At least in plastic surgery there is a somewhat ubiquitous saying that “great is the enemy of good.” It’s not a perfect saying but the underlying meaning is that sometimes our quest for perfection can actually mess something up that is already a great result. In general life, however, I like to rephrase this saying as “perfect is the enemy of production.”
And I think this applies to personal finance in a major way. In ways that I unfortunately see all the time.
So in this post, I’d like to go over 3 prime examples of how I see perfect rear its head as the enemy of production over and over again in personal finance.
3 ways that perfect is the enemy of production in personal finance
From the top…
1. Finding the perfect asset allocation
This is one that I always run into.
The story usually goes like this: A physician wants to start investing their money. So they do some reading. However, instead of this financial education spurring them to action, they get bogged down in all of the billions of different ways that you can invest your money.
So, the create an asset allocation. And it’s usually really complex to begin with. And then they tweak it. Because they read another blog post or book suggesting another great asset class to include in your portfolio.
But they are still not quite sold. So they do some more research. And then they tweak some more. But then the market is going down a bit. So they hold off because maybe they should be investing more in certain types of bonds.
This goes on ad infinitum. The quest for the perfect asset allocation is now stopping them from investing at all. And, when you begin investing, the amount you invest via your savings rate is way more important than your return – or your asset allocation for that matter.
Keeping it simple
I must admit that I fell victim to this a little in the beginning. Not in that choices led me to delay my start to investing. But in the sense that my initial asset allocation was probably a bit more complicated than it needed to be.
Our initial asset allocation (found here in our written financial plan) was:
- 40% US Stocks
- 35% International Stocks
- 5% REITs
- 10% US Bonds
- 10% TIPS (Inflation indexed bonds)
And keep in mine this is pretty simple compared to most asset allocations that I see. But I’ve simplified it even more now and primarily use the two funds for life strategy that I discuss in depth here.
The reality is that there are tons and tons of perfectly reasonable asset allocations. As long as you invest long term in the overall market using low cost, broadly diversified index funds, you are winning.
Don’t let your search for the non-existent “perfect” asset allocation get in the way of moving along your path to financial freedom. And if you are looking for a simple way to determine your asset allocation of stocks and bonds, use this as a guide.
2. The would-be physician real estate investor
This scenario involves even more severe analysis paralysis than the above example.
Why? I’m not 100% sure. Some may say that it’s because bigger risk is involved. But I’m not sure that’s accurate. One failed real estate investment is way less damaging to your financial future than not investing in the market as above.
I think the real reason that this promotes more fear, a more fanatical search for “perfect,” and less production and action is that it is less familiar to physicians. And we like to really feel like we know every nook and cranny of a thing before we jump in. But that is not even how medicine works! For instance, did you feel ready as an intern? Or a first year attending? I know I didn’t! But still we moved forward…
But I digress…
I truly believe that real estate investing is an accelerant on the path to financial freedom for doctors. When done the right way. And Selenid and I put our money where our mouths are. We invest actively in real estate, embrace the real estate flywheel, and have built portfolio of 18 units.
So, yes. Real estate investing does need to be done the right way. But notice that I did not say it needs to be done the “perfect” way. There are many right ways to do it. The key is learning to find, screen, and analyze deals. And this goes for active real estate investing and passive real estate investing. The only difference is that in passive investing you need to analyze the property and the deal sponsor.
At that point, you don’t need to look for the “perfect” investment, just a “right” one.
Let me give an example
I have a lot of people e-mail me interested in learning about real estate investing and wanting to get into it. Which I love!
I’m always happy to hop on the phone and have a chat about how we invest, why it works, and basic strategies. And then I’ll usually get some follow up e-mails or calls about potential properties to invest in. And this is where things get sticky.
A lot of new investors get hung up on certain details of a potential investment. And they lose the forest for the trees. Because not every detail of a real estate investment needs to be, or ever will be, perfect.
We have invested in properties with a higher purchase price, higher interest rate, more needed repairs, or lower potential rents than we would like. And these properties have all been successful. Because the deal worked as a whole. If interest rates were high, then maybe higher rents cancelled them out for instance. Here’s an example…
Keeping it simple
When evaluating a potential real estate investment, you are evaluating the whole deal. And while there are 5 ways to make money via real estate, cash flow is the one to focus on in your analysis.
So, set your cash flow criteria for you to invest in a real estate investment (ours in 10% cash-on-cash return). And then, if a deal meets that criteria, invest in it. If not move on. Don’t make it more complicated than that. Otherwise perfect will be the enemy of production again.
And here is a guide of How to Screen & Analyze Investment Properties the Right Way so you can get started!
3. I can’t do a side gig
Alternative streams of income are game-changing for physicians.
The COVID pandemic demonstrated to us that our doctor jobs are not as completely safe as we perceived. Alternative streams of income create income diversity, de-couple us from our doctor income, and create flexibility and exponential gains in our journey to financial freedom.
Luckily for doctors, our skills and knowledge are unique and in high demand. So there are lots of opportunities to create alternative streams of income through things like consulting, medical surveys, and more.
Every doctor can be very successful in establishing a side gig in my opinion. However, the search and wait for protection after precludes progress, production, and alternative streams of income. Too many doctors say they are just not ready, don’t know enough to do “X,” or need to prepare more. This is a fallacy though.
Listen, I’m not saying to jump into a side gig blind. Or not prepare at all. That’s a disservice to you and those working with you. But once you get to a certain point, you just gotta go for it. You will never be the perfect expert witness until you get experience doing it. And the only way to do that is to actually do it!
Keeping it simple
It’s all about mindset.
What helped me get started is remembering that there are tons of other doctors doing just this, with amazing side gigs. So why not me?!
And I can promise you that the only difference between someone doing it and you, is just that they started. They have no more inherent skill or predilection to do this than you.
Often, another road block is that doctors are just not aware of all of the opportunities available to them. So, this is a full list of better physician side gigs to help you create alternative streams of income!
And here are 5 alternative streams of income that I created so far…
If there is an underlying theme here, it’s this
Perfect is a fine compass to guide you in the right direction.
But at a certain point, perfect becomes the enemy of production. In personal finance and in life.
Specifically in personal finance, perfect can delay your arrival at financial freedom and the ability to care for your patients on your own terms significantly!
So jump in the arena with me!
For even more tips and tricks to reach financial freedom, watch my Masterclass Webinar on The 12 Steps to Financial Freedom for Physicians here!
What do you think? Have you seen perfect become the enemy of production before? What happened? How did you address it? Let me know in the comments below!