5. Dishonest Partners, Business Managers, or Brokers
There are people who can look you in the eye, shake your hand, promise to care about your welfare, and then betray your trust.
Many doctors learn this sad lesson. Brokers, financial advisors, and physicians' own practice partners are the culprits in many of the financial problems that physicians are stuck with. Survey respondents expressed anger and sorrow about being duped by people they knew and had trusted.
"I was working with a financial planner and investment broker when I was too busy caring for patients and a practice," said one physician. "I counted on them for investment [stock] advice. It turned out their company was pushing junk. I lost all my IRA savings in 2000, and then another large amount in 2008." Another doctor said, "I've never had luck with planners, even though I save a lot. I would have been better off if I just spent my money or put it in the bank."
It's important to look for credentials and references when working with planners and investors, although they are no guarantees. It's also wise to monitor your holdings regularly and not adopt a complete hands-off attitude. That way, at least you may notice when things look amiss, and you can begin to ask questions. On the other hand, it's not always possible to recognize when someone is trying to scam you. (Remember the professional investors who were scammed by Bernie Madoff.)
6. Bad Loans That Drain Your Savings
Why is your relative skipping all family gatherings? It could be that they're defaulting on a personal loan—as many physicians found out to their dismay.
Some physicians made loans to close friends or family members. No paperwork was signed, and there was just a handshake to seal the deal. Then the loan recipient no longer returned phone calls, stopped being in touch, and always had an excuse for not paying. Of course, the relationship soured. In some cases, the money lost was extensive.
The moral of the story is: Don't lend money to anyone without having a legal agreement. Don't even lend money to an immediate family member unless you are fully prepared to lose the money. Let a lawyer put repayment terms and consequences into a legal document. You don't need to charge interest to a relative if you don't want to, but you'll have recourse if the person decides not to pay you back.
"I loaned money for a relative's business that failed, and I got nothing back," said one doctor. "I loaned money to a relative who left the state and never paid me back," noted another physician. "I lent money to close relative who I felt would pay me back, and then he married a woman who talked him into keeping the money and said I didn't deserve it," said a third. "He wouldn't listen to anyone else in the family."
7. Other Investments
Timeshares and whole life insurance as investments are also risky. As noted by survey respondents: "I had a timeshare that I never used." "I had a timeshare that I needed legal help to sell."
Others did not do enough homework regarding the pros, cons, and reasons for making such purchases: Timeshares shouldn't be considered an investment. They're merely a vehicle to help you have a vacation at a specific locale. They are difficult to sell and often go unused.
Whole life insurance is another vehicle that some people think is a useful investment strategy and others feel is a bad investment and a waste of money. While whole life insurance can be helpful at times, its costs and fees can be unnecessarily high, and certain rules and restrictions on withdrawing money may leave you in a bind if you can't access your savings.
"We often see physicians who are just getting started building a financial foundation and have been pitched, and bought, large whole life insurance policies that they can't afford," says Inman.
"Buying permanent life insurance is a decision that shouldn't be taken lightly, as there is usually very little need to own life insurance forever, and the money going into your cash value could be invested more broadly outside of an insurance policy. Life insurance is only going to provide for your family if something happens to you and they collect the death benefit. Paying expensive premiums on whole life insurance that prevents you from having additional money to pay down debt or invest for the long term does not set someone up for financial success," he said.
Kolluri says the most important thing a physician can do to ensure his or her financial future is to take advantage of time and start early. "You should have a game plan; take the time to reach out to experts, get knowledge, and get experience. "Building wealth and personal financial security is not that difficult. Stay focused on your work and pick a simple investing approach."
Medscape Business of Medicine © 2019 WebMD, LLC
Any views expressed above are the author's own and do not necessarily reflect the views of WebMD or Medscape.
Cite this: Leslie Kane. Doctors' 7 Most Painful Investment Mistakes - Medscape - Jul 29, 2019.