Practice Academy Winter 2023: Achieving financial independence -- learning financial secrets from physician multimillionaires

Secrets of physician millionaires: ©Andranik123 - stock.adobe.com

INTRODUCTION

When physicians take a comprehensive approach to wealth building, they can achieve financial independence, leading to a happier, healthier life. When doctors understand the “why” powering their investing goals, they can live the life they choose and leave burnout behind. No one strategy will result in long-term retirement success, but by combining well-thought-out tax plans and investments, the overall goal of financial independence is possible. Physicians need to be intentional with their spending, create a targeted savings rate of at least 20% and carefully invest in tax-efficient accounts to generate the biggest returns over time.

By adding more advanced strategies, such as tax loss harvesting, custom indexing and private investing, physicians can create an investment growth path that will lead them to multimillionaire status. A strong financial plan will allow doctors the freedom to focus on their passions and alleviate stress at work.

LEARNING OBJECTIVES

• Learn to identify and understand common challenges and obstacles that individuals face when striving to retire with a substantial savings of $5 million or more.
• Explore three effective strategies designed to increase your likelihood of amassing $5 million in savings for retirement. These experts will provide you with practical methods to enhance your financial planning.
• Through a detailed case study, learn how these strategies can be applied in real-life scenarios, allowing you to better grasp their practical implications and application in your own financial planning.

Meet the panelists

Bill Martin, CFA
Chief Wealth Officer
Earned Wealth

Jordan D. Frey, M.D.
Plastic Surgeon and Founder
The Prudent Plastic Surgeon

If the definition of financial independence is the ability to do what you want, when you want, with whom you want for as long as you want, then the essence of financial independence lies in one’s ability to have control in life and make choices without financial constraints. A crucial starting point for physicians pursuing financial independence is assessing their current financial situation and clearly defining their future goals, says Jordan D. Frey, M.D., plastic surgeon and founder, the Prudent Plastic Surgeon Wellness brand, and presenter at the Medical Economics Fall Practice Academy.

Building a financial plan is a key step, according to Frey, who shared his experience of creating a plan early in his journey to financial independence. “I had more than $500,000 of student credit card debt, no savings, no investments,” Frey says of where he started financially. “We really thought hard about why we wanted financial freedom and why it was important to us, and I think that’s an important component, as well. You don’t want to just say, ‘I want $5 million of investments or as a nest egg, because then I’ll be able to retire, and I’ll be happy.’ It doesn’t just happen magically. You have to really think intentionally about what you want.”

Frey advises starting by developing a written financial plan that lists priorities, such as getting out of debt and establishing a certain level of net worth. With the goals established, you can begin mapping out how to get there. For Frey, it started by creating a saving rate of 20% that relied on smart index-based investing. This plan also helped him assess whether new opportunities were worth the risk, because the plan illustrated what his returns would be based on historical averages.

“If we’re talking three or four years ago, we knew we didn’t need to invest in crypto because we can just invest using this index approach, and we know we’re going to reach our goals,” Frey says. “We don’t need to take on more risk than that, and that has proven to work well for us.”

Frey says whether you are working with a financial professional or not, it is important to educate yourself so that you at least know enough to tell good advice from bad. In a poll of physicians, only 47% said they could tell the difference. Bestselling financial planning books or blogs can give you the basics you need to help sort through advice or even find the right financial planner to help you on your journey.

By forming a financial plan and sticking to it, a physician can achieve results that stretch well beyond a bank account. “I honestly found that I became a better doctor and was able to focus more on what I loved about medicine,” Frey says. “I wasn’t so bitter anymore about everything that I had taken from me, including all this debt that I felt like I was never going to get out of; I was never going to be able to reach financial freedom, I was never going to be able to practice on my own terms.”

After starting with a net worth of minus-$500,000, Frey is now approaching $1 million in net worth. “That’s been really fulfilling for us, to see the small kind of financial habits that we’ve picked up really have made a big difference,” Frey says. “We’re not at financial freedom yet. We’re still on the path, so we’re still working to get there, but it’s been really fruitful and enjoyable and fulfilling to see.”

Solutions & takeaways

• Identify specific financial goals you want to achieve.
• Create a financial plan with clearly defined steps that move you toward your financial goals.
• Educate yourself so you can distinguish good financial advice from bad.
• Invest 20% of your income to guarantee a steady climb to financial independence.
• Explore advanced investment opportunities, such as tax loss harvesting, custom indexing and private investing, to accelerate progress toward your financial goals.