By Mary O’Brien, M.D.
It’s tax time again. Those little pieces of paper that seem so important to the Internal Revenue Service are arriving in our mailboxes. It’s a good time to review a few basic tips on money management and investing. You know, the principles no one actually taught us during our many years of training to save lives.
What does money management or investing have to do with health care? A lot. Financial worries, either personal or institutional, often compromise patient care. People can act with “impure motives” if dollar signs cloud their thinking. Everything we recommend to a patient, client, or student should be in his or her best interest. Those of us in health care should keep our finances in order so that our motives are honorable. Working with a fiduciary financial planner is similar. Such a professional is obligated to do what’s best for his client, not himself or his company.
Keeping all of this in mind, there are some timeless investment tips that apply to almost all of us:
- Saving and investing are different. Step 1 is to get out of debt. Step 2 is building up an emergency fund of at least three to six months of living expenses. Then investing can begin.
- Educate yourself and don’t invest in things that you don’t understand. In our culture you can earn an advanced degree and have no idea how to handle money. The first thing you have to invest is time.
- Sign up for a 401(k) or 503B plan at work and fund it to the max. Investing each month (with money taken out of your paycheck before you see it) is the best path to security.
- Watch out for management fees and fund expenses. There is a cost to investing, and awareness is key.
- Take advantage of time and youth. Shocking numbers of people in their 20s, 30s, and 40s have no investments at all. Modest, steady, monthly investments in your 20s and 30s can lead you to millionaire status in your 60s.
- Whether you’ve been investing for six months or six decades, do not make decisions based on fear or greed. What separates most people from their money is emotional overreaction when markets tank. Anyone who has worked in an ER (emergency room), OR (operating room), or ICU (intensive care unit) knows you cannot save a patient if you panic. “Steady as she goes” sounds simple, but it’s tough when markets correct as they always do. Stick it out. The rebound always occurs.
- Diversify investments and institutions. Depending on your stage in life, some mix of stocks, mutual funds, bonds, REITS (real estate investment trusts), and CDs (certificates of deposit) is prudent. Never put all of your eggs in one basket — or in one hen house.
- Don’t fall for hot stock tips, free-dinner seminars, or charming financial sales people.
- Don’t fuss or meddle too much. Some people cannot leave their investments alone. Occasional adjustments are warranted based on your personal situation and market conditions. A giant oak will never reach its full potential if it’s transplanted every few months.
- Be cautious and discipline yourself. People with significant financial assets often develop significant egos. Don’t let brokers take advantage of you by flattering your ego. Remember the Bernie Madoff scandal. Unscrupulous people can be master manipulators.
Some combination of hard work, discipline, prudence, and common sense helped you develop your career. Those same principles can help you secure your financial future.