Shortly after graduating high school, my uncle gave me a copy of Rich Dad, Poor Dad by Robert Kiyosaki. I’ve been a fan of Rich Dad’s books and other products ever since. The underlying premise of much of their work is that financial education is largely missing in our society, and they try to support this issue by providing a common-sense approach to complex topics (hope this sounds familiar as we interact with patients !). One of my favorite lessons from the Rich Dad series is the importance of working for assets, not money.
Currency and asset have different definitions. To clarify, for the purposes of this article, currency is money used to pay for goods and services, while assets are tangible and intangible items of value that make money.
This means that, for most people, your home is not an asset. Instead, it’s good stuff to buy with the money you earn. Does it have value? certainly. But can the money it earns be used to buy other goods and services? Not too possible. On the other hand, a home rented out to a tenant is an asset because it provides funds that can be used for other purchases.
As doctors, we are easily a popular target for the way businesses market themselves to live a good life. We are the target of equally popular lenders who line up to support us in enslaving ourselves to monthly payments by punching the clinical clock. This can lead to burnout, the opposite of financial freedom.
So how do we draw better paths?
Through a lot of reading, seminars, formal education, and hard study without resisting temptation, I’ve come to believe that most physicians need three basic steps on the road to financial freedom:
Step 1: Invest in yourself to increase the value of your work time.
Step 2: Make a plan to invest your income in money-generating assets.
Step 3: Whenever possible, use the money in your assets to improve your lifestyle, not your money at work.
invest in yourself
To paraphrase Warren Buffett: The best way to succeed is to invest in yourself. Whether it’s perfecting your medical skills with a CME, improving your “soft skills” such as emotional intelligence and communication, or acquiring another externally validated skill through an advanced degree (MBA, MPH, etc.) or certification (CPE, HCQM, etc.). , investing in yourself can get you a higher return on your time investment in the form of a higher salary. Physician executives with advanced degrees earn more than those without advanced degrees, and those with strong communication skills are more likely to negotiate higher salaries, and the examples continue. Investing in personal and professional development is a must for physicians seeking financial success—but taking advantage of this increased profitability is key.
investment cash flow
Investments provide returns in two forms: capital appreciation and cash flow. For example, a rental home may increase or decrease in value (appreciate/depreciate) over time based on supply and demand in the local market, while also providing cash flow in the form of rent payments. Likewise, some stocks pay dividends in the form of cash flow, while also raising or lowering the price per share depending on market conditions.
Ideally, the investment results in positive cash flow and capital appreciation. Different situations call for prioritizing cash flow or capital appreciation when choosing an investment, but it is worth considering that cash flow allows for immediate returns to fund other benefits. These returns can be reinvested, invested in other assets, or used as money to buy goods and services you need or want.
Let your investment success define your lifestyle
One of the main drivers of physician burnout is the debt burden—not because of the debt itself, but because it generates a steady stream of high income for physicians. A common mistake doctors make is taking on high levels of consumer debt (material objects that do not generate cash flow) simply because their high income allows for monthly payments. Once in this position, it’s hard to get out (trust me, I’ve been there!).
This habit of exchanging time for money to support keeping up with Jones’ lifestyle is common among physicians and is very unhealthy. While this requires discipline, I encourage all physicians to work towards empowering them to expand their lifestyle by investing in cash flow rather than salary. Doing so breaks the metaphorical chain of work.
Essentially, the reason to work for assets instead of money is to stop trading time for money. Shifting from trading time for money to investing time in assets that can earn you a compounding effect will enable you to practice medicine from a position of passion rather than necessity – a liberating journey indeed!
Editor’s Note: The views expressed in this article are the author’s own and do not necessarily represent the views of the DO or AOA.
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