Money is the one of those necessary evils needed expand and thrive in a capitalist society.
Yet with all of the abundance of money swirling around our financial system, many doctors of chiropractic seem to constantly struggle to attain this valuable resource.
The secret to wealth is not in spreadsheets, mutual funds, or the next get-rich-quick scheme; it is in wisdom and the application of that wisdom, when everyone else around you is trying to take short cuts, wishing their way to wealth and prosperity. If you want to be wealthy, then you must understand the truth about your personal financial plan.
The purpose of personal financial planning is to get someone into financial abundance so that their most important goals can be realized. This is a high purpose and something desired by most people. Yet, while this is a worthy objective, there are many pitfalls that plague even the best-laid plans.
Here is a summary of the “dirty dozen” or most common money mistakes I’ve encountered over the last two decades in delivering financial planning services to professionals.
They are the difference between success and failure in your overall financial experience as a successful chiropractor. If you avoid these catastrophic errors, you could have a far more abundant and expansive financial journey.
The top money mistakes
1. Not investing in specialized knowledge.
In this information age, knowledge is power and it is critical that you spend time every day gaining more knowledge for success. Your greatest investment is in your own abilities, which improve with correct information and the competence created by its successful application.
The greatest benefits can be derived from mastering financial and economic laws, sales, marketing, and executive management (with the assumption that you already know quality chiropractic medicine). Take advantage of books, audio recordings, videos, courses, and coaches to become more proficient in these areas. They will pay you the greatest lifetime returns.
This is a huge money mistake—putting off until tomorrow what should have been done yesterday. It is easy to avoid making financial decisions, until it’s too late.
You may not want to confront your finances and instead just concentrate on being a doctor, doing other actions that do not take you directly toward your ultimate financial goals. This is financial suicide on an installment plan and the only way to resolve it is to buck up and take action. The pain of doing it is often less than the pain caused from not doing it.
3. Failure to set definite financial objectives and implement a plan for reaching them.
The adage is true: If you fail to plan, you are planning to fail. A lack of specific goals creates an uncertain financial future, because the end result of your economic decisions is hard to evaluate. You want to set standard policies and procedures so you’ll know if you’re making forward progress. Any written plan is better than no plan.
4. Failure to view your household as a business.
The head of household is the owner or controller of the family assets. Many economic decisions made in the home are on an emotional level that would never be made in the context of a for-profit business. To have acceptable financial results in the household, financial decisions must be made with the intent of making a profit.
5. Failure to realize your income potential.
If you do not have sufficient income to live the life you want, then you are simply not providing enough value to the marketplace in exchange for that income. Your task is to figure out how you can provide more value on the job.
Learn new skills, find out what services are most in demand by your community, and establish a mindset of thinking and behaving like a wealthy person. The wealthiest people are the ones who provide the greatest perceived value to the economy.
6. Failure to recognize the impact of inflation.
Inflation reduces the purchasing power of your dollars over time. The purchasing power of the $100,000 you have today will in 20 years be only $45,650 (assuming an inflation rate of 4 percent). This is probably the largest external threat to your wealth, and the way to handle it is to produce value in the marketplace greater than the rate of currency devaluation.
7. Failure to implement strategies to legally avoid taxes.
Income, estate, and gift taxes can be substantially reduced or eliminated through effective tax planning. Taxes are probably the single largest expense over the course of your career. It is critical to gain a working knowledge of tax laws and their application so more hard-earned wealth can remain with you.
8. Failure to manage the risks you have assumed.
Each individual must understand the type and degree of risks assumed in owning a business, investing, and operating as a productive member of society. You assume about 90 different risks on a daily basis, and failure to manage these risks can cause wealth destruction. Diversification is the solution to risk exposure.
9. Having inadequate protection against risk.
Life, home, health, auto, disability, liability, and other forms of insurance are mandatory to protect you against unforeseen and catastrophic losses. Any risks you cannot easily afford to pay for in cash should be transferred to an entity that can afford the exposure.
You can also protect assets by using various legal structures such as limited liability companies, limited partner- ships, and trusts that offer creditor protections.
10. Letting spending run wild.
Lack of discipline in spending habits can cause even the best-laid plans to fail. Adhere to the ironclad rule of not spending more than you make, because if you do, you incur the penalty of paying interest—compensation the lender demands for taking the risk of giving you money you have not yet earned. The cost of interest over a lifetime can (and does) destroy the best wealth- building plans. Live within your means.
11. Having unrealistic expectations.
It takes time to build an estate. Too many people expect dramatic results too soon and become disenchanted when their get-rich-quick schemes do not pan out.
After factoring in costs, an investor can expect net returns from moderately conservative investing to be in the range of 3 to 7 percent. If you want greater returns than that, then own a profitable small business or become a competent, professional market investor. Only your production will make you wealthy.
12. Failure to use professional advisers.
No one can live long enough to become an expert at everything— especially the intricacies of efficient financial planning. A major mistake is to accept secondhand advice without careful inspection and testing. Surround yourself with competent professionals and specialists and find a qualified financial planner to coordinate the efforts of your entire financial team. Your team will likely need to include an accountant, attorney, business management consultant, and other experts as needed.
These 12 common money mistakes lie at the heart of any failed attempt at financial planning. Learn and apply the laws and basic fundamentals of financial well-being and you will avoid these errors naturally.
P. Christopher Music is a veteran financial advisor, bestselling author, and international speaker who works exclusively with professionals in private practices. He is the Founder of Econologics, Results- Based Financial Planning, and the Private Practice Millionaire Academy, which serve chiropractors in achieving financial independence. He can be contacted at email@example.com or through PrivatePracticeMillionaire.com.