Time is money, and money is time

It is kind of like magic — you just save, invest wisely and unemotionally and you have wealth at the end. Really. But it will take a lot of time.

One of hardest beliefs to relay to those who want to be financially secure are the basic tenets of saving “enough” and being patient for a long time. During this long process, the investing must be in a careful and unemotional disciplined manner. It works every time-but it is like watching the proverbial paint dry.

As physicians, both our personalities and perhaps our specialty choice may work against being patient. After all, we spend many years in training, learning to exchange information quickly in a trusted and integrity laden manner. We also learn to repeatedly make rapid and important decisions. These experiences might not lend themselves to waiting patiently while our investments grow.

Note also that I used the term “careful” in the investing process above. “Careful” means avoiding investment mistakes. These include using a salesperson and not a fiduciary to guide your investments. It almost always means avoiding insurance products like whole life cash value policies and annuities. Hearing these products pushed to you is a sure sign that you don’t have advice in your interest. Although the medical world is uncommonly trusting, the business world is not. You must seek out advice that is aligned with your best outcome and not assume it to be so. Careful also means using inexpensive and diversified index type funds to spread your investments all around the world and in many investment categories (stocks, bonds, and sometimes prudent investments in alternatives). And careful means not making impulsive changes in your financial plan and portfolio. We should fully expect that our accounts will swing up and down in price over time (mostly up), and reacting when that happens is a recipe for failure.

I also used the term “enough” above. Not saving enough (for most families, at least 15-20% of income from a young age) is a certain way to fail. If you are starting to save later in life (common with student loans), then you should aim for a higher savings rate. There are many good recommendations for young physicians to “live like a resident” in the early years of practice in order to pay off debt and to get a good start on retirement savings. A real benefit of controlling spending as you accumulate a retirement portfolio is the very fact that you are used to living on less. The lower your lifestyle cost, the less you need to accumulate for that life in retirement.

I’m not saying it is easy. It isn’t. It’s hard. Few investors do it well. Some investment advisors fail when they succumb to the fear of losing clients who seek “performance.” A good advisor will repeatedly remind you of the need for time and patience. Listen to them.

Not everyone has the same need for growth, and there are different varieties of portfolios for different goals. Yet it is the very rare family that does not need or want to keep up their purchasing power after taxes and inflation. This means at least 3 to 5% growth on average per year just to be able to buy the same amount of stuff in the future as you do now. Most of us want more than staying in place, and that means that a majority of your portfolio should be in global equities and should stay there for a long time.

I’m asked how much I monitor my personal investments. On a religious basis, I look once a year.Not that I do anything after looking, as I make modifications in the portfolio from time to time only when I think an asset class has either become overvalued or undervalued. Otherwise, I know it is a mistake to care too deeply about any short to intermediate changes.

Looking once a year, you will notice a trend upwards. Not every year, and sometimes it takes a few years. But there is more money regularly averaged out over time. Some of the money is due to savings and additions. But portfolio growth occurs as well, and as the base of savings increases, you begin to see the growth overtake the yearly additions. We say that at the beginning of your savings journey that the amount you save is more important than the return on your investments. But later, the return on investments will dwarf your savings amount. This is the magic of time.

So, if need be, fight your impulse to gain wealth rapidly. It will end poorly. If you don’t have the discipline and patience to use time to your advantage, get fiduciary help that does have these qualities.

Steven Podnos MD, CFP, practiced pulmonary and critical care medicine in both private practice and in the Air Force reserve for forty years. He is the founder and CEO of Wealth Care LLC, a fiduciary fee-only financial planning practice and can be reached at [email protected].