Rx for Financial Success: My biggest mistake

 

February 25, 2014

 

In 1988, I met two up-and-coming doctors with a lot in common: both were 34, married and had young children in private schools. Having squared away their career path, they were both starting to put serious thought into planning their financial future. One—an internist I’ll call Bob—soon became a client of mine.

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The other—an anesthesiologist I’ll call David—told me he liked managing his own finances. Fair enough. David was clearly a very capable and intelligent man, and our encounter was social, so I didn’t pursue the subject. Little did I know at the time how much I would regret not pressing just a little further, offering to meet and take a courtesy look at his financial situation and goals.

 

Actually, I did get a chance to do that, but not until it was too late. You see, I lost touch with David but recently reconnected with him after 26 years. What I learned about this now 60-year-old was surprising, and a little distressing. At a time when he would have liked to be preparing to retire, his family’s finances wouldn’t allow it. Despite David’s very considerable earning power, his investments had risen and fallen with the markets, as well as the different advisors and investment philosophies he had tried over the years.

 

I couldn’t help comparing David’s situation with that of my longtime client, Bob. Take a look at the highlights in the table below:

 

Bob   the Internist/Client

 

David   the Anesthesiologist/Acquaintance

Lived in a suburb while building his practice; now lives closer-in

Bought in River Oaks in the early years of his practice; is still   there

Put children through private schools

Put children through private schools

Wife never worked outside the home

Wife is a podiatrist; still works part-time

Owns a second home within driving distance of Houston

Owns a second home within driving distance of Houston

Created a goals-based plan in 1988 and has  stuck to that plan

Tried a few advisors over the years but currently is self-managing investments

2014 income: $250,000

2014 income: $800,000

2014 net worth: $5.6 million

2014 net worth: $5 million

 

Look closely: with more than three times Bob’s income (more, if you count his wife’s earnings), David’s net worth is actually less. More worrisome, at a time when he might have been preparing to retire, he is still tied to the fortunes of the markets, taking on additional risk in an effort to catch up with where he wants to be.

 

Bob, on the other hand, had a consistent plan early on and followed it. He wanted to give his family a great lifestyle and his kids a top-notch education (which he did) while being able to retire at 62 (which he will soon do). At that point he can invest his time and effort in enjoying life with his wife, children and grandchildren.

 

I will always wonder how much better David’s situation might be if I had asked him to sit down with me back in 1988. Even if he hadn’t become a client, he might have come away appreciating the need for what we call a 360-degree view of a family’s financial life. At PARTNERSINWEALTH we look at our clients’ investment portfolios, of course. But that’s only one part of what we do, because it’s only one part of a family’s financial life.

 

Today, I always make an effort to mention to people I meet what I do for a living, and offer to review their financial plan with them. I would hate to make the same mistake twice.

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The professional team at PARTNERSINWEALTH will put you in control of your family’s finances. We don’t replace the valued advisors you already have. We enhance their effectiveness, folding together diverse aspects of your finances to help you make better decisions and plans. For more information, helpful guidance or professional assistance with your financial big picture, please contact Jim Waters, CFP®, at PARTNERSINWEALTH 713.964.4028 or jrw@partnersinwealth.com.