How Easy is Financial Independence?
Next June 1,2 Dr. James Dahle from whitecoatinvestor.com will be one speaker of many at the Orthopreneurs conference in Dallas (www.op2018.com to register). His belief (as well as hundreds of thousands of his followers ) is that one does not need a financial advisement expert to retire on time. His topic: “How to retire early without a financial advisor”. Is this possible? Is it advisable? I guess you’ll have to wait until June to find out, but I’ve learned the lesson the hard way.
I remember when I was 25 years old, fresh out of dental school and making my first paycheck. I was single, hadn’t yet bought a practice and had few extra dollars to invest. A friend who was a day trader told me that he had a “sure thing” in a Canadian Gold Mining company and that I had to invest (please don’t laugh out loud at me). I didn’t have a financial advisor, but if I did, that person would have told me to throw my money in the street before making such a risky venture. Worse, I was convinced that because of my age, I could be riskier with my investments because I was younger and had a lot of time to recoup the money if I lost it. (I later heard a phenomenal money manager explain that until your investments were earning in interest what you were investing every year, preservation of capital, not growth was key.)
As you might have guessed, that investment didn’t work out, I lost every penny and moved on. I worked with a few financial management companies over the years, ranging from insurance agents who tried to convince me that they knew how to invest, to full service companies who were “turn key”. I’ve managed my own investments back in the late 90’s when the tech boom was on and I’ve hired individual investors to help me. In short, I’ve seen it all and know enough to tell you that you need to make an informed decision that fits you.
Last night, I had a young couple ask me about a particular investment firm and whether they were worth the large management fee. I explained to them that there are a lot of variables and one needs to make the decision for themselves. Questions one should ask should include:
How much should I put aside every month?
How do student loans play a role?
What investment vehicle(s) is/are best for me?
Do I need an advisor? If so, what are their credentials?
Does the advisor have clients I can speak with?
How does the advisor get paid?
Should the same firm/advisor handle my financial advice AND do the investing or should there be two separate firms for checks and balances?
There are many, many more questions you should ask and often trial and error will be your best guide. However, one concept should stand out above all else: The value of Compound Interest. What does that mean?
Here’s a little example from Investopedia.com:
A 25-year-old who wishes to accumulate $1 million by age 60 would need to invest $880.21 each month assuming a constant return of 5%.
A 35-year-old wishing to accumulate $1 million by age 60 would need to invest $1,679.23 each month using the same assumptions.
A 45-year-old would need to invest $3,741.27 each month to accumulate the same $1 million by age 60. That’s almost 4 times the amount that the 25-year old needs. Starting early is especially helpful when saving for retirement, when putting aside a little bit early in your career can reap great benefits.
Be smart when it comes to your retirement and learn what it is that you don’t know. Don’t be a lemming and just follow the crowd, because this is your financial future. YOU need to take an active role in this decision. We have somewhat complex financial lives with practices, real estate, student loans, staffs, practice loans, equipment purchases, etc, and your life insurance broker turned “financial advisor” most likely isn’t knowledgeable enough to handle the difficult tax code questions for which you’re likely to need answers.
Find a great team to help you, or do it yourself, but start early, live as frugally as you can and do your best to rule your finances so that they don’t rule you.
Wishing you an amazing day,
If you want to come to learn more about an amazing business meeting for orthodontists, simply visit OP2018.com . We’ve got a world-class lineup of speakers, amazing food and an ambiance that will make you want to come back year after year. You can always email me at Glenn@OrthopreneursRD.com or message me on Facebook. I’m here to help.