Setting personal financial goals might fall by the wayside with an excellent job like that of a physician. You have a high income, so why worry about setting financial goals?
But unless you plan to work your ass off as a doctor for the next few decades, it’s good to figure out what you want to accomplish with that income.
My Financial Goals with My Money
My personal financial goals were to grow my investments to a point where I could draw down from them. Passive income, as the cool kids say.
In 2017 I didn’t think an alternative career in medicine was feasible. I didn’t want to depend on medicine for the rest of my life for income and financial security.
I wanted my money to offer me income and stored value.
Passive income from investments generates the income. And a savings account or a purchased property will be that stored value that I can tap into when necessary.
What Money Shouldn’t Do
I don’t need it to buy me luxuries or signal my wealth.
Money can’t give me confidence or offer total financial security, no matter how much of it I have.
It can’t make me happy or give me freedom, love, or respect. It can hardly give me security which is what it’s most known for.
Think of an economic disaster, a significant financial mistake, or a personal health disaster; these things should highlight that the above things aren’t achievable with money alone.
Setting Realistic Financial Goals
If money is only a tool, I want to examine how the masters use it. It seems they all either lend it out, invest it, or figure out easier ways of having more of it.
Investing is relatively easy these days. What’s hard is avoiding the allure of the sexy options like whole life insurance and Airbnb properties or syndicated deals.
But if you put your money in conservative whole-market investments, they seem to do well for most investors.
2. Lending it out
Banks lend money to people. And money-savvy individuals do the same. They buy peer-to-peer notes or do hard money lending.
Or perhaps they lend money to friends and family for particularly good investment deals.
3. Earning more of it with less effort
Earning money from medicine is like breathing through a straw.
If I only had to interact with a patient and was left to do what I thought was suitable for the patient, shit, that’s easy as pie. All day long, I would do that.
Selling courses, books, and programs, endorsing products, and putting your name on a weight loss clinic are all easier ways to make money.
4. Avoid wasting money
If the money comes in, then spend it after you’ve set some aside. The money you earn from working should get invested so that it can continue to earn.
Once these steps are accounted for it’s rewarding to then invest in your friends, family, and community.
5. Have a number in mind
Setting a personal financial goal requires that you have a number in mind. How much do you want in your retirement account? Or how much income do your want your portfolio to earn?
I coach physicians who don’t have any number in their head. They believe that once they reach that number they’ll know.
Or they believe that they’ll have enough once they have worked long enough in their specialty.
6. Know the math for passive income
A financial goal might be to have all retirement spending covered. So how much is this supposed retirement spending?
The exact number isn’t important but a ballpark is good. $5,000 per month? $15,000 per month? $150,000 per month?
From this value we can figure out how much investment return we need from a portfolio of securities or real estate to cover this retirement spending.
How to Set Financial Goals
The easiest way of setting personal financial goals is to figure out what you want from your money and then numerify it.
I want a paid-off house and an income to pay for housing, healthcare, food, and transportation.
Once you know the categories it’s easy to assign some values. If this is hard then having someone else work through it with you would be a good exercise.
It’s better to set achievable goals. If you want more of a financial cushion, you can always continue working longer.