One of the best things about graduating dental school is finally having time to read for pleasure again! Recently, I have been devouring books on personal finance. Seriously, they’re addicting! 🤓 I have provided a synopsis of these books below, extracting the gems for you to takeaway! If you’re a bookworm like me, be sure to check out my list of recommended books on Leadership/Entrepreneurship for dentists here.
The White Coat Investor: The White Coat Investor provides personal finance and investing advice for doctors. However, at only 157 pages, author James Dahle only skims the surface. You will inevitably have to do your own research on how to follow through on his prudent advice. A good starting point is the companion website: https://www.whitecoatinvestor.com.
- Lifestyle: Dahle quotes The Millionaire Next Door, “Most people have it all wrong about wealth in America. Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend…it is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes. Wealth is more often a result of a lifestyle of hard work, perseverance, planning, and most of all, self-discipline.”
- Saving: You should have an emergency fund of 3-6 months worth of your living expenses or enough to last as long as your disability insurance waiting period (the length of time between the date you become disabled and the date when you start receiving payments from the insurance company). Dahle also recommends that doctors put 20% of their gross income towards retirement.
- Investing: Doctors get a late start on earning/investing due to years of higher education. However, investing allows your nest egg to outpace inflation. Retirement accounts and low-turnover index funds minimize your tax bill and investment costs. A Chartered Financial Analyst (CFA) is probably the best designation for an asset manager and the hardest one to get.
- Tax-Deferred Retirement Accounts: The best way to minimize investment-related taxation is through the use of retirement accounts, including 401(k)s, traditional IRA, Roth IRA, and HSA accounts. Dahle argues that most doctors should also be taking advantage of the Backdoor Roth IRA.
- Asset Protection: A good individual disability policy will probably have a disability benefit of around $5,000/mos ($60,000/year) and the cost will be 2-5% of the benefit or $1,200-2,000 per year. An occurrence-based malpractice policy is usually preferable over claims-made, since tails may be 2-3 times the cost of the annual premium for a claims-made policy. NOTE: The White Coat Investor was published in 2014; the quoted figures may need updating.
Money, Master the Game / Unshakeable: Money, Master the Game and Unshakeable are written by motivational speaker Tony Robbins. Money, Master the Game is dense at 688 pages, while Unshakeable is more manageable at 256 pages. Both books provide a guide to investing for financial freedom.
- Power of Compounding: Tony explains, “You’re never going to earn your way to financial freedom. The real route to riches is to set aside a portion of your money and invest it, so that it compounds over many years. That’s how you become wealthy while you sleep. That’s how you make money your slave instead of being a slave to money. That’s how you achieve true financial freedom.” ✨
- Low Cost Index Funds: Historically, most actively managed mutual funds do NOT beat the market. Actively managed mutual funds involve higher fees paid to a fund manager, and rarely provide better returns than the stock market. A better investment is low cost index funds. Index fund investing is so powerful that Warren Buffett has said it is how he would instruct his wife to invest if anything happened to him!
- Corrections & Bear Markets: On average, corrections (decline of 10-20%) occur once a year and bear markets (decline of more than 20%) occur every 3-5 years. Successful investors must have an “unshakeable” mindset to weather the storm and avoid emotional sell offs. In fact, bear markets are viewed by unshakeable investors as an opportunity to buy stocks at deep discounts!
- Ray Dalio’s All-Weather Portfolio: Ray Dalio suggests a diversified asset portfolio with 30% stocks, 40% long term US bonds, 15% intermediate US bonds, 7.5% commodities, 7.5% gold.
- Brokers vs. RIA: When it comes to financial advisors, there are brokers (not required to act in your best interest), registered investment advisors (AKA fiduciaries, required to act in your best interest), and those who are dual-registered. In the US, there are roughly 278,000 brokers; 26,000 dually-registered advisors; and 5,000 fiduciaries.
- Questions to ask your Financial Advisor: Tony lists 7 questions you should ask your financial advisor, including: Are you a registered investment advisor? Are you or your firm affiliated with a broker-dealer? Does your firm offer proprietary mutual funds or separately managed accounts? Do you or your firm receive any compensation for recommending particular investments?
Your Money or Your Life: This is a classic book by Vicki Robin and Joe Domingues that outlines how to achieve Financial Independence and Retire Early (AKA, the FIRE movement).
- Life’s Energy: Money is what we exchange our life’s energy for. In other words, we sacrifice the finite hours of our life in exchange for money. This definition provides a new perspective on the value of our material possessions (i.e., How many hours of my life did it take to earn the money to purchase this item? Was it worth it?) 👀
- The Concept of Enough: The authors urge us to resist the modern traps of consumerism and personally determine how much is “enough.” Clutter is excess beyond our established point of enough.
- Earned Income vs. Work: How you earn an income may not be synonymous with your life’s work or purpose…and that’s OK! If we don’t find fulfillment in how we earn an income, we should try to maximize our earned hourly wage.
- Tracking Income/Expenses: We should track our earned income, expenses, and investment returns. Out of these three variables, we have the most control over our expenses.
- FI Crossover Point: Tracking your income/expenses/investment returns allows us to determine the amount of time you will need to work to reach the crossover point. When our investment returns exceed our expenses, we have reached the crossover point, or financial independence. This means you’ll never have to work for money again unless you choose to.
What personal finance books do you recommend? Comment below!
DISCLAIMER: Nothing on this blog constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. Any ideas or strategies discussed herein should not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial objectives, needs and risk tolerance.