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Certified financial planners Michael Lynch and Alisa Olsen discuss their article “Create your own financial vision for independence,” an excerpt from their book Taking Care of Your Future: Your Simple System for a Big Retirement. Michael and Alisa explain why your financial plan must be driven by your personal vision, not someone else’s. They share a critical concept for planning: your income drives your working life, but your expenses drive your retired life. This single shift in perspective determines how much you need to save and what your financial independence will look like. This episode explores how to set a clear vision (like the nurse who just wanted to avoid nor’easters), how financial goals for housing and education are interrelated, and why the two most important elements in any plan are time and money. Learn how to define your own vision and make the decisions that will turn it into your reality.

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast. Today we welcome Michael Lynch and Alisa Olsen. They’re both certified financial planners. They’re co-authors of the book Taking Care of Your Future: Your Simple System for a Big Retirement. There’s an excerpt from that book on KevinMD, “Create your own financial vision for independence.” Michael and Alisa, welcome to the show.

Michael Lynch: It’s great to be here, Kevin.

Alisa Olsen: Great to be here. Great to be here.

Kevin Pho: All right, so both of you are certified financial planners, and as physicians (and this audience is mostly clinicians), we are very interested in hearing about your perspective and tips. Michael, talk about the KevinMD article that you shared with us from the book.

Michael Lynch: The main focus of that was really what we think is the most important thing with financial planning: figuring out what you want in life 10, 15, 20, or 30 years down the road. Have your vision for your retirement. Whether it’s your financial independence or you’re working until the end, whatever your vision is, you don’t let anybody else push you around.

Then it’s that vision that is going to determine what you need to do to get there, which, if you start early enough, you can almost put on automatic pilot. So yeah, it’s like taking a step back. Yogi Berra said, “If you don’t know where you’re going, you’re bound to wind up someplace else.” We don’t want you to be financially sick after 30 or 40 years of working, serving patients, and helping heal people. So, get it figured out early.

Kevin Pho: So Michael, for your physician clients, what are some examples of visions that they’ve communicated to you? What would that look like?

Michael Lynch: Well, here’s one. I have a cardiologist at a main place that most people would know who said, “I never want to retire because I see when my patients retire” (we call them clients, you call them patients, right? Some people call them customers, whatever), “When my peeps retire, they go downhill quick.”

I started thinking about that. It didn’t ring true with me because I work with a lot of engineers and a lot of nurses. We have a wide practice, so I work with people that make $30,000 a year and people that make $3 million a year. So we see a wide range. That’s not what we see with most. So I talked to him next time and said, “Your clients are executives, aren’t they? They’re at the top of whatever pyramid they’re at.” And then that made sense to me.

So with him, what are we looking at? What do doctors get burned out on? You get burned out on the call, on the night shift, on all that stuff. And so our vision typically with the physicians is: “Can I go part-time? Can I go half-time? Can I get off the treadmill? Can I have more time for family life, more time for travel to enjoy the financial rewards that we’ve been able to build up?” So that tends to be the vision. How do we slow this thing down but never stop?

Kevin Pho: Alisa, in the excerpt, both of you share a story about a nurse who just wanted to sip tea during a nor’easter. So for those of you who get a chance to read the excerpt, tell us about that story, and how does that translate into a simple emotional vision?

Alisa Olsen: Absolutely. It starts with a vision. When we asked, “What are you looking to do in retirement?” Their vision was essentially, “When it’s a snowstorm, I want to be able to enjoy myself and not have to go.” That was part of their retirement vision of not having to slog in on a storm in bad weather. That’s what they wanted to work towards.

That was their vision of financial independence, either saying, “I’m done and I’m out,” or “I’m done, I’m not doing it, I’m just doing what I want.” So I feel like everyone has to start with what their end goal is. Then it’s all about how we get you to that end goal. What are we working towards, and where are we in that process? Are you already there? And you can choose at any time, because that’s another question we ask: “If you could do that tomorrow, do you want to?” Sometimes people say, “Yes, I just needed permission to say yes.” Or like Mike’s example, the other person said, “No, I don’t ever want to quit. I want to be able to know I can, but maybe I don’t ever want to because it fulfills me.”

Michael Lynch: And Kevin, if I could add on this one, this is an interesting one. To fulfill her vision, she wanted to retire. She said, “I don’t want to travel. I’m not in great health.” Her husband was not in great health either. We put a generator in the house, financed the generator, redid the kitchen, and she got to live her retirement dream.

I say that because she had diabetes, she got sick, and she passed this year. It was a good thing that she was able to retire, and she did not think she could, and we were able to show her she could get it done. She was so happy. The last thing she told me was, “I told you I was sick. I told you I wasn’t in good health.” It’s like someone on a tombstone that says, “I told you I was sick.” It’s one of the famous old comedians who did it.

So one of the things that brings it back to your audience, which physicians and nurses and health care people know, is that life can turn on a dime. We have today. We have this minute, but we might not have the 10, 15, or 20 years we want. So we do want to blend the future and the present and really get done what we want to get done. Money is just a tool to make that happen. Most people do not spend all their money; they do not die broke. So if you’re not going to spend your last dollar, how can we use those dollars to create the life that we want for our loved ones and ourselves?

Kevin Pho: Alisa, when you talk to physicians, and I’m sure this happens a lot because I talk to physicians, they can’t imagine a life outside of medicine because for the past 20 or 30 years that they’ve been in medicine, it has been so consuming ever since they were a pre-medical student. Now, what do you do when you encounter physicians like that when they can’t really articulate what their vision could be because a life in medicine is just so consuming?

Alisa Olsen: That’s a great question. What do you do when there is no vision? I feel like if there’s no vision, we say, “OK, maybe it’s something that’s going to come down the line.” But sometimes being financially independent is just as important to them. They might say, “Hey, maybe I can’t see retirement, but I want to know that I have enough.”

And so we really focus on financial independence and note that those two things don’t necessarily coincide. Someone could be financially independent and still working. Somebody could not be financially independent and be retired. So for us, it’s really looking at financial independence, making sure they see where they are and where they can go. Then it’s their decision. I think that brings a lot of power or a lot of peace to people. “OK, I don’t have to retire. I want to keep doing it, but I know if something were to happen, I don’t need to worry because I’m all set.”

Kevin Pho: Michael, one of the core concepts you wrote in the article was “Expenses drive your retired life.” Right? So talk more about that concept and how it relates to your physician clients.

Michael Lynch: Well, financial independence is all about expenses, and that’s not being a scold saying you can’t go to Starbucks and pick up your coffee. It’s just a recognition that what the money is for is to finance your lifestyle.

Two people could have the same salaries while working, earn the same amount of money, and live on the same street. One family may need $10,000 a month to live, and the other one may need $25,000 based on lifestyle decisions, preferences for cars, preferences for vacations, or preferences for supporting adult children. The key to finding out if you’re financially independent is not talking to somebody and saying, “Well, I have a million dollars. I have $5 million.” It is figuring out, “OK, my lifestyle requires $10,000, $15,000, $20,000, or $25,000 a month to make it go.” I will be financially independent when I have enough assets and rights to income sources, like Social Security—some doctors may still have a pension or something similar—that I can support myself passively.

So we have to know what we spend. While we’re earning, we don’t pay attention to it perhaps that much. We pay attention to a few dials, make sure we don’t go in credit card debt, pay our bills, and fund our retirement plans. But do we have enough? What I will say for your doctors is I got a doctor client, and when I saw him, he was doing perfect middle-class financial planning. He was maxing out his employer retirement plans and he was five years from retiring. His wife was a nurse.

I gave a speech, and when I got somebody like him, I said, “Man, you have to kick it in the rear.” He asked, “What are you talking about?” I said, “Well, you’re doing middle-class financial planning, but you’re a high earner. If you make $150,000 a year, Social Security replaces a lot of it, and $20,000 or $30,000 in a 401(k) or 403(b) gets you where you need to go. But if you’re earning $600,000 a year, you need to do additional investing if you’re in fact spending and living on it,” which this family was. Fortunately, we got it done right. He was an absolutely model client because we could make a treatment plan and he could follow it, but that wasn’t something that was taught.

If you just read the publications that are out there, they’re targeted for middle-class and working-class people. High-income affluent people like doctors and lawyers have a hard time building wealth a lot of times because it’s not automatic like a business owner. They have high taxes. Your doctor clients and your listeners will notice everybody’s handing them the bill, right? Nobody hands the plumber the bill, but they hand the doctor the bill, and everybody assumes you just print money. If you don’t mindfully stuff it away for yourselves, there may come a time where, yes, you’re consuming your work, yes, you love your work, but all of us professionals start out young and engaged, and then the whole thing can change on us. At some point, we might want to say, “Well, you know what? You keep that change. I’m going to go fishing. I’m going to go golfing. I’m out of here.” So that’s what we want to put your people in a position to be able to do.

Kevin Pho: Alisa, in the article it was noted that housing, education, and retirement are all interrelated. What would you say is the most common or difficult trade-off you see families having to make between those big goals?

Alisa Olsen: Absolutely. I feel like especially when you have long hours, if you’re going to have a family or you say, “Hey, in the next couple of years we want to start a family, we want to move into a house,” it’s really about looking into the future and planning for those costs and making sure that they all work together.

You can have a kid, but if you have to do daycare, those daycare costs could be $25,000 or $30,000 depending on where you are and what you need. Also housing costs matter. It’s all about making those things fit. Sometimes we look at it and they like to say no one can ever afford their first house, but you might be tight in those years where you have both. But then sometimes what we see is, “Well, if we’re done with daycare or early childhood education, that cost can then bleed into saving for college.” Once that’s off the table, that’s another thing to save.

It’s all about looking at all those expenses and how they’re going to integrate in with one another, especially for younger people starting out and wanting to build a family. We don’t want you to feel like, “Wow, I can’t do both,” or “This is really tight.” That’s not our goal, but we look at it from a lot of different viewpoints so that we hope people are really confident when they are making those decisions.

Kevin Pho: Alisa, are there any common themes when it comes to red flags or mistakes that you see some of your physician clients make when it either comes to vision or financial planning? Are there any commonalities in the mistakes that you see them making?

Alisa Olsen: This kind of ties back to the question about living expenses driving retirement in general. We work with a lot of people in hospitals and in education, and the first thing we really talk about is having an understanding of what you’re spending.

If you don’t track it, that’s fine, but if you say, “Listen, I just really want to replace my take-home pay. I don’t have time for that, but if I can live on my take-home, I’ll be good,” then that’s a key data point. “OK, let’s replace your take-home income.” We can do that because those expenses really drive what you’re going to need for retirement.

I feel like where people can get it wrong is when you have that number. “Oh, I need $10,000.” You don’t really know. And then in retirement, you realize, “Hey, I actually need $15,000.” Well, that extra $5,000 a month or $25,000 a year really requires a big replacement in the amount of overall assets you need. You need a big pile of money to generate that extra income. So I would say some place you can do it wrong is if someone works with us for a few years saying, “Yep, I only live off this, I only live off this,” and then they’re in retirement, and it’s like, “OK, holy smokes. I don’t have enough.” That’s where we feel like people can get in trouble or get it wrong.

Kevin Pho: All right. Let’s zoom out a little bit. This excerpt, of course, is from your book Taking Care of Your Future: Your Simple System for a Big Retirement. Michael, what are some other key points you want my physician listeners to come away with after reading your book?

Michael Lynch: I think one of the big things is time and money. “Inch by inch, it’s a cinch; by the yard, it’s hard.” To put it in a medical context, it’s like reverse compounding. I loved nicotine. I loved smoking cigarettes. I’m 56 years old and I haven’t smoked in years. Why is that? Because I knew that it would ruin my life right now if I had continued. It wasn’t going to hurt my twenties, it wasn’t going to hurt my thirties, it probably wouldn’t affect my forties, but my fifties, sixties, and certainly my seventies, it was going to debilitate me.

Investing is the exact opposite of that. If you start early, the money that you’re able to squirrel away in your twenties, thirties, and forties takes care of the fifties, sixties, and seventies. You almost need nothing in later years. Now, that brings one of the challenges physicians have, which is unique to you. That needs to be thought through, planned around, and then hopefully leveraged: You start working late, and you start earning late.

So we do a lot of planning with our physicians around those intern years. A lot of times that starts with family formation. How is it we bridge to get a house on the intern type of salary when we know what’s coming down the pike? And then the flip side of it is you have two physicians, which is very common. A lot of your listeners are probably two-physician households now. I know when I was at that part of my life, and Alisa certainly went through that part, very similar to me, I said, “I’m buying a house based on one and a half incomes, not two.” Because when we have babies, one of us might decide that we want to style it back and reprioritize. It’s hard to know where we’re going to be.

So that’s why I would say time and money: “Inch by inch is a cinch; by the yard, it’s hard.” And that whole issue I said with affluent people having a harder time building wealth than not affluent people is because they look at taxes being high. You start earning later. In a certain sense, you’re a little bit like athletes. They have a huge salary for a short period. Physicians earn very solid incomes, but they start a decade late. So that needs to be thought through as well.

Kevin Pho: Michael, one of the things that you said in the excerpt was, “Either you take vacations or your children will.” Right? So unpack what that means for people that sometimes maybe are too frugal or save too much.

Michael Lynch: So there are different personality types with money, Kevin; that won’t surprise you. Spenders don’t have a problem with that. Spenders will take vacations, and their kids will earn their own vacation. It could be fine. But what we see with a lot of saver types, the people that really do get into this in their twenties, thirties, and forties, the type that hire us, is by the time they get financially independent, they have such a habit of saving that they feel uncomfortable spending.

The point on that is that your money is going somewhere. I remember my father, a businessman; he had to run a business and it kind of got him out of retirement. He was back and he was booking airline tickets and he was going to China. It was $10,000 for my mom to fly in the front of the plane. I asked, “Dad, each or both?” And he said, “Both.” I said, “Well, here’s what I want you to see, Dad.” I was actually on the treadmill at the gym doing it. I said, “Every time you have a choice to spend $10,000 and fly in the front of the plane or $2,000 and fly in the back, I want you to see me spending your money to fly in the front of the plane.” He loved it.

And so that’s my point. Your money is going somewhere. You’re spending it, your kids are spending it, or someone you give it to is spending it, or the government gets it. So it’s not about wasting money; that would be stupid. But it is about optimizing out what is important to you. Different things are important to different people. But make sure it’s there for you and you use it. Is it to make yourself work less? Is it to spend time with the grandkids? Is it to rent the whole house for the family and get together? Everybody is different. That’s what I mean by that. People don’t spend their money.

Kevin Pho: We’re talking to Michael Lynch and Alisa Olsen; they are both certified financial planners. We’re talking about their book Taking Care of Your Future: Your Simple System for a Big Retirement. Now I’m going to ask each of you just to share some take-home messages that you want to leave with the KevinMD audience. Alisa, why don’t we start with you?

Alisa Olsen: Yeah, I would definitely say first off, take advantage of what’s offered to you in your benefits from your hospital or your employer. Just make the most of that. Make sure you’re utilizing that if you have a certain type of plan, like a legal plan that you can opt into, or making sure that you have benefits that you can opt into, or even making sure you’re getting the most of your match.

Also, I would say sometimes people feel like they’re overwhelmed. We have conversations with our neighbors who say, “Why? I can’t save that much. So why should I bother?” I do feel like you need to remember you just need to do what’s best for you. You will certainly see progress over time. Really, the best time to start saving was yesterday, but the next best time to start saving is today.

Kevin Pho: And Michael, we’ll end with you and your take-home messages.

Michael Lynch: I guess my take-home message is I would treat your financial health the way you tell your patients to treat their physical health and understand that it’s kind of very similar. Just like you don’t have control of what your patients do and they know what they should do and they oftentimes don’t do what they should do, you wouldn’t want them beating themselves up. It’s the same for you.

I would say spend a little time on it every year. Be mindful of what you need to put in. We haven’t even talked about this aspect of it, but be mindful of the income taxes you’re going to pay and the way you accumulate your wealth. And then don’t be scared to use it when it’s there at the end. That would be my take-home.

Kevin Pho: Michael and Alisa, thank you so much for sharing your perspectives and insights, and thanks again for coming on the show.