32
    for like how much how long do you need
  • 00:55:35
    them do you really need ongoing advice
  • 00:55:36
    do you really need someone to sort of do
  • 00:55:38
    stuff for you in perpetuity or is it
  • 00:55:40
    just a one-time check-in you're just
  • 00:55:42
    trying to get some questions answered
  • 00:55:43
    and then you'll call it a day if you're
  • 00:55:46
    going to use an advisor choose one
  • 00:55:48
    that's paid by a flat fee or hourly rate
  • 00:55:50
    ideally a fee only advisor if you can to
  • 00:55:53
    again avoid those conflicts of interest
  • 00:55:55
    if you truly want hands-off investing
  • 00:55:57
    you could use a robo advisor but again I
  • 00:56:00
    really don't I don't think Robo advisors
  • 00:56:02
    add a whole lot of benefit for most
  • 00:56:03
    people versus using a Target date fund
  • 00:56:05
    except for maybe some tax optimization
  • 00:56:07
    on the taxable account side and remember
  • 00:56:10
    that advising fees are in addition to
  • 00:56:12
    fees on investment so what I mean by
  • 00:56:14
    that is if you're paying your advisor
  • 00:56:16
    point three percent per year to manage
  • 00:56:18
    your Investments and they're investing
  • 00:56:19
    in something that has an expense ratio
  • 00:56:21
    of 0.3 percent per year your actual
  • 00:56:24
    total fees for the for the E for each
  • 00:56:26
    year is 0.6 which means you have to
  • 00:56:29
    subtract 0.6 from your annualized return
  • 00:56:31
    to see cert that's the actual return
  • 00:56:33
    that you're going to make so if they're
  • 00:56:35
    choosing to invest in things that have
  • 00:56:37
    high expense ratios you're kind of
  • 00:56:39
    getting hit twice with twice with fees
  • 00:56:41
    and you're going to really end up behind
  • 00:56:43
    um so you really want to make sure that
  • 00:56:44
    they're investing in appropriate things
  • 00:56:46
    that have low costs
  • 00:56:48
    so you still need to understand what
  • 00:56:49
    they're doing none of the using a
  • 00:56:51
    divisors does not obviate you of the
  • 00:56:53
    need of knowing something about
  • 00:56:54
    investing in retirement and all this
  • 00:56:57
    stuff like you should come to the table
  • 00:56:58
    with an idea not do this for me and at
  • 00:57:02
    the bare minimum they should be able to
  • 00:57:03
    explain why they're doing it and help
  • 00:57:05
    you understand why they're doing what
  • 00:57:06
    they're doing
  • 00:57:08
    so what I would say is you know I think
  • 00:57:10
    most people you can start if you've
  • 00:57:12
    never done this before just write down
  • 00:57:13
    two or three financial goals and figure
  • 00:57:15
    out where you're starting from you know
  • 00:57:17
    what are you spending on like where
  • 00:57:19
    what's your current uh net worth just
  • 00:57:21
    add it up just know where you're
  • 00:57:22
    starting from and that gives you your
  • 00:57:24
    jumping off point when you're trying to
  • 00:57:26
    develop this look at your monthly
  • 00:57:27
    spending project like when you become an
  • 00:57:29
    attending like what is your budget going
  • 00:57:31
    to look like how much do you want to
  • 00:57:33
    start saving for retirement how do you
  • 00:57:34
    fit all of this into a plan that is
  • 00:57:36
    really workable and if you think you
  • 00:57:38
    need an advisor determine what questions
  • 00:57:40
    you're actually going to have for them
  • 00:57:41
    what are the specific reasons you're
  • 00:57:43
    looking for an advisor and make sure
  • 00:57:44
    you're choosing one that isn't going to
  • 00:57:46
    charge you through the nose or provide
  • 00:57:47
    really bad advice and can be
  • 00:57:49
    incentivized to do so the other thing is
  • 00:57:52
    that you know I love I like this quote
  • 00:57:54
    in addition to you know Rome wasn't
  • 00:57:56
    built in a day and there are many roads
  • 00:57:58
    blah blah blah but the point is is that
  • 00:58:00
    like as long as you're saving enough and
  • 00:58:02
    you're you have a reasonable investing
  • 00:58:04
    strategy you're going to do just fine
  • 00:58:06
    there's not one correct answer that this
  • 00:58:09
    um and honestly like saving a lot
  • 00:58:11
    overcomes a lot of overcomes a lot of
  • 00:58:13
    mistakes so as long as you don't make
  • 00:58:15
    the big mistakes particularly in the
  • 00:58:17
    beginning those first few years isn't
  • 00:58:19
    attending you can kind of make it up so
  • 00:58:21
    you know reading about this working on
  • 00:58:24
    this and like you know you know work
  • 00:58:26
    making the small mistakes now is great
  • 00:58:29
    because then you're prepared when you're
  • 00:58:30
    in attending to sort of do the right
  • 00:58:32
    thing you're used to doing this you have
  • 00:58:34
    some knowledge of it and you're not
  • 00:58:36
    going to make and you can at least avoid
  • 00:58:38
    the big mistakes taking on a lot of debt
  • 00:58:40
    at the beginning of your career not
  • 00:58:41
    saving enough at the beginning of your
  • 00:58:42
    career and making sure that you position
  • 00:58:44
    yourself sort of in a good spot you know
  • 00:58:46
    10 15 20 30 years down the line
  • 00:58:50
    all right and with that I'll take any
  • 00:58:53
    additional questions
タグ
  • Financial Planning
  • Budgeting
  • Investing
  • Medical Professionals
  • Financial Advisor
  • Emergency Fund
  • Debt Management
  • Retirement Savings
  • Lifestyle Inflation
  • Personal Finance