Learn to Manage Your Money Like a Decamillionaire (Part 1 of 3) – Formerly: How to Become a Decamillionaire Doctor, Part II

Editor’s Note: This post was originally published in September 2018 and has been updated and reposted due to its high level of relevance.

 

“It requires a great deal of boldness and a great deal of caution to make a great fortune, and when you have it, it requires ten times as much skill to keep it.” – Ralph Waldo Emerson

 

Over the past 17 years working as a financial advisor, I have learned that Emerson was right.

Our job – the core reason why you have hired Practice Financial Group – is precisely to help you keep more of your money. Then to grow the money you keep and to help simplify your life!

 This post is part of a series where I give an overview of the process of becoming a decamillionaire doctor. Although I use the term “decamillionaire” referencing $10,000,000, the principles are important, not the actual amount of money you accumulate. Everyone shares different values, and some might not care about having $10,000,000 in the bank. But if you’re reading this post, you do care about being the best version of yourself and making the best decisions. That’s the goal!

The steps to becoming a decamillionaire doctor require you to not merely do certain things, but develop the character and mindset of a decamillionaire. It will literally require you to change who you are. In summary, here are the steps:

1. Become a clinical expert
2. Learn to make money with your clinical expertise by:
   1. Learning to lead
   2. Establishing systems in your business
   3. Learning to sell
   4. Doing your work fast
3. Learn to manage your money like a decamillionaire

In a previous post I addressed parts 1 and 2 above (How to Become a Decamillionaire Doctor Part I). In this post (divided into 3 parts), I address the third step: Learn to manage your money like a decamillionaire. As your financial advisory firm, our job is to help manage your money; these next posts are not designed to teach you the minutiae of our job, but rather, to share with you three problems you face that work against you in the effort to keep and grow your money: 

1. You.
2. The entire world is out to get your money, literally.
3. In America we’re conditioned to have a false concept of real wealth.

 

 Problem #1 – You.

How can I say this respectfully? We all have strengths. These strengths make us unique and great. Your success is a direct result of these strengths. But every strength has its corresponding weakness. This is part of being human.

The very attributes you possess that make you good at earning money work against you when it comes to keeping and growing your money. Let me say that in another way: the better you are at making money, the worse you likely are as an investor.

Consider these personal attributes that most successful, high-income earning doctors have in common:

• They are proactive
• They have an extremely high level of personal responsibility and like to be in control
• They are intelligent, even the “smartest guy in the room”

These attributes are shared by almost every successful person on earth. The problem is that they work against you when it comes to saving and investing your money. Why? Let’s look at each a little closer.

Proactive

Don’t just stand there, do something! This is the mantra of the doctor. Save lives. Fix teeth. Run tests. Take x-rays. Diagnose. Perform treatment. Act…now!

But when it comes to investing, the mantra should be: “Don’t just do something, stand there!” Investing is a lot like planting grass and watching it grow. Or better yet, like planting a fruit or shade tree—it takes years to bear fruit, and decades to provide shade. To quote the best investor ever, “Somebody is sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett

Successful investors are patient, even lazy (don’t believe me? Google: “lazy investor”). For more on this topic about lazy investors, check out this post titled: “What if Rip Van Winkle Invested in the U.S. Stock Market?” Most doctors are trained to produce results now; they give a treatment, then follow up in a month or so. On the contrary with an investment portfolio; you build the portfolio, then follow up in a decade or so.

In July of this year, I met with a client who had begun investing with our firm in April of this same year. After just under 3 months, he wanted to talk about the performance of his investment portfolio and what we were doing, including what changes we should make to improve the returns. I kindly tried to tell him that this would be like unearthing a recently planted sapling to check the roots while asking, “where is the fruit?”

The best investors are lazy; this doesn’t come naturally to you.

In Control & Ultra-High Personal Responsibility (aka, “Type A” personality)

To be an exceptional doctor, having a “Type A” personality can be a big asset. As a patient, I want someone who will do everything in his power to help fix my problems. However, this strength, if not checked, can be a major weakness when it comes to building wealth. Why?

If passive income is your goal, then the investment itself implies that you give up your cash and yield control. Yielding control is very difficult for most “Type A” doctors.

For example, consider this statement we hear a lot: “I want to invest in real estate. That way, no matter what happens, at least I can go down and kick the dirt on my land.” In translation, this statement could mean: “I don’t really trust anyone or anything but myself, so I’d rather be poor (dirt doesn’t sell for much) and in control than anything else.”

Another application of this personality trait is the doctor who wants to stay in control by hoarding large amounts of cash. I understand that having cash feels good, but holding cash is like pulling your money out of the game and sitting it on the bench. Again, if your goal is passive income, then your cash needs to be in the game working for you!

The best investors give up control; if your name is Dr. ___________, this likely doesn’t come naturally to you.

Intelligence

Doctors are typically the smartest person in the room. This keen intellect is critical for the work they perform but it frequently works against them when they step outside of the operating room. The smart doctor naturally thinks:

“I’m smart, shouldn’t I be able to figure this investing thing out?”

Or:

“Why would I take advice from that guy, I’m smarter than him?”

In short this is a classic case of “you don’t know what you don’t know” about investing. And even if you learn, you still have the hurdle of successfully executing your plan.

If not checked with the help of a trusted advisor (or a spouse, in most cases), the very attributes you possess that make you good at making money work against you when it comes to keeping your money and putting that money to work for you. So you need to work hard to make money, then get out of your own way.

 

Problem #2: The entire world is out to get your money

To be continued…