I have negative net worth! Why pay a financial planner?

Recently, Passive Income, MD kindly asked me to write a guest post on what, initially, seemed to be a difficult topic. He wanted me to write a post making the case for residents – financially stretched to the limit – should use a financial planner. It was a great exercise for me and I ended up convincing myself. Let’s see if I convince you, too!

10 Reasons Residents Should Use a Financial Planner

When Passive Income MD asked me to write an article on this topic, I went through some serious reflection – how can planning benefit residents? Would a resident with negative net worth be wasting money by hiring me? It was a good question to consider and I now have answers I couldn’t articulate before. Thank you, Passive Income MD, for the challenge!

There are many misconceptions about what a financial planner really does. What most people don’t realize is that true financial planning is not limited to a series of reports or a to-do list given to the client to implement. Planning is an ongoing process of active engagement and interaction. A financial planner and her client work as a team to secure and improve the client’s financial future, one decision at a time. The work done by the best financial planners easily pays for itself multiple times over.

But what if you are at the inception of your career? Can a financial planner really make a difference? As you might expect, I’ve come to the conclusion that good financial advice can benefit you more now than at any other time in your life. Here are 10 reasons to hire a financial planner while you’re in training:

  1. To give you clarity about spending It’s not uncommon for a client who is a new attending to lament that he spent way too much in training and is now not able to enjoy his new attending salary as much as he had dreamed he would. A financial planner will help you focus on spending and saving so that you can spend purposefully rather than emotionally. She will, for example, run projections of how extra spending today may affect your net worth 10 years from now. Seeing your future in black and white will help you make better decisions in training.
  2. To help you set and adjust your goals Part of the financial planning process involves discussing and deciding on your priorities while setting future goals. Planning forces you to reflect and articulate your dreams, set goals, and map out a path to achieve them while considering probabilities and roadblocks. Assumptions about the future play a key role in your plans; when those assumptions change, we work together to update your roadmap.
  3. To keep you away from whole life policies and other bad deals How many doctors have bought overpriced life insurance because it sounded like a great deal? As fee-only financial advisors, our job is to protect you from making bad decisions. As Carl Richards, the talented financial planning illustrator and author of The Behavior Gap and The One Page Financial Plan put it, your financial planner stands between “YOU” and “STUPID”.
  4. To help you invest appropriately If you qualify to contribute to a retirement plan at work, your financial planner will review your investment choices and help you build an appropriate portfolio. Starting out with a suitable portfolio while you’re young will boost your retirement savings. Your planner will also help you determine other choices that are appropriate for your tax bracket, such as Roth IRA contributions.
  5. To educate you about finances You’re busy enough already. Do you have the time and desire to master everything you need to know about personal finance? Do you know what you don’t know? You can figure a lot out by reading books and finance blogs such as Passive Income MD, or you can learn only what is relevant to you and leave off the extraneous material. On the other hand, if you really do want to study both finance and medicine, I’ll be happy to recommend a few books to begin your education.
  6. To help you make big decisions Above all, what we do boils down to ensuring our clients have the financial clarity to make good decisions. When you know how buying a house during residency can affect your ability to pay down student loans on the timetable you want, it’s easier to make that decision. The earlier you have clarity about how much you need to earn and save to retire by 50, the more time you’ll have to work toward that goal. On the other hand, if you’re 40 and decide to retire in 10 years, you might just wear yourself out getting there.
  7. To connect you with the right professionals As a fee-only financial planner, I have access to a private network of other fee-only planners across the US who have experience with local attorneys, real estate agents, insurance agents, and so forth. When a remote client needs a specific professional, I simply reach out to my network, knowing they will steer my clients in the right direction.
  8. To help you make career decisions One thing doctors don’t know about me is that I review every contract under consideration. While I’m not an attorney, my contract review helps clients understand the quality of the benefits package and the tax effects of various provisions. Recently, I was able to help a doctor carry over fellowship benefits to her upcoming position as a new attending (same employer) by advising her what to do to avoid a break in service.
  9. To keep you from making emotional decisions As I said recently on White Coat Investor, emotions and finances are like gasoline and a lit match. You can blow up your finances with one irrational decision, whether it is due to exuberance or fear. A big part of our job is to be the voice of reason when clients want to panic sell in a market correction, accept an offer that is “too good to be true”, or invest in beachfront property in Canada.
  10. Because you get special pricing in training Residents and fellows who become clients get the same high contact level and interaction that new attendings and experienced attendings receive, but at a lower price. We purposely designed our pricing structure to be affordable in your “lean” years so we would have the opportunity to help you when we could make the most difference. At a minimum, our goal is that financial planning will cost you nothing because of the better financial choices you make throughout your career.

As financial planners, we prefer to focus on prevention and the overall health of our “patients” rather than waiting until you need a cure. While a good financial planner can help “heal” you at any point in your career, the earlier you see one, the more fiscally fit you will be over the course of your life.

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