Binge read all things wealth building, debt reduction, & lifestyle.

The ultimate financial goal is to create total income replacement through investments. For the medical professional, this means you no longer have to work for income. Your stock/bond portfolio, investment real estate, etc generate enough income for you to live comfortably - indefinitely.

Inflation, the gradual increase in the prices of goods and services over time, will erode the purchasing power of our savings and investment portfolio. If you've been anywhere other than living under a rock for the last few years, you've noticed firsthand how inflation shapes your buying power. 

Understanding Inflation's Effect on Investments

Inflation has a profound impact on various investment vehicles, such as stocks, bonds, and real estate. Let's consider the potential consequences of inflation on each of these asset classes:

1. Stocks: Inflation tends to drive up the cost of raw materials, wages, and other factors of production, impacting companies' profitability....

If you're a "this is too long to read" kind of person, the short answer is yes.

Index funds are designed to passively track, or "mirror", a group of stocks. Common examples include index funds that track the entire US stock market, or the S&P 500.

Passive investing sounds boring and slow. Turns out, the data doesn't support that conclusion. Index funds have been shown to outperform actively managed mutual funds over long periods of time - which is mostly driven by low fees. The additional benefit of diversification also means that your risk is generally lower than when investing in individual stocks.

Active vs Passively Managed Funds

Actively-managed mutual funds sound more aggressive & fancier, which makes us generally inclined to think they would be better. After all - isn't it true that you get what you pay for?

Investing is the one world in which this doesn't always hold true. Because actively-managed funds have a fund manager doing active trading in an attempt to beat...

Health Savings Accounts (HSAs) are amazing investment products to create wealth with the most tax benefits possible.

If you're thinking you knew what an HSA was and are now completely confused, let me explain...

An HSA, in its most basic form, is intended for medical expenses. When you contribute money to this account, you reduce your taxable income for THAT YEAR. Thus, you save money on taxes immediately.

These are very different than Flexible Spending Accounts (FSAs), so don't get them confused. 

How do Health Savings Accounts work?

Here is the full scoop:

1. MONEY ROLLS OVER EACH YEAR
-Unlike an FSA, the money rolls over if unused in that year. It's not a "use it or lose it" system. 

2. CONTRIBUTIONS ARE PRE TAX
- Contributions are pre tax if you contribute through an employer. If you purchased your own plan, they are tax deductible. 

3. GROWTH IS TAX FREE
- Probably the best feature!

4. MONEY CAN BE USED FOR MEDICAL EXPENSES AT ANY TIME, TAX FREE
- Just make...

Becoming a millionaire feels like a lofty goal. It may even feel like something that's impossible to accomplish.

I became a millionaire at 31. When someone references between a millionaire, they are most often referencing having a net worth of $1,000,000 or more. 

What I want to talk about here is an entirely different question: Is having $1,000,000 invested enough to retire?

The short answer is, no - at least for most healthcare professionals earning a six figure salary.

How can anyone create $1M in investments?

The recipe for $1,000,000 invested is this: consistent savings rate + time + compound interest.

Let's assume you're a PA-C earning $110,000 per year. You start investing 15% of your gross salary at age 28, and continue this until retirement at 65. Here's what your portfolio looks like as you age:

If you're not sure how to go about building investments while you have debt hanging over your head as well, watch this free video training on debt strategy for medical...

There are a few money goals every medical professional should be willing to hustle for. One such goal is reaching an investment milestone of $100,000. 

$100K invested means total balance invested across all investment accounts. This could include your 401(k) or 403(b), Roth IRA, brokerage account, etc. 

Although $100,000 is an arbitrary number, it represents something much bigger. Hitting six figures invested allows the beginning of a transition - the point where your money starts working harder to earn more money than you are.  

Investing Is A Long Term Game

The beginning of any investment journey is slow. It feels like you're contributing TONS of your income from your W2 job in medicine, but not seeing that beautiful growth of compounding returns that everyone talks about. Here's a visual representation of what a 401(k) portfolio looks like over time, looking at the portion of the total balance that is made up of your...

If you're a consistent investor, CONGRATULATIONS. That alone is a major accomplishment! If you're not there yet, no worries. Click here to learn how. 

Considering the effort you're putting into preserving and growing your funds, it's important to be aware of any hidden factors that may be depleting your investments.

Unfortunately, such a factor does exist.

It's your investing fees.

What Fees Are You Paying?

Fees come in several forms. The first is related to the investment itself. Each fund you choose has an expense ratio that represents the fund's internal operating expenses. It is represented as a percentage, and can be interpreted as the percentage of your returns that is taken from your account to pay for the fund's fees. 

Not sure what the expense ratio is for the funds you've invested in? Just google the fund's ticker (collection of capital letters representing the fund name). Click the Morningstar link. The expense ratio will pop right up. 

...

I became a millionaire at 31.

I didn't sell a business, get a six figure inheritance, or rob a bank. Rather, my husband and I accomplished this feat by being incredibly purposeful and deliberate with our finances over a period of many years.

When I graduated from physician assistant school at the age of 25, I was saddled with an overwhelming student loan debt of $161,000. My husband and I had little savings to speak of, no real knowledge about investing, and the added burden of a mortgage to contend with. The future looked daunting, and at times it felt like we were facing an insurmountable challenge.

At the time, I thought my primary money problem was my student loan debt. (Turns out, it wasn't. More on that later.) Nevertheless, I remained determined to tackle my student loans head-on and focused all my energy on paying them off as rapidly as possible, hoping to achieve financial stability sooner rather than later.

I worked full time as a PA-C, and then...

Do you have a spouse, dependent(s), or substantial assets?

If you fall into any of those categories, read on...

A basic estate plan is something almost all of us should be thinking about. This starts with a determination of how your assets should be addressed upon your death. This can be accomplished through a will or a trust.

A will is a legal document designating what should become of your assets after your death. It should also designate a guardian for any dependents. A will can request an executor to create a trust after your death to hold assets for a minor (I would have an attorney set this up). A minor should never be directly listed as the beneficiary of a life insurance policy.

If you die with a will, your assets will go through the process of probate. Probate is the process of the legal system reviewing your will and the distribution of assets. This process takes time, involves lawyers, and costs money. Of note, 401(k) plans and IRAs...

What are the key things you need to do to protect yourself financially in the event of a recession? 

1) Keep your emergency reserves in cash. This should be 3-6 months of expenses in a savings account or high yield savings account. If you are nearing retirement, it will need to be more. Don't be tempted to invest your emergency fund. It's a bad idea. 

With current interest rates, a high yield savings account absolutely makes the most sense. Mine is paying 3%!

2) Mind your debt burden. High interest debt needs to go NOW. Make any sacrifice possible to pay off your high interest debt, particularly credit card debt. Low interest student loan debt is different and should find a different place in your money plan, particularly federal loans at the current 0%.

THIS IS THE TIME to get incredibly aggressive with paying off any credit card debt.

3) Stick with your investing strategy. Your stock/bond allocation should make sense for you in general, regardless of the market. You...

Personal finance is 1000% easier than fitness. You can literally find the motivation one time to set everything up, and then let the process work for you. Turns out, hitting the gym once won’t get you the abs. 

We have 90% of our finances automated. What actually happens is this:

Multiple investments come out before we see our checks. This removes any temptation to spend the money and is one of the best personal finance hacks there is. These include:
- Her Roth 401k
- His traditional 401k
- Solo 401k (for small business owners only, but allows us save taxes on business income)
- His & her HSA *100% of balance is invested
- Dependent care FSA *not an investment, but reduces our income taxes and pays for childcare

After-tax investments are next. These include:
- His & her Roth IRAs
- Taxable brokerage
- Investment real estate
- Kiddo investments *For the full scoop on how to invest for kids, click here

*The Roth IRA always comes before the other...