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Converting a Healthy Money Mindset into Wealth Building Action

Crafting a health money mindset is imperative to reach financial freedom. I’ll be honest, before I started my financial education and worked on my healthy money mindset, I didn’t even necessarily believe in the importance of mindset. And man, was I wrong! Look no further than my past & unhealthy relationship with money.

After a few months of mindset work, my financial well being improved a ton. I also recognized how damaging the “money isn’t important” taboo in medicine can be.

However, a healthy money mindset is only necessary but not sufficient to build wealth. It’s only the first step in the one-two punch. Action is necessary.

healthy money mindset
Ready to leap?

Unfortunately, action can be scary. Change is scary. Whether due to analysis paralysis or something else, it is often inaction that is our biggest enemy.

Related Post:
How to Win the Fight Against Analysis Paralysis

Converting a healthy money mindset into wealth building action

So, let’s ask and answer some important questions to help us all move from a healthy money mindset to the right actions to actually build our wealth!

Do doctors have a certain mindset about money that impacts how they approach investing or prevents them from doing it at all?

For doctors, money is generally considered a taboo subject.

The misguided mindset is that we didn’t become physicians to make money, we did it to help people (true) so to think about our personal finances makes us a worse doctor. Combine this with enormous debt, delayed gratification, and the fact that doctors get no formal financial education throughout our long education and training as well as our ego driven difficulty admitting when we don’t know something and this is a recipe for disaster!

This is the unhealthy one that I had before I began working on a healthy money mindset.

I actively avoided the topic and dug my head in the sand. Unfortunately this led to burnout as my financial well-being plummeted. Unfortunately, this type of burnout has become widespread a this study shows…

It was actually when I started paying attention to money that my financial well-being improved (along with my overall well-being subsequently). And I became a better doctor. This was an epiphany and is why I am so passionate about sharing my story with other doctors. And why I care about physician financial well-being to begin with!

And so, how should doctors change their attitudes about money/investing to create more wealth?

The first hurdle in the healthy money mindset shift that needs to happen for doctors is that thinking about your personal finances is okay.

It doesn’t make us bad doctors and actually helps make us better doctors as our financial well-being improves and we can focus on what is most important and what we love about our jobs – our patients!

Related Post:
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After this hurdle is cleared, doctors most often cite two limiting beliefs related to their ability – or inability – to improve their finances. And these two limiting beliefs are:

  • A lack of time and
  • A lack of understanding

These usually emanate from the misconception that personal finance is too complex for us to understand. However, in reality, being successful with your personal finances is pretty simple, especially compared to the other stuff that doctors do in their daily lives. 

And in terms of time, being successful in personal finance is really about creating a foundational understanding and building healthy money habits.

So yes, in the beginning, there is a time commitment. However, I broke this down to reading 10 pages of a finance book and 1 finance blog post each day between my OR cases. Then, over time, I learned enough to build the healthy money habits that now automate my debt payment strategy, investments, and overall wealth building.

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What are the important steps to take when it comes to investing?

Like I mentioned above, the most important thing when it comes to investing in building healthy habits. And the first actually has nothing to do with investing and has everything to do with saving.

Especially in the beginning of a doctor’s career, the amount you save is way more important than the returns you get on your investments. As a general rule of thumb, doctors should save 20% of their pre-tax income to invest.

To do this, I recommend that doctors run a budget for at least a few months to understand and then control their expenses. (And here is a great budgeting guide!) Because the path to wealth is to create and grow the margin between what you make and what you spend. And while what you make is not always in your control, what you spend is always 100% in your control. If saving 20% seems too hard at first, then work to save an extra 1% each month until you reach 20%.

After that, it’s important to invest those savings in broadly diversified low cost index funds. These investments approximate the entire stock or bond market. Since we are investing for the long term, this has shown to be a safe bet as the overall stock market has always gone up in the long term. This simple formula will ensure that just about all doctors reach retirement and financial freedom on their own terms.

What are the important things to avoid?

To invest successfully, you need an investment plan that does not require you to time the stock market or predict individual stock winners because this has been shown to be impossible in myriad scientific studies.

So, you should avoid any active investing strategies involving actively managed mutual funds or individual stocks. In addition to underperforming broadly diversified index funds 80% of the time, these active investments also eat into your returns via higher fees and taxes.

I also avoid risky alternative investments like cryptocurrency, angel investments, and the like. As high income earners, doctors just don’t need to take this high level of risk to reach their financial goals. So it is simply not worth it.

Related Post:
The 3 Most Tempting Current Investments to Avoid

Lastly, doctors don’t need to have a financial person or financial advisor managing their money. It’s possible to do this all on your own like I do, it takes minimal effort.

However, I’m not opposed to using a financial advisor who offers good advice for a fair price. The fact thought is that by the time you’ve educated yourself enough to recognize good from bad advice, you probably know enough to just invest yourself and save the advisory fee (which can add up to hundreds of thousands of dollars throughout your career). If you do think a financial advisor is right for you, here are 7 questions to ask an advisor to tell if they are good or not…

Are any investment-specific actions specific to doctors?

Of course!

There are many paths to financial freedom (working because we want to, not because we have to) for doctors.

As high income earners, our margin for error may even be slightly less than the average person despite our high debt burden.

The top 3 pieces of advice for doctors are:

  • (1) Pay off your debt within 5 years of finishing training (This is my debt pay down plan),
  • (2) Save 20% of your pre-tax income, and
  • (3) Invest in broadly diversified index funds of stocks and bonds according to your asset allocation (percentage of stocks and bonds in your investment portfolio).

After that, you really have your course automated and just can enjoy the amazing work you do as a physician. Oh yeah, also, make sure to ignore everything that you hear about investing in the physician’s lounge!

Of course, avenues like real estate investing (the right way!) are available. But they aren’t 100% necessary!

What tools are available for doctors to learn about money and investing?

There are some relaly great resources out there for physicians to learn about money management and investing.

In general I recommend picking one personal finance book to read each year and one blog to read one post daily.

My favorite personal finance books and ones I recommend starting with are The Millionaire Next Door by Thomas Stanley and The Psychology of Money by Morgan Housel. In terms of blogs there are a few out there and you can certainly use mine or any others. You can also check out my Masterclass Webinar on The 12 Steps to Financial Freedom for Physicians here!

It’s amazing how quickly you stack knowledge in a short period of time just through these little habits!

Turning mindset work into wealth building action is tough but necessary

The key is that you will never feel ready.

Remember your first day of residency? Did you feel ready? No way! I definitely didn’t. It’s the same thing with anything in life. Money and personal finance is no different.

Education is necessary. But at a certain point, you just need to jump in the water!

And here are some more resources to help with both your healthy money mindset and the actions that follow!

What do you think? How is your money mindset? Have you ever had a tough time converting mindset to action like me? Let me know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

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