"Financial Freedom Rx "-- A Gem

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Taylor Larimore
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"Financial Freedom Rx "-- A Gem

Post by Taylor Larimore »

FINANCIAL FREEDOM Rx is written by Chirag Shah, MD and Jayanth Sridhar, MD, with a Forward by Mel Lindauer, co- author of "The Boglehead's Guide to Investing." This is a sample of the book's many "Investment Gems":

"Doctors are brilliant scientists and clinicians but terrible with money."

"Having strong personal connections with friends and family is the strongest predictor of overall happiness and better health."

"To have enough to be financially independent, one cannot live paycheck-to-paycheck and expect to magically accumulate great wealth."

"You should continue to read at least one financial book each year to foster your ongoing financial education."

"These financial instruments will be described in depth:

* Traditional individual retirement account (IRA)
* Roth IRA
* Backdoor Roth IRA conversion
*401k
*403b
*529 educational plan
*Health savings account (HSA)
*Real estate investment trust (REIT)

"Live below your means."

"It is important to have some fiscal literacy as you embark on your career, and continue to become more literate as your wealth grows.

"You must stick to your plan--during bull and bear markets, despite the temptations of speculative investments or shiny, unnecessary new things."

"When you amass 25 times your annual spending, you can draw 4% per year for the next 30 years."

"Do not fall into the traps of risky or speculative investments."

"Be sure never to carry credit card debt beyond your statement due date."

"Maximize workplace retirement plan contributions up to the match (free money).

"One difference between 401k/403b and 457 plans is that the former two plans carry a 10% penalty if one withdraws money before the age of 59 1/2."

"Open and fund a 529 account for each of your kids to help pay for college and higher education."

"To help you save consistently, consider automatic investments from your bank account directly into your brokerage account."

"Investors consistently sell when the market is low, when they should be buying, and buy when the market is high, when they should be selling.

"I have not made any impulse buy or sells in a while, and my surgery days seem a whole lot less stressful!"

"Physicians might be smart, but in general we are not smart enough to beat the market consistently."

"Index funds have very low expense ratios, keeping more money in your pocket and low turnovers, making index funds tax efficient."

"The average annual returns were about 8% for total stock market index funds over the past several decades."

"Tax-loss harvesting allows you to capture the loss on individual lots in your taxable portfolio. It is relatively easy to tax-loss harvest when you invest in index funds."

"As your portfolio grows, you slowly shift from trying to win more to trying not to lose what you have."

"Your asset allocation should be calculated for your entire portfolio, including retirement and taxable accounts together rather than within each individual vehicle."

"Lifecycle funds are a great option for those who want to 'set it and forget it.'"

"Consider placing the least tax-efficient funds in a tax-advantaged account if possible."

"You will eventually get to a point when wealth preservation becomes more important than growing wealth."

"Plan on buying a term life insurance policy at a young age once you are married and/or have dependents."

"There will be plenty of people who will try to sell you whole life insurance. Be very wary."

"Umbrella insurance does not play any role in professional liability."

"Investment advisors focus exclusively on your portfolio, while retirement planners can help navigate investments, pensions, and Social Security to insure that your retirement income is tax-efficient and steady."

"Ideally your advisor should be a Chartered Financial Analyst (CFA), a Certified Financial Planner (CFP), and/or a Chartered Financial Consultant (ChFC)."

"Many variable and indexed annuities carry high fees that benefit the seller (your advisor) and, in general, are not recommended."

"A fixed single premium immediate annuity (SPIA) might be advisable for those who think they will outlive their money in retirement."

"A good, trustworthy financial advisor can be hard to find but can greatly reduce the stress of creating and managing your financial plan."

"It is still very important to know financial basics so that you can critically evaluate your advisor's performance."

"A great resource to find an experienced estate lawyer is the website of the American College of Trust and Estate Counsel."

"Probate can be a long and expensive process. -- An estate lawyer in your state can help you determine if and how your heirs can avoid probate."

"Having a will is a smart idea, particularly if you have children."

"In 2021, the federal (estate tax) limit was $11,700,000 per person."

"If you are married and wealthy, it might be prudent to title your and your spouse's account separately."

"Revocable trusts help most affluent couples minimize federal and state estate taxes so they can leave more of their wealth to their heirs."

"There are several advantages to irrevocable trusts."

"Financial independence is a peaceful place, devoid of the financial stresses that impacted you throughout your training and career."

"Always allow for some extra wiggle room to handle unexpected expenses once you stop actively earning an income."

"None of us sacrificed our 20s and our health to become doctors simply for the financial rewards."

"Its a lot easier to spend money when you know you have enough."

"Tapping your various savings accounts in the most tax-efficient manner can be somewhat complex."

"This is a good time (early retirement) to consult a tax advisor and study resources dedicated to the topic, like "The Bogleheads' Guide to Retirement Planning."

"Another way to reduce one's tax burden is to make an IRA charitable contribution..."

"A taxable account is a good account to pass on, as the cost basis "resets."

"Live below your means. Remember that "enough" is absolute, not relative. Find happiness with enough."

"But for most, a second mortgage and the upkeep costs of a second home can be a drain on one's finances, not to mention one's time. Never let your possessions own you."

"Divorce is quietly one of the biggest financial (and emotional) calamities one will face in life. It is a 50% bear market that you may never recover from financially."

"Do not get comfortable with debt."

"I lost close to $20,000 my first year of investing, not including the commissions I was paying for individual stock transactions. Now my money is parked in index funds."

"Keep your finances simple, utilizing workplace savings accounts, index funds, and automatic investing."

"Start living below your means, get your family on board, and change the trajectory of your life."

More Investment Gems

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
StartedAt22
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Re: "FINANCIAL FREEDOM Rx "-- A Gem

Post by StartedAt22 »

Thanks, Taylor. My next book, which I picked up last week, is "Predictably Irrational" by Dan Ariely (thanks Boglehead reading list!!) Perhaps I will add Financial Freedom to my queue.

In particular, the following "gems" stood out to me:
"Having strong personal connections with friends and family is the strongest predictor of overall happiness and better health."
"Live below your means. Remember that "enough" is absolute, not relative. Find happiness with enough."
A task begun is nearly half complete | Enough is as good as a feast | Risk: Ensure your goals can be met even under worst case scenario and be realistic.
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JoeRetire
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Re: "FINANCIAL FREEDOM Rx "-- A Gem

Post by JoeRetire »

Taylor Larimore wrote: Tue Aug 03, 2021 10:59 am FINANCIAL FREEDOM Rx is written by Chirag Shah, MD and Jayanth Sridhar, MD, with a Forward by Mel Lindauer, co- author of "The Boglehead's Guide to Investing." This is a sample of the book's many "Investment Gems":

"Doctors are brilliant scientists and clinicians but terrible with money."
Seems like quite the over-generalization to me.
"To have enough to be financially independent, one cannot live paycheck-to-paycheck and expect to magically accumulate great wealth."

"Live below your means."

"When you amass 25 times your annual spending, you can draw 4% per year for the next 30 years."

"Do not fall into the traps of risky or speculative investments."

"Be sure never to carry credit card debt beyond your statement due date."

"Maximize workplace retirement plan contributions up to the match (free money).

"Open and fund a 529 account for each of your kids to help pay for college and higher education."

"Plan on buying a term life insurance policy at a young age once you are married and/or have dependents."

"There will be plenty of people who will try to sell you whole life insurance. Be very wary."

"Having a will is a smart idea, particularly if you have children."

"Its a lot easier to spend money when you know you have enough."

"I lost close to $20,000 my first year of investing, not including the commissions I was paying for individual stock transactions. Now my money is parked in index funds."
These are gems? :confused

Sorry, but meh.
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Miriam2
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Re: "FINANCIAL FREEDOM Rx "-- A Gem

Post by Miriam2 »

Taylor, thanks for these personal investing thoughts and gems. Their simplicity is especially useful for the many newbies to our BH forum and for those starting out in their financial life or trying to catch up. Good food for thought.
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Munir
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Re: "FINANCIAL FREEDOM Rx "-- A Gem

Post by Munir »

It's equivalent to a 101 college course for many if not most Bogleheads. Good for newbies. This does not mean it is not worthwhile. Good reminder.
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