#148 5 Financial Mistakes You Need To Avoid In 2023

Hey, everyone, this week we're going to be talking about something we all hate talking about, and that's making mistakes. Yes, you're a doctor and you make mistakes in your daily life, also in your career, unfortunately. And some of those mistakes can be costly, so we try to avoid those at all costs. So this week we're going to be talking about five financial mistakes that you need to avoid this year. So stay tuned. Welcome to the Passive Income MD Podcast where we talk about creating your ideal life through multiple streams of income. I'm your host, Peter Kim. If you enjoy hearing about this stuff, make sure to hit subscribe so I can bring it to you every week. Now let's get on with the show. Okay, I know that if you're watching this, you're most likely type A, or at least you're perfectionist in a lot of ways. None of us like making mistakes. You know, we went into healthcare, we went into our professions to help people. And we know, at least through training, mistakes can be quite costly. And so we've learned to be at least a little risk averse. So we like to weigh the risk and the benefit and create that risk benefit ratio, at least in our minds before we make any decision. Because our decisions and these mistakes can be quite costly, especially when life and death are on the line. I'm an anesthesiologist, so I'm there at really critical times. And of course I don't want to make a mistake at all. I'll do everything in my power not to let that happen. However, no matter how careful we are, mistakes are, are inevitable, especially when it comes to other things in our lives, and particularly financial mistakes happen. The key is to minimize those, at least be conscious of those, be deliberate about trying to avoid those mistakes. Because sometimes those mistakes can be quite costly and it can be really, really difficult to make up for them, especially on the other side. You probably know that a lot of those big mistakes are really obvious ones, like don't spend more than you make, don't keep all your money in cash under your mattress and things like that. Or there's some other big mistakes that a lot of times we don't think about. And if we did and we were a little bit more intentional about it, we would actually set ourselves for a lot more success in the future. So here's that first mistake. Not diversifying your portfolio. Now, I know this may seem kind of obvious. Many of you have heard about the concept of diversification. We talk about it all the time. And so maybe you think you're pretty well diversified. You've got these index funds, you've got this retirement account. But when you look at it today, especially with what's going on in the economy, how much has the value of those decrease? And if you're honest with yourself, do you have investments on the other side that are actually not doing as bad, or maybe they're actually doing quite well in this time? If you don't have investments moving in different directions, both up, both down, and where one can pick up the slack when others are not doing well, then you might not really have a diversified portfolio. If you're just investing in your medical practice and you expect that to be the majority of your income moving forward until maybe when you're 60 and you're ready to retire, then, then you might not be as diversified as you think you are. There's so many things that could change in our environment, in the regulations and the political environment that we live in today. Medicine isn't immune to technology and things are changing every day. So if all of your income is really tied up in your day job, if all of your investments are tied up in simply index funds, if your plans for retirement are all dependent on just the 401k, then you might not be diversified enough. I think this time, if any, is a great stress test for that. So. So take a look at your portfolio and see what it's doing. The thing that most of us want is security at the end of the day, knowing that there will be income, knowing that there will be investments in growth. No matter what part of the cycle we're in at this time, we're probably in something called winter, where investments may not be doing as well. And then we eventually we move into spring. We don't know how long that winter will be, but look at your portfolio right now. How stable is it? Is it still creating income for you? Does it give you freedom in your life? And if it doesn't, is it possible that you might want to consider adding other things to your portfolio? For example, I used to be all invested in stocks. It was all invested in technology stocks because that's where I thought all the great potential was. I didn't know any better. Then I learned about these diversified index funds and I started investing in those as well. The thing was, it wasn't really impacting my life in any way, meaning that I couldn't work less because of these, my stock portfolio or my retirement account, 401k. So I look for other ways to diversify my portfolio. And I found real estate And I began to appreciate what real estate was all about for me, which was producing cash flow so that things, especially when the investments make maybe weren't doing as well. There was still cash flow to continue to provide income for me and my family. I knew that as this income continued to grow that would mean I have to work less in my day job being a physician. So now when I look at my portfolio, I know not only have stocks, I have real estate. A whole bunch of different types of real estate, different asset classes across geography, across different sponsors, both active, both passive, you name it, it's all within real estate. Then I'm investing in things like mineral rights which produce cash flow for me as well. I'm also investing as an angel investor in certain startups. That's not producing cash flow for me either. But that gives me a chance to really get a lot of upside potential in the future for a very small part of my portfolio. I also invest in other cash flowing companies. I own equity stakes and companies that actually do produce cash flow on a monthly basis. All these things put together really help me create some stability in my portfolio. Sometimes things do well, sometimes things don't do well. But there's always something that is doing okay and doing well and producing cash flow at all parts of the cycle. If there's a priority that I'd say that all of us should have. So take a look at our portfolio, make sure it's well diversified and it's set up for success no matter what season we're in. Okay, I want to take a moment to talk about SEP for Life Insurance. They're a nationally recognized independent insurance brokerage specializing in life and disability insurance for physicians and high income professionals. As brokers, they work on the client's behalf to shop around, find the most suitable products at the most cost effective rate. I know that's really important to all of you because the volume and exceptional reputation of Set for Life as well as the relationships that they have developed with companies over the years, their clients, they have access to special services not available elsewhere in the industry. These include special discounts, priority underwriting, handling and on some occasions exceptions in the underwriting process. So if you want to check these out, find out more information, make sure to contact SEP for Life Insurance today and let them know we sent you. Thanks so much. Number two, financial mistake you don't want to make this year is to not have the proper disability insurance. I have the opportunity to talk to a lot of doctors and the more I talk to doctors and physicians, I find that There are situations where the unexpected happens, whether people get into accidents, whether at work, outside of work, maybe they have some medical issues especially. Maybe I'm getting to that age where people are starting to. Maybe I'm just getting to that age where people's health, it's starting to change. I'm in my mid-40s, I'm trying to stay as healthy as I can, but I feel like my health is changing in a lot of ways and it's hard to know what will happen. When I first got disability insurance as a resident, it was always a judge just in case type thing. Now I'm at this time where I'm starting to see people rely on their disability insurance when their health goes bad. Many of us would not be able to perform the duties of our job if we're not healthy. And so are you protected against that? Maybe that's something that you picked up as a resident, maybe that's something you picked up early in your attending career but you haven't revisited. There are things called own occupations, specialty specific insurance, and especially if you're in a job that is highly technical, what you don't want to do is have your hand hurt, for example, and have an insurance company say, look, we're not going to pay your disability insurance because you can still be a doctor. You can go back and be a family medicine doctor, but you're trained to be like an anesthesiologist, for example. You have to protect your career. You have to protect. Your greatest asset, at least right now for most of you, is your ability to create large income through being a physician. You want to protect that at all costs. At a certain point, when your investments create enough cash flow that allow you to self insure yourself so that if anything happens to you, you're still covered, that would be the beautiful place. That's fine. That's ultimately where you want to be. But until that point, you want to make sure you have disability insurance to cover yourself. So if you even talk to an independent disability insurance agent anytime recently, I would recommend you do that and at least review your policy so you know exactly what would happen if something happened to you. All right? The next financial mistake you absolutely don't want to make is not understanding how you can absolutely take advantage of the tax code. I'm sure if you're watching this, your largest expense, at least what it feels like, and actually maybe in reality it's the amount of taxes you pay. Now, obviously taxes go towards doing a lot of good. The government actually incentivizes you In a lot of ways to do things that are good for society, for good for even future taxes for them that may actually result in more. More tax collection. Because if you build businesses and you have payroll and you have other employees, they make sure that they're set up well in the end. And they're doing that through a set of incentives and telling you, especially as a taxpayer, what you can do. Now, many of us as physicians, we know that there aren't a lot of options available to us to minimize our taxes. The first thing to do is actually speak to a tax professional. Now, many of us try to do our own taxes. And if you're a very simple W2 employee, maybe you can do it on your own. But just like if you have a medical, you want to speak to a specialist, I think it's absolutely important to find a tax professional specialist who understands you, your goals, and what you're trying to do. For example, if you're a real estate investor, I think it's absolutely important to find a tax professional who understands real estate and the tax benefits of it, how to put it all together and ultimately create a win win situation for yourself. It actually creates a win win situation for society and the government, making sure you're set up correctly as an entity and as an investment. For example, we've all heard real estate professional status where you can take a lot of your passive losses from real estate, actually convert them into active losses, and offset maybe your W2 income, your day job as a physician, maybe by having a partner or spouse be that real estate professional. And we've talked about that in previous episodes, but that's something that you need to know about. My previous CPA didn't even know what that was or thought. That wasn't even possible for someone like me. Then I found a tax professional who was an expert in real estate because that's something that I was interested. That was something I was doing heavily. And he set me up for success when it comes to taxes. It completely changed what stayed in my pocket end of the end of the year and allowed me to do so many different things in terms of future investments in contributing and spending time with my family. All of these things were made possible by just finding the right tax professional. I didn't necessarily have to do anything different right off the bat, but they guided me to find that right situation. So if you're with a CPA right now that you've been with for years, and that's okay, they know you well, but maybe you've evolved, maybe your Investments have evolved, your goals have evolved, but you don't have that CPA to help you during that process, then maybe you should consider looking into a new one and asking around. And I know the question is, where do you find that person? Ask around to your friends and colleagues in your community, obviously in all these Facebook groups that we have. Ask around to find somebody who might fit your goals and your needs. The next financial mistake that you have to absolutely avoid is making investments in things you don't understand. I've done this as a doctor. Many people see me as a target in a way. They know that I'm a high income professional, I have money, maybe I don't even have time to look at investments. So they see me as an opportunity. So I've been approached by all sorts of people to invest in all sorts of things, from obviously real estate, different funds, to different types of alternative investments, whatever it might be. I've been asked to invest in so many different things, and guess what? They all sound great in a lot of ways, especially when someone's talking about it, especially if there's someone you know. And so I hate missing out on opportunities. This whole FOMO thing is a serious issue for me when it comes to investments. I just want to make sure that I don't miss out on an opportunity and wanting to diversify. I like to look at so many different things. The problem is if you don't understand them, you definitely don't want to put a lot of money into them because you don't know where the risk is. And I love talking about risk because I think understanding risk, having that balance, understanding how to do the proper due diligence for these investments allows you to mitigate risk and then really increase the potential for upside. That is the holy grail for me. Reduce the downside, increase the upside. And that really happens when you understand how to do the proper due diligence for certain investments. I have some physicians as family, and at the end of their life, I remember looking at their portfolios, at least talking to them and wondering where all the money went. They made money during the heyday of medicine. Where did it all go? And if you talk to them, many of them made investments in some big things that they didn't understand and lost money along the way. Maybe somebody invested in a medical device that, that they thought was the next best thing. They didn't know anything about it, but it just sounded nice. So they joined in with a whole bunch of different people, lost a good amount of money, maybe they invested in a Real estate deal in a development deal and sort of a risky deal that they knew nothing about. They didn't know how to do the due diligence of the property or the sponsor or the market. And this happens all the time. And it's sad to see, which is also why we created our course at Passive Real Estate Academy and in the community around it, just to support each other, to make each other smarter and help each other avoid making dumb decisions. But these mistakes, especially in this area of making investments, can be quite costly. When you're putting down 25,000, 50, a hundred thousand, whatever it might be, that is your time that you're putting down. That's time that you've put in to create that income. You probably pay taxes on it and you come up with that amount. And so you've given up a lot of opportunity for that investment. So you want to make sure that your money is secure, that it's going to grow and get you where you want to be. And lastly, this is one of the biggest financial mistakes you don't want to make this year. I know that this year, with the economy, everything that's in the news, doom and gloom, this may be the time where people are very, very afraid to make any sort of investment. And I can understand that. I can empathize with that. But in a time like this, I think one of the greatest returns on investments is investing in your own education. I know people talk about that all the time, but investing in your future is probably best done in times like this. We've all done it in the past. We've taken student loans, we've invested in ourselves with really no guarantee. Obviously, we knew that if we worked hard, we could work ourselves up the ladder and do well at the end. But honestly, there was no guarantee of any of that yet. We still invested in our future through college, medical school and that sort of thing. But I think it's important to keep investing in your future, to stay ahead of things, to go to conferences, talk to other people, buy books, join communities, these kind of things, and really investing in yourself, both in terms of time and in terms of money, will pay off significantly in the end. I think this is a time of great opportunity. What we're in right now is where the people that are educated, that have confidence, that have the community, that are connected to the right types of resources are going to really reap the benefits coming in the next 5, 10 years by planting those seeds today. Hey, everyone, join me for our annual Leverage and Growth Summit, which is happening on March 15th through 19th, 2023. This virtual summit is for physicians, and it's one of my favorite events of the year. And the reason I love it is that it's all about stories. It's stories of physicians doing really amazing things outside of medicine, leveraging their medical degrees and all their ambition and skills that they've grown and cultivated throughout their medical training and then using it for some other venture. Now these stories are of doctors creating their ideal lives. It's such a cool experience and there are tens of thousands of people who have participated in it and have been a part of this. I think you're really going to enjoy this. The best part, it's a free summit, so make sure you head on over to leveraginggrowth.com and sign up. You can join our exclusive Facebook group where you can meet some amazing people and really connect to get some really cool things done. This year we're offering free coaching. It's a great opportunity if you're interested in something and maybe you just don't know how to take action or where to get started, that coaching will happen every single day of the conference and help you leverage and really grow your big idea. So I'm excited about it. I hope you're excited about it, too. So go and secure your seat and I'll see you there. Thanks, everyone. I know that if you're watching or listening to this, that's exactly what you're doing. You're investing in your future. So maybe I'm talking to the wrong crowd again. It's something I have to really emphasize. Make sure you invest in yourself. Be sure that you're hungry and learning new things. I talked about not investing in things you don't know. I think it's obviously important to take nibbles at things because that's how you learn. But you don't want to invest huge in things, make big, costly mistakes that you can't rewind, that you can't get back again. Investing and betting on yourself in terms of the future, that's something that, again, will stick with you for the long term. All right, I hope that was helpful. We all make mistakes, but we know we're going to make mistakes. But if there's some big ones that we can really avoid by just being intentional for looking out for them and trying to avoid them at all costs and mitigating the risk of them, then we're going to be poised to take advantage of this time. Even when the economy's down, even if things look bleak, we'll be setting ourselves up for future success. By taking these steps, I know you can really help secure your financial freedom and really have that peace of mind that all of us want when it comes to investments, money, and the future. All right, let's talk again soon, everyone. Thanks. Enjoy the show. Let me know by dropping a review in the podcast app you're listening to us in. And if you haven't already, make sure to hit subscribe. Are you part of our community yet? Join thousands of physicians who are also on this journey to creating their ideal lives through multiple streams of income. You can join us on our Facebook group, Passive Income Docs, and you can always learn more at our website, passiveincomemd.com thanks again for allowing me to be a part of your journey. See you next time.