Money Minutes for Doctors #35 ~ The Investment Ladder
We have all heard of the game “Snakes and Ladders”, the ancient worldwide classic involving a board with numbered, gridded squares. A number of "ladders" and "snakes" are pictured on the board, each connecting two specific board squares. The object of the game is to navigate one's game piece, according to die rolls, from the start (bottom square) to the finish (top square), helped by climbing ladders but hindered by falling down snakes. While this simple game is a race around the playing space based on luck, the world of finance and investing is infinitely more calculated ~ with disciplined players benefiting from their ability to see the longview and make informed decisions. Here to talk with us about the investment ladder, and the associated pitfalls, is Ms. Katherine Vessenes, JD, CFP®, RFC, Founder and President of MD Financial Advisors.
About Ms. Vessenes:
Ms. Vessenes works with over 300 physicians and dentists from Hawaii to Cape Cod. Her firm uses a team of experts to provide comprehensive financial planning to help doctors build their wealth and protect their wealth while reducing taxes now and in the future. Katherine is a longtime advocate for ethics in the financial services industry; and has written three books on the subject of investment strategies. She has received many honors and awards including: numerous tributes from Medical Economics as a top advisor for doctors, multiple 5-Star Advisor Awards, honored as a Top Woman in Finance, in addition to being selected to be on the CFP® Board of Ethics. Katherine can be reached at: Katherine@mdfinancialadvisors.com or 952-388-6317. Her website: www.mdfinancialadvisors.com.
Investment Ladder:
1. Make sure you have an adequate emergency fund
2. Pay of debt above 5 to 6% - exception if you are PSLF
3. Simultaneously start to save/invest in Non-Qualified accounts
4. Use 401k or 403 b up to match- preferable in Roth if you have that option
Problems/to avoid:
1. Don’t wait to start investing until all your debts are paid off as you will miss the compounding effect
2. If you have debt work with your financial advisor to develop a plan to pay it off. Don’t carry a balance each month.
3. Don’t put money into illiquid investments if you will need it in the future
4. Don’t put money into your 401k, it there is no match
a. Make sure you understand the vesting terms if you are transitioning between jobs
5. DIY: an option but retirement savings is so complex rarely works! Often find DIY Docs either are way behind or never get started
6. Generally AVOID alternative investments/private deals
Red Flags:
1. Clients carrying credit card debt every month
2. Client who have not analyzed approach student debt.
3. You haven’t thought about the future and running out of money
4. “play” the stock market – it’s real money!
5. Using colleagues as their financial mentor