What You Don’t Know CAN Hurt You

I’ve learned so much about life and money in the last couple years. When I look back to mid-November, 2014, I was entirely unaware of the world of personal finance blogs. If someone were to mention MMM, I’d assume they were either referring to the Minnesota Mining & Manufacturing company (also known as 3M) or maybe the similarly named delicious chocolate with the thin candy shell.

Late November that year, I would discover Mr. Money Mustache, and within a couple months, The White Coat Investor. I would read more books, put my investments under the microscope, and start making projections for the future. And a glorious future it would be.

But there was so much I did not know two years ago.

I didn’t know that the aforementioned and other great sites existed, and that they would prove to be so insightful and invaluable.

I didn’t know how much money I spent in a normal year. Given the winding career path I had been on, I didn’t know what a “normal year” might even look like in terms of spending.

I didn’t know that I would soon be able to afford an early retirement. Two years ago, I would have told you I’d probably retire sometime after our boys graduated from high school (i.e. after 2029).

I didn’t know I would want to retire quite so early. It wasn’t until I started studying for a bogus MOC exam that I started to wonder.

When my wife asked me what in life I found most stressful, every answer was job related. She was surprised, and I suppose I was, too. I’d never thought much about it. When the job isn’t optional, it’s easy not to focus much on the negatives.

I didn’t know how to harvest tax losses, how to best utilize a donor advised fund, the difference between a SEP-IRA and a solo 401(k), or when I could access a 457(b). This list could be much longer, but you get the gist.

An Interesting Conversation

Not long ago, I was chatting with a physician couple I’ve known for years. As doctors often do, we started talking shop. We talked about the good, the bad, and the ugly. They have no idea I have this site or the requisite knowledge, but it kinda felt like they did. I get this feeling more and more these days. It’s not because my secret is out.

No, it’s just that I’m more interested in listening to other people’s ideas on the topics I discuss here, and I may tend to ask questions or make comments that steer the conversation that way. It’s not intentional, but perhaps natural, given where my head is at these days.

After our discussion, I felt like my friends were right where I was a couple years ago, but perhaps with a little more job dissatisfaction, which seems to be sadly more and more common among my colleagues. This is a two physician couple the same age as me, with kids about the same age as mine. Their lives are very busy, like mine. Just as I do, they wish they had more time.

I was a little sad but completely understanding when they told me they were counting down the years until they could retire.

I was quite interested when they told me how they had seriously considered leaving to do some work in Australia or New Zealand.

I was rather surprised when they said they didn’t think they’d be able to fully retire when they would have an empty nest, a situation they won’t face for more than a decade.

I should not have been surprised by any of this. It wasn’t long ago that I shared many of these same sentiments and beliefs about what the future held for my career and my family’s finances. Like me a couple years ago, I think there’s a lot they simply don’t know.

how long ’til we get to the top?

We’re taught nothing about personal finance throughout our formal education. When we finally earn a healthy salary, many of us are swamped with debt, learning the nuances of practicing medicine in the real world, and trying to balance it all with an active family life. We’re living in new cities, moving into new homes, and making new friends. There’s hardly enough time for a proper shower, let alone a self-directed personal finance education.

What You Don’t Know Can Hurt You

We didn’t get too deep into the conversation with my friends. I don’t want to come off like an authority on the subject, even if I secretly am. We had catching up to do in areas unrelated to personal finance, so we didn’t dwell on the particulars of their situation.

I don’t know exactly what this dual-physician couple knows or doesn’t know regarding their own finances, but I think it’s best for anyone who doesn’t want to work indefinitely to know the following:

Net Worth. It’s difficult to Mapquest directions to your destination if you don’t know your starting point. I like Personal Capital for this. Personal Capital can pull information daily from all your different investment, bank, and credit card accounts, and allows you to add items such as property. All the cool kids are using it. But is anyone actually using Mapquest anymore?

my portfolio beating the S&P 500!

Annual Spending. I track my spending via Mint.com and I don’t give a rip if you sign up or not, because there’s nothing in it for me. But it does mostly automate the process, and I’ve been happy with the user-friendly interface, so I highly recommend it. I also recommend accumulating points and miles to drastically lower your travel expenses.

FI Number. Use your knowledge of your current annual spending to estimate your spending needs in retirement. Be sure to factor in expenses that might be new, like health insurance, and expenses that will go away, like professional attire and some commuting costs. Also, inflation will be a significant factor if you’ve got a long ways to go. 25 x anticipated annual expenses = your FI number.

Investment Fees. Transparency is one of the buzzwords of the 2010s and it’s imperative that you know what your total investment fees actually are. Investment Fees will cost you millions if you don’t take steps to minimize them.

Available Resources. Know where to go when you have a question, and read a personal finance book or two. Don’t be afraid to make an inquiry in a forum such as Bogleheads or White Coat Investor. I have many additional resources listed in my DIY investing guide and on the Recommendations page.

Your Partner’s Wishes. If you are married or in a long-term relationship, it’s important to be on the same page when it comes to finances and career goals. Children, and what’s best for them, may be a consideration.

The Power of Information

Without this knowledge, it’s impossible to make realistic plans or projections. An informed decision requires information. If you have a good idea of the suggested bullet points above, you can actually start to formulate a ground plan for your future.

somewhere over the rainbow…

The information is out there. It’s right here, in fact. It’s at dozens of other blog sites much like this one, occupying our own little corner of the internet. The trick is getting the information into the hands of the people who could really use it, the people who might never wander down the side streets that lead to the corners that our sites occupy.

I wonder if my friends have a handle on those important nuggets of knowledge outlined above. My guess is they’ve got a few of the pieces to the puzzle, but with some pieces missing, and none put together, they can’t see the big picture. If they did, I don’t think they’d be talking about doing locums twelve years from now if they’re already counting down the years.

If you can live on half, you can start from zero and be a few years shy of financial independence in a dozen years. And they’re definitely not starting from zero. But how do I best tell them all of this?

Perhaps we’ll see them again, and we may revisit the idea of an early retirement, and start to get into more details. My wife and I might be more forthcoming with our tentative plans, which we alluded to, but gave far from a full disclosure. I may direct them to some websites I like that focus on the subject at hand.

Someday, I might even tell them about my own website.