In our previous physician-oriented blog, we brought our physicians and medical professionals the news that four areas of Medical Talent could sometimes transform into four areas of weakness when it comes to your Money Talent.
Medical Talents Vs. Money Talents: Backstory Review from Part I
The lack of money talent is no fault of physicians. It simply was not included as part of your training. As we have said, sometimes the same quality that enriches your medical ability, hurts your money ability.
- One of those four areas of weakness in Money talent included reasoning. As previously mentioned, reasoning is a vital medical talent. However, faulty Money Reasoning can warp into faulty Rationalization.
- Then, we gave you some hard answers about how to defeat (overspending) rationalization with a Backwards Budget. (Please check it out.)
A Second Medical Talent Which Can Become a Money Weakness
The second area of weakness was an overwhelming tendency for Outsourcing.
- Indeed, every life job that does not involve medical skill invites the doctor into outsourcing. This can become an addiction. And this addiction is a real drain on your cash-flow.
- So, we showed you how to eventually overcome Outsourcing Addiction. This included a little education in Personal and Business Finance. You might want to read or review that Gavrilov blog from Part I before reading this Part II.
Gavrilov Gold: Learning That Magical 20 Percent of Personal Finance Knowledge
Gavrilov & Co once again reminds you, Doctor, that we work with you on accounting and tax matters. However, we differ from your average accountant in one way: We believe in helping you sharpen your money talent.
(You’ll see us call our teaching, advising and consulting qualities by the name “Gavrilov Gold.)” Certainly, we want you to learn enough about personal and business finances to protect yourself from weakness in your Money Talents.
In the Physician Philosopher’s words, we help you “learn the 20% doctors need to know about personal finance to get 80% of the results.” And that means you will certainly accrue more wealth and security than the average doctor.
Now, Let’s Proceed into Part Two of this topic–Money Talent Vs Medical Talent.
First, we will cover two more Money vs. Medical talents. Secondly, we will share more about the twenty percent you need to know about personal finance. Remember, knowledge of twenty percent of personal finance will allow you to reap 80 percent of the benefits. You can find the beginnings of it in this article.
And thirdly, we will introduce you to a personage we like to call “Dr. Pareto.”
3. The Physician’s Third Medical vs. Money Talent: Competition
Doctors are competitive. And that is one of the medical talents that is sharpened in training.
In the Philosopher Physician, Dr. Turn says, competition is “one of the reasons we got into medical school in the first place.” Whether we were competing in a single player game or competing against others, “competition is part of the game.”
Can You Become a Gunner in the Money Talent Game?
In med school, the docs who try to outdo everyone else are called gunners. We cannot think of another profession that has such a name for overachievers.
However, there is one area doctors neglect when they try to out-do each other. They never try to outdo each other with the amount of money they actually save. And saving money is a money talent most physicians badly need.
Gavrilov Gold: Saving Money and Doing It Right
Exactly what makes it difficult to get doctors motivated to proper long term saving and investing? We have three points for physicians to learn to sharpen their Money Talent with Saving and Investing Skills:
- Accept average market returns. In a way this seems to be the opposite of using competitive energy. It’s bland. It goes against our hard work ethic. We find that doctors want to research and pick winners.
- However, Good investors have learned that the opposite is true when it comes to investing. No risky fun research. Relaxing and accepting the average returns on your investments is a great but difficult lesson.
- You see, automatic savings and passive investing are what pay off in the financial arena. Physicians who can resist competing and invest quietly in passively managed index funds actually do better than the majority of investors out there.
By the way, this last point isn’t just Gavrilov Gold. It is also the tried and true financial process of Dr. Turner’s book. It is entitled, “The Physician Philosopher’s Guide to Personal Finance…”
Sometimes, we fear that physicians would rather do something financial that was fearless, risky and competitive and lose–than do something financially average and win. That’s when the good medical talent of competition morphs into a lackluster money talent of financial destruction.
As Dr. Turner says, “Who knew that you could be both average and competitive at the same time?”
4. Lounge Lizard Love: (Doctor’s Lounge, That is)
Finally, We Come to the fourth and final Medical and Money Talent challenge. There is no doubt about it. Navigating the doctor’s lounge is practically a medical talent. And yes, it is necessary to have a place we can escape patient pressures and staff complaints.
However, the doctor’s lounge has also become a place where physicians converse about the glory of their latest worldly acquisitions.
Why Do Physicians Do This?
Closely related to the Competition talent for physicians and medical professionals is lounge bragging about their latest expensive toys and trips. Even keeping up with the Dr. Joneses isn’t enough.
Thus this Doctor’s Lounge game reveals the weakness of a physician’s money talent for saving money. Nobody ever brags about the money they are saving, for example, for retirement.
Do you know that dedicated doctor who still works far beyond retirement age? He or she is may not really be that dedicated. Many times, he just can’t afford to quit and live on his meager savings. Yes, having a comfortable and early retirement means saving money. This is the very opposite of fun, competitive conversations about your latest toys and luxuries.
Gavrilov Gold: Money Talent Take Aways for Physicians
We answer the Medical vs. Money talents of Competiveness and The Doctor’s Lounge with the 10 Percent Rule. According to this rule, you should spend only 10 percent of any bonus or unexpected money.
For example, you might go from 6,000.00 per month to 17,000.00 a month after training. It can be tempting to spend it all. So, don’t. Just allow yourself 10% to spend on something you really, really want—your reward. Save or invest the rest in your financial goals.
The 10% Rule from the Physician Philosopher
To understand the 10% rule, you must understand you can control the “lifestyle creep.” Lifestyle creep means the more you get, the more you spend. And then the pay-check-to-paycheck lifestyle creeps up on you as you attempt to outdo all the Dr. Jones in the Doctor’s Lounge.
Beware: Real Money Talent Means You stick to 10 %
Most advisors will tell you not to take any reward for pay raises. They hate “lifestyle creep.” But we think that is unrealistic. We believe you can give 10% to upgrading your lifestyle without hurting your ability to save or invest. Otherwise, we fear you might go wild with spending 100% of your next pay bump.
More about the Lifestyle Creep
“For every bump in pay, bonus, or unexpected money that you receive: 10% of the money goes towards lifestyle creep and the other 90% goes towards building wealth.”
Other advisors might say, spend nothing, not even 10 % on a reward. But we know human nature. You must reward your heart a little in order to keep your head in control.
So, spend that 10% and put the 90% of your windfall into paying off student loans or saving for retirement. Don’t use it to out-gun the Dr. Joneses.
Speaking of Percentages: Meet the Pareto Principle
Calling Doctor Pareto! Actually, Pareto is a principle, not a person and not a doctor. To put it briefly, “The Pareto Principle can be stated many ways. However, the premise is that 20% of the work will get you 80% of the results.”
You can apply this to any topic, including investment for doctors.
With the little knowledge about what falls into the 20% doctors need to know about personal finance, you will be in control of your financial life. And it doesn’t have to be complicated.
Yes, you could probably do this yourself with a little reading. However, Gavrilov & Co is here to help you as you learn to blending your Medical talents and Money talents into a truly good life.