Help! I'm a High Income Earner But Scared to Invest

A high income does not equal high net worth or high wealth. To get a high net worth, that high income has to be saved and invested (appropriately). Doctors and other high income earners get into trouble when they don’t save, don’t invest, or invest inappropriately. Sometimes it’s one of these factors that gets them, but most of the time it is all three happening at once. Why? Sometimes it’s lack of financial education or awareness. But many times it’s because we are scared to invest.

And that is what this post is all about!

Awareness – The first hurdle

The first hurdle to building wealth as a high income physician or professional is usually a lack of understanding of why we need to invest.

This is what happened to me throughout my training and is what happens to many physicians throughout their career.

We don’t understand the concept that our high income does not issue us becoming wealthy. It’s not always intuitive that even if we make $1 million/year, if we also spend $1 million/year, our net worth is the same as my dog, $0.

So, we fail to develop a savings rate and fail to invest.

This pitfall is what I mean when I say a lack of financial awareness. This pitfall leads to a failure to save.

Overcoming the first hurdle

This is usually accomplished in one of a few ways:

We come in contact with some person, mentor, blog, podcast, etc. that opens our eyes
We come to the harsh realization that we have financial issues that will not fix themselves

My financial eyes opened as a result of both of these things happening concurrently.

Education – The second hurdle

The next hurdle in the path to financial well-being is financial education.

This is different than financial awareness because we can be financial aware but still make bad financial decisions that cost us our wealth.

I’ve talked a lot about this before. But I firmly believe that financial education should be tied unto medical education. However, the fact of the matter is that it currently is not.

So, it’s up to us.

This pitfall leads to making inappropriate or self-defeating investments.

Overcoming the first hurdle

Invest in yourself and educate yourself.

If you are in this phase of the process, use these resources to help you!

Fear – The final hurdle

I’m being a bit facetious when I say that this is the final hurdle. There are of course many more “hurdles” or pitfalls in the path to wealth building. Things like asset protection, inheritance planning, sticking to your financial plan, etc. But if you reach these pitfalls, that’s a good problem to have.

Remember, the formula to build wealth is simple. Follow it through and you will be wealthy and live life on your own terms.

And a big part of that formula is overcoming these 3 pitfalls.

Anyway, back to fear

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This may very well be the most difficult step for a lot of, if not all, people. And it especially afflicts high income earners.

After one becomes aware of the need to invest and becomes educated about investing, they often get really overwhelmed about the risk of investing. Investing becomes intimidating. All of a sudden, their hard earned money is at risk of dissappearing for nothing!

Investing starts to seem even worse than spending on unnecessary consumer items. At least when you buy a boat, you lose your money but you get a boat!

The pitfall here leads you to just straight up not invest.

And that is very dangerous. So let’s take a closer look at what is really behind this fear…

The risk of investing

Dr. William Bernstein classically discusses the risks of investing nd breaks them up into shallow and deep risks.

Shallow risks…

…are the risks that most investors actually worry about. Shallow risks are what makes people scared to invest. But they are the least important and the least dangerous to your wealth building.

Let me repeat that…the investing risks that most people fear and are afraid of are the least harmful to your actual wealth building.

They are paper tigers. Shadows in the closet.

These risks include things like short term volatility in the stock market. People see their portfolio lose 6 figures in one bear market and freak out. This seems understandable. Until you remember that you are investing for the long term. That you assessed your risk tolerance and set an asset allocation according to that risk tolerance. And you invested in low cost broadly diversified index funds to approximate the market. Which is a safe way to invest for the long term.

Now, that short term volatility doesn’t seem too bad. Heck, you might even realize that stocks are on sale and buy more index funds while the price is low and everyone else is trying to sell.

*Know the difference between shallow and deep risk before diving in*

In summary, shallow risks are only as dangerous as you let them be. If you let them scare you, you might deviate from your financial plan and that very well will hurt your wealth building.

So don’t be scared.

Deep risks…

The deep risks of investing include:

Inflation (Your money is worth less)
Deflation (Goods and services are worth less)
Confiscation (The government takes your money)
Devastation (Your money is destroyed – think Germany after WWII)

These are real reasons to be scared to invest. If any of these scenarios occur, your wealth will take a huge, if not fatal, hit.

But, should these actual risks, the real monsters under the bed, keep you up at night? The answer is still an emphatic no!

If any of these deep risks take a real hold, you have bigger issues than your finances. They spell the imminent downfall of your life and livelihood as they stand. Further, they are largely completely out of your control. And lastly, historically they are extremely uncommon and unlikely to occur.

So, I don’t worry about these deep risks.

What you really need be scared about when you invest

The real thing you need to be scared of is being scared to invest.

Huh?

Basically, not investing should scare the sh*t out of you. It should keep you up at night. If you don’t invest, you will not build wealth. You will not achieve financial well-being. You will not be free to live your life on your terms. Money will be a real problem.

The simple fact of the matter is that no matter how much money you earn, no matter how high your savings rate, saving alone won’t get you to your goal.

They key with risk in investing is not to avoid it. The key is to manage that risk.

How do I manage investing risk

Everyones individual risk tolerance will differ.

But in general, the way we should be managing our investing risk is the same.

I’ll distill it down here with references to previous blog posts that go into more detail:

In the stock market, approximate the market and limit fees by investing in broadly diversified, low cost index funds for the long term. Actively managed accounts underperform passive portfolios like this 80% of the time. Be on the right side of that equation.
- Stress Free Stock Market Investing Is Easier Than It Seems!
Create an asset allocation that reflects your risk tolerance. You should be able to sleep like a baby during a bear market. Otherwise, your allocation is not set to your risk tolerance appropriately.
Rebalance your asset allocation once a year so you can ignore your investments the rest of the year. You will also guarantee yourself to buy low and sell high. And that’s how you win the game.
- Asset Allocation and Rebalancing: A How-To Guide for Buying Low, Selling High, and Relaxing In Between
In real estate, whether through direct investing or more “passive” approach like syndications, make sure your properties provide positive cash flow after careful due diligence and analysis.
- How to Screen & Analyze Investment Properties the Right Way
Avoid tempting investment fads that entail too much risk. You as a high income earner just don’t need to incur significant risk to reach your financial goals if you follow the simple path. So these investments are just plainly best avoided.
- The 3 Most Tempting Current Investments to Avoid

A final word

It’s ok to feel scared to invest. I did.

Like anything else, you will probably never feel quite ready before starting. And, like anything else, you will need to just do it. Of course before you just do it, educate yourself enough. How much is enough? You’ll know. Deep down you’ll know. Even though you still feel scared to invest.

The scariest conversations I have in the doctors’ lounge or messages that I receive or calls with coaching clients are the ones when someone is sitting on a huge pile of cash in a savings or money market account. And they tell me they haven’t invested because they are too worried about risk.

My goal is then to find out if they feel this way because of a lack of education, in which case that is precisely the cure. If education is not the issue, then the focus becomes overcoming this understandable trepidation through mindset work and other strategies.

Ultimately, your biggest opponent to your wealth building is the one facing you in the mirror every morning!