As of September 1, 2019, we are excited to officially launch The Osler Funds. It took a 1 ½ years of planning, preparation, partnership negotiations and legal work to develop an investment platform that, we believe, will help physicians and allied professionals in their financial and retirement planning.
Investing specialists can spend decades learning the tools and qualifications to become a designated expert. However, there are financial basics that anyone can learn and employ, relatively quickly, that may make you more financially literate and lead you to financial independence.
We will start with humble beginnings in the hope that our message will resonate with our colleagues and develop a utility for our readers. We aim to provide blog posting on a monthly to quarterly basis. Feel free to forward this blog to a fellow colleague or interested friend. We encourage questions, comments and feedback.
In today’s blog, I will discuss the one financial advice that almost all advisors will agree with: Spend less than you make. It's very simple in theory, but not always the easiest advice to follow. There is a similar medical condition that is analogous: Obesity. Eat less and exercise more to maintain a healthy weight. Again, simple in theory, but not the easiest advice to follow.
One of the biggest benefits you receive after the completion of your medical degree and finish your medical training, is your ability to generate a decent salary. After years of living modestly, physicians transition from an indebted student to the more glamorous lifestyle of a professional. Your older colleagues are living in big houses, driving nice cars and going away to foreign destinations for holidays. It becomes very easy for new physicians to assume a lifestyle and create a spending habit that is beyond their earnings capabilities. This will ultimately lead to a large debt load and create a financial stress/burden that many of our colleagues may have experienced.
Debt is not all bad. What is a good debt and bad debt? In general, debt that will increase your long term earnings capabilities (e.g. med school and residency) or debt that is a lifestyle necessity (e.g. a home, a method of transportation) is justified and a good debt. However, is buying a $500k house or a $1.5 million dollar house advisable? Is that sports car you always wanted something that you can reward yourself with after years of schooling? These are decisions that are made easier once you become more financially literate.
As physicians, we understand that our basal metabolism slows as we age. Eating a healthy well balanced diet and supplementing with modest amounts of strenuous daily physical activity should be a recipe for a better lifestyle. Yet, why is a large segment of our population now overweight, including physicians. According to the 2007 Physicians Health Study, 40% of the 19,000 doctors were overweight and 23% were obese (Physician Obesity The Tipping Point: Glob Adv Health Med. 2014 Nov; 3(6): 8-10)
It's not a wild statement that the “Obesity” epidemic and the “Debt” epidemic are analogous. Too much easily available calories is a major contributor to obesity and poor physical health. Too much easily available debt is a major contributor to poor financial health.
The first step in treating any disease is to recognize that you have that disease. The same goes with financial health. The first step in treating your financial health is knowing your spending habits. Do you have financial discipline? What is your debt load and can you afford the interest payments? In turn, for eating and exercise: Do you have a healthy diet? Are you gaining weight? And if so, does that bother you?
The second step is to create a game plan and develop reasonable goals. For a 30 year-old Internist, her goal is to have $1 million in assets by 40. First, she should create a simple budget or use her bank and investment statements as a guideline to what she is capable of saving yearly. If she is making $250k per year and spending $100k on food, debt payments and other expenses. After taxes of 40%, she would generate excess cash or savings of $50k ($250k-$100k= $150k, $250 * 40%= 100k in taxes, $150k-$100k=$50k yearly savings). $50k for 10 years would get her $500k. She would need to generate approximately 10% per year in investment returns over those 10 years to meet her $1 million financial target at the age of 40. Her financial game plan is reasonable and might be achievable with solid investment decisions.
If you are not financially experienced or uncertain that your financial game plan is realistic; it’s a good idea to talk to a financial advisor or someone you trust that has financial experience. Similarly, if you want to lose weight or maintain a certain fitness level and can not do so, maybe it's time to join an exercise group or talk to a fitness and/or diet advisors.
When you were an undergrad or a med student, you created a game plan on how to enter medical school or enter a residency, respectively. You knew the courses you had to take, the volunteer work required and the relationships that needed to be cultivated to secure your references. As you are reading this blog, have you thought about what your financial goals are for 2020 and 2030? Will you meet your financial goals for 2020? Similarly, did you set a health goal for 2020 and 2030?
After long hours training through med school and residency, I came to an important conclusion. If you are going to work hard for your money, it’s a good idea to make your money work hard for you. As physicians, you are fortunate to have a stable income. To become financially independent is much simpler for physicians than the general public. If you focus on limiting your spending to less than what you earn, your chance of financial independence is extremely high. However, game plans can be easy to create and not always easy to implement and achieve.
In future blogs, Lorne and I will discuss topics that are focused on financial matters that may be of interest to our medical colleagues. Our goal is to assist our readers in becoming more financially literate and better investors. We know that you work hard for your money. It's time to make your money work for you. It’s time to be financially independent.
If you have questions, comments or suggestions, please feel free to email one of us.
The Osler Fund,
c/o McElvaine Investment Management Ltd.
301-1321 Blanshard St.
To Stay Connected on Updates and Latest News from The Osler Funds