5 Reasons You Aren’t Winning With Money
I began The Financial Cocktail to share my learnings with the CRNA community. I am by no means the wealthiest or highest earning CRNA. My path has not been perfect. The intent behind this blog is a means to share my shortcomings and observations so others do not make the same mistakes.
Success in personal finance is not a zero-sum game. I would argue that financial success is contagious. More than a few CRNAs, entrepreneurs, farmers, and businesspeople shared their financial pearls with me.
One must be in the right place…at the right time…and ask the right questions to come across these pearls.
I typically write about how to budget, how to invest, and how to grow wealth. This time, I would like to focus on what not to do. There are plenty of things holding CRNAs back from reaching their full potential.
TL;DR
Not everyone is on the same financial journey.
Your decisions mold your situation.
Not everyone wishes you well
Manage your finances based on where you want to go in life.
Some luxury handbags are empty.
What’s important about CRNAs reaching financial potential?
Well, I can’t think of anything better than smart, industrious, conscientious people with too much money. Maybe CRNAs with a magic genie lamp or unicorn sparkle dust that can fix all of the world’s problems, but let’s start with this for now.
I have identified 5 areas of hindrance. Areas I have found myself in at one time or another. Without overcoming these negatives, my wife and I wouldn’t be looking to join the two-comma club at age 30 – a feat only accomplished by 2% of millionaires.
And for the critics out there, there weren’t any trust funds or windfall incomes. No crazy investment returns. We self-funded our educations. We have pets, a child, and medical expenses. Just two (relatively) young people causing trouble, one of which writing this blog entry.
Hopefully this post brings awareness for areas of improvement. And I will include a solution to each area that worked for me.
Poor Mentors
During my high school years, I learned most people are broke. 60% of Americans do not have $1,000 sitting around to cover expenses. And don’t think this is limited to low-income earners.
It’s not always the people in the flashy suits or sports cars that are doing well. I couldn’t see past this in my early years. That Mustang and big house was the status symbol.
These flashy folks were outspoken about how they came about such possessions. Maybe it was a bonus at work or they were simply paid well. Maybe they used leverage. Lots of things can go on a credit card for later.
Come to find out, it was the 70-year-old farmers who held most of the wealth in town. They wore blue jeans and flannel shirts. Never brand names. Never flashy clothes. They actually went out of their way to remain discreet. Some looked borderline homeless.
The high school me wanted the Mustang, but knew if I had real wealth, the Mustang would follow. So, I started listening to the people who had real wealth. Even if farming wasn’t in my future, their lessons apply universally.
One guy purchased the exact same new truck every year. Same make and model. Same package. Same color. All so no one would notice. Every 8 years or so, manufacturers would change the body style. This would blow his cover.
That $50,000 Mustang didn’t come close to the farmer’s new $300,000 combine. And you wouldn’t hear about the combine at the nearby country club. Nope, but you could find the farmers in the back of a gas station having coffee at 0600 most mornings.
And no one would have guessed the net worth of the old farm boys in the back was something close to $100M. As Montgomery Gentry sang in their 2011 hit, “He could buy your fancy car with hundred-dollar bills.” Don’t be fooled by a facade, find your people.
Excuses
Jocko Willink is one bad man. U.S. Navy SEAL officer, author, and podcast host. Willink and Leif Babin co-authored, “Extreme Ownership: How U.S. Navy SEALs Lead and Win.” Absolutely transformative.
Any and every situation you have ever experienced was your fault. Your actions may not carry the most fault, but you are at fault.
I first heard about this book on a TEDx talk. Willink was speaking to his commanding officer about a military situation with friendly casualties. The chaos of battle, the fog of war, and bad luck produced a horrendous outcome.
During the debriefing, the commanding officer was looking for fault and accountability.
I don’t remember the details exactly, but the first guy accepted blame and said he should have maintained their position and contact with friendly soldiers. NO, said Willink.
A second SEAL said it was his fault for not communicating their location quickly enough. NO, said Willink.
A third SEAL said he should have properly identified the target before firing. NO, said Willink yet again.
Each SEAL, in turn, voluntarily claimed FULL responsibility for the friendly casualties.
There were many faults. Plenty of blame to go around. Willink told each SEAL they were not at fault and he accepted full responsibility because he was the commander. He suggested new techniques and procedures to prevent this from happening again. He accepted ownership of the situation and offered a solution. Many solutions.
If you arrive late to work, did you…
Leave early enough?
Account for traffic?
Make optimal use of your time getting ready?
Have your lunch packed?
Have your clothes laid out?
Have your go-bag ready?
Could you have showered the night before?
Fueled the vehicle before hand?
Prepared everything for your kids the night before?
And his lists would go on and on and on. It sounds excessive, but how far are you willing to go? You are the commander of your finances. I can’t seem to pay off these student loans. Have you…
Tracked your expenses?
Adhered to your budget?
Cut spending?
Eliminated discretionary expenses?
Negotiated a higher wage?
Picked up overtime?
Found a battle buddy?
You get the idea. I’m not a big excuse guy. Mrs. TFC is now a stay-at-home mom. In order to meet financial goals, adjustments needed to be made. Hence, full time locum work. This way, we cut our expenses and fully compensate for her loss of income.
Cave to Social Pressure
I really dislike this one. We are CRNAs and people know we make good money. They don’t always know how much, but they know it’s enough to be comfortable. Or should create a comfortable lifestyle with proper management.
Social pressures influence the cost of living. Live in a certain part of town. Drive a certain vehicle. Kids attend private school.
If you want these aspects of life, by all means, go for it. Just have the finances to back it up. CRNA money is far from infinite.
I like to work around social pressure by sticking to my guns. I know what I like. I know what I’m willing to spend money on. Just because a peer drives a Mustang doesn’t mean I need to also.
I don’t have a problem passing on an event because it doesn’t work for me. And I expect the same from my friends. If we set up a vacation that they don’t have room for in the budget, I hope they would take a pass. Or best case, find a middle ground that would work for everyone.
If your friends don’t align with your values and goals, it might be time for new friends. Tough recommendation but look at the alternative.
Following Money Recommendations
Look at who provides recommendations. If I give advice, I don’t see a dime if you choose to accept or pass on my suggestion.
My problem started in high school economics. We were discussing ways to purchase vehicles. The teacher was discussing financing options and asked which were best. After looking at the interest rates, I suggested paying cash.
I said the vehicle will go down in value, so financing will put you underwater for a while. She said it was not possible to buy a vehicle in cash. Big problem here. That’s how my family traditionally buys vehicles.
College Tuition
During high school, talks of college started. Despite self-funding my education, I heard so many people say, don’t worry about the student debt. It’s good debt. You will earn more and be able to pay it off later.
Well, fewer students are graduating with a bachelor’s degree in just 4 years. And a good percentage of college graduates are not working in their field of study. This creates strain to pay off the accumulated student debt which carries an interest rate of 6.5%.
I’m disappointed that both the high school and college angles were pushing advanced education for as many people as possible. There are great career paths aside from 4-year universities.
I heard the same rhetoric for graduate education. Fortunately, CRNA school is one of the few advanced degrees where 1-year gross income supersedes education costs. For everyone else, good luck.
Financial Professionals
I had two professional financial advisors early in my career. Both charged similar fees, around 2% annually. This is high because I didn’t have much invested with them at the time. Regardless, many advisors charge fees based on how they manage your money. They don’t much care as to performance because they take their fees either way.
Some firms charge based on trades. There is nothing to stop your advisor from trading unnecessarily, thus racking up fees. Or influencing which accounts you choose because they too carry different fees.
Loan Brokers
This is a joke. One look at a CRNA contract and the broker begins salivating. They are ready to deliver the hard sell. They know you can “afford” the $3,000 monthly payment on 2 new vehicles. Don’t do it.
Same with mortgages. After presenting our employment contracts, we were cleared for a $1.8M house in rural Arizona. The most expensive house was $600,000, so they just said we could pick any house and they would write a loan.
Two 20 something newly graduated professionals don’t need a $1.8M house in rural Arizona. Everyone takes a commission off the sale. Loan officers, banks, realtors, and the city. Everyone except me.
And the most important question…Do we really need a house like that?
Allocation
Many financial professionals recommend a savings rate of 15-20%. That’s too low for CRNAs, especially broke CRNAs. The time for spending on “wants” is after taking care of business.
How about budget recommendations? Ever heard of the 50/30/20 budget? 50% towards needs. 30% towards wants. 20% towards savings.
I understand this is a rough guideline, but high-income earners can do better. The average millionaire saves 38% of their income. Which came first, the chicken or the egg?
SMART Goals
It’s important to establish a goal. This creates a personalized guideline. I want to pay off $200,000 of student debt in 2 years. Great!
$200,000 / 24 months = $8,333 per month
That gives you a savings rate. You can earn more anesthesia dollars or spend less elsewhere. Your goal has been set. Don’t be generic. It’s not overly difficult to create a personalized plan. If you want some help, email me.
Don’t allow others to dictate your spending.
Living to your Income, Not Net Worth
CRNAs tend to be a bunch of HENRYs – High Earner, Not Rich Yet.
Retirement is a financial ratio, not an age. It’s when a nest egg can sustain the cost of living (and then some). So, the higher the savings rate, the faster this ratio is achieved.
Life-long HENRYs are those 20+ year CRNAs who work a job they hate because they NEED to. Not because they love anesthesia or the patients. They are paying for a primary residence, two lake homes, 3 kids in college, and multiple vacations per year.
I don’t see a problem with 3 houses, helping the kids, or taking multiple vacations per year. I just won’t be working full time when I have them. I’ll be enjoying the fruits of my gas passing labor.
I’m a short-timer HENRY. I don’t view Mrs. TFC and I as wealthy or rich because our passive income is yet to supersede our cost of living. Well, as a traveling locum it probably does, but not the life we want in retirement.
We purchased a house in Arizona. With our lender’s $1.8M budget in mind, we settled on a respectable 1,400 sq. ft. house valued at $255,000 fit the bill. And it was still way more than we needed.
This price range matched our net worth. This mortgage was our only debt. And we had the high incomes to support the purchase. Housing was tight. We got pinched. Learned a lot. Lost money, but whatever. It’s just money.
4Runner
Here is an exercise to try. Mrs. TFC was in the market for a new vehicle. I asked, “How much would you be willing to spend on a 4Runner?” She replied, “I don’t know because I don’t know what they cost. I don’t know what a good price is.”
Ahhhh… A fatal answer. It’s important to ask, “how many shifts would you work for free in exchange for this vehicle?”
If a CRNA making $200,000 annually ($12,000 monthly Net) were to purchase this 4Runner for $60,000 cash, it would require 5 months of work. 21.6 weeks of work. If you wouldn’t work 108 8-hour shifts in exchange for a 4Runner, then it isn’t worth it.
Mrs. TFC does not earn what the average CRNA earns, so her trade was even greater.
We handled this by prioritizing our income allocation. First, we met our investing goal. Then we covered expenses. The leftover discretionary allotment and overtime income went into a 4Runner pool. This pool grew over a matter of 6 months.
$9,950 à $16,450 à $27,000 à 38,000 à 48,000 à 60,000
Point being, we did not leverage our income for big purchases. We successfully lived a comfortable middle-class lifestyle. Living to our net worth allowed for a savings rate between 80-85% of our net income during this time. We noted significant growth in a matter of months.
As our net worth grows, I read fewer things from right to left. It’s nice to slowly inflate the lifestyle. This way, we have a firm grasp on our personal finances while concurrently enjoying what life has to offer.
As always, thanks for reading!
