I have yet to meet someone starting off in a worse financial spot than me. And don’t get me wrong, I started off so poorly solely due to my poor financial decisions and lack of knowledge. I was scared to learn and intimidated by my mistakes. But if I found my way out, so can you.

Calculate Your Net Worth

The best way to illustrate the turnaround is to analyze my net worth change in my first year as an attending. I like to calculate my net worth as a way to check my personal finance scorecard.

When I started tracking my net worth in June 2020, things were bleak. I was worth negative $412,000. I hated seeing these numbers. But it gave me a starting point so I could work to make them better. Moral of the story? Personal finance is scary at the beginning. But looking the big bad monster in the face is the best thing you can do: you’ll realize it actually isn’t as scary and difficult as you thought and can start making positive changes. For example, I didn’t receive my first attending paycheck until mid-August, but even by then, a month and a half later, I had improved my net worth to negative $378,000. No matter where you are in your life, you can make a positive change.

Review Your Net Worth At Least Twice a Year

I saw a big jump between October and November by forcing appreciation on an investment property — Real estate in a wealth accelerator. This is proof. More on that property and its cash flow here.

After the last check in September 2020, we crossed the fabled red line of $0 net worth and got into the positive — way into the positive. In fact, in just 14 months, I increased my net worth by more than $800,000.

I did this by focusing on our assets and liabilities. Our biggest assets were our primary home and investment properties. Now I know, I am totally on the side of saying that your primary home is not an asset. And we don’t treat it that way. But we do include it in our net worth calculations. Investment properties, on the other hand, have made a HUGE impact on our assets. Through cash flow and forced appreciation, resulting in home value gains of near $100,000 for each of the three properties, this has been the single biggest positive influence on our net worth. And this doesn’t even count the tax benefits.

As for liabilities, our biggest liabilities were the mortgages on our primary home and our investment properties. But we noticed that our primary home was a wash when comparing assets and liabilities, as it counted as 42% of our assets and 41% of our liabilities. Meanwhile, our investment properties counted 50% towards our assets and only 28% towards our liabilities.

Create a Savings Rate of At Least 20%

The way to wealth is by creating and investing your margin. What is your margin? Well, it’s the difference between what you make and what you spend. You can have the best investment strategy ever, but if you have no money to invest, it does you no good. So, spend the time to develop a monthly budget and build in a savings rate of at least 20%. Mine ranges from 45-50+% each month.

Then, you need to invest that savings rate. But before I go into that…

Develop a Debt Pay-Down Strategy

Student loans were a big part of my liabilities. That is why, each month, we pay huge amounts from our 45-50% savings rate from above to pay off my student loans. Each $1 we pay off is $1 that our net worth increases.

It also helps that we have no auto loans or other consumer debt. This is because we pay for every big purchase in cash after we have saved enough. Or we pay on our credit card to get points and then pay off the entire balance at the end of the month (or else the points aren’t worth it).

Invest Your Savings Wisely According to a Financial Plan

Like I said before, once you have some money saved up, you need to invest it to build wealth. But investing can seem complicated and scary. Here’s the truth though…it’s doesn’t have to be!

Over time, the stock market has actually shown itself to be a safe investment. Over any 20 year period, the overall stock market has always gone up. And you should only be investing money that you don’t need for a long time. So, if there was a way to invest in the overall market, you would be in good shape. And lucky for you, index funds do just this! Moreover, based on the Trinity study, index funds have been shown to beat “active” investing like day trading and margin calls 80% of the time. So, create a written financial plan like mine that guides your investments in safe vehicles like index funds and watch your wealth grow.

The bottom line: look at your net worth. You can analyze and see what you are doing. Try to maximize your assets (things that put money in your pocket) while minimizing your liabilities (things that take money out of your pocket). Follow your financial plan so you can put things on auto pilot and enjoy your life!

Jordan Frey MD, a plastic surgeon in Buffalo, NY, and, as the founder of The Prudent Plastic Surgeon blog, is one of the fastest-growing physician finance bloggers. Feel free to send Jordan a message at jordan@prudentplasticsurgeon.com.

Illustration by Jennifer Bogartz