Four years ago, in 2020, I committed to my financial education. Before that, I had convinced myself that personal finance was not important but, in reality, I was intimidated by the topic and embarrassed to admit it. 

So, how am I doing after all these years of fixing previous financial mistakes? Below, I share my list of 10 financial mistakes and how I am slowly but steadily fixing them.

1) Spending up to my paycheck.

This was the biggest “A-ha” realization that my wife Selenid and I had. The principle of saving some percentage of monthly income seems so simple now. But we, like many people, just never really gave it any thought. Our savings rate was 0%. 

To fix this, we sat down and developed two budgets. One was for our current situation as a plastic surgery fellow and a PhD student. It seemed impossible to cut spending when 75% of our income was going to New York City rent and childcare. But we created a savings rate of around 5% and noticed that our lifestyle did not noticeably change. 

Selenid and I also created a full budget for when our incomes increased within the next year as we became an attending surgeon and professor, respectively. We established a savings rate of 31%.

There are a bunch of ways to increase your savings rate and stop spending everything you make. Our method was to sit down and budget (using our guide) to establish a chunk increase in savings. Another way is to save 1% of your monthly income one month. Then 2% the next month, and so on. Before you know it, at one year, you have a savings rate of 12%. 

2) Spending first, saving later.

Fixing this one of our financial mistakes was pretty simple for us. 

Instead of spending throughout the month and then saving whatever was left (usually zero), we took out our goal monthly savings (at least 20% of our monthly gross income) at the beginning of the month when the paycheck hit the checking account. Then, we could spend the rest guilt-free.

We started doing this by having my student loan payments, retirement contributions, and other savings directly removed from our account before we even saw it. This is a great way to get on track with your savings.

3) Not paying off any debt.

This was one of our biggest financial mistakes that needed fixing.

My student debt seemed insurmountable. This led me to totally avoid it or even acknowledge its presence. This was obviously a mistake since interest works around the clock whether you acknowledge it or not. 

To fix this, Selenid and I sat down and set a goal of when we would like our debt paid off. For us, it was five years. We decided to allocate an amount that would get us to this goal. This initially counted toward our overall 31% savings rate since each dollar that we pay toward debt is a dollar increase in our net worth. 

Today, we still pay more than $6k monthly to our student loans. However, our plan is working as we project to be student debt free in July 2024, which is about a year earlier than expected.

4) Dipping into savings and buying on credit.

In 2020, we stopped these habits cold turkey. 

It was one of those things that we knew we shouldn’t be doing but it was often the path of least resistance. We made a commitment to each other not to do this and wrote it in our personal financial plan. The only allowed exception was for necessary expenses (like my surgery board fees) that we otherwise could not pay outright. If there were other items that we wanted and could not pay for outright through our checking, we purposefully saved for them and bought them when we could if we still felt we wanted/needed them (a very key concept and strategy called intentional spending). 

We still are very good, although not perfect, at practicing this. Recently, we accumulated some credit card debt when I used it to cover board review courses and fees for my board certification. But we pay that off aggressively to get back to $0 credit card debt.

5) Not paying attention to investments.

I remember speaking with my financially savvy cousin, who told me that he managed his own investments. This seemed like such a complex task that I almost dismissed it out of hand. However, after reading three introductory books on the topic, I felt knowledgeable enough to do this. 

All three books advocate for investing largely via broadly diversified low-cost index funds with a fixed asset allocation that is rebalanced one or twice a year.

This approach seeks to approximate the stock market average, which has always gone up over the long term. I also learned about the different accounts that I could invest in, including tax advantaged and taxable accounts. Within these buckets, you can choose the way that you want to invest your money — for me, it was an 80% stock/20% bond split with stocks invested in broadly diversified low-cost index funds. This has now changed to a more aggressive allocation.

After becoming knowledgeable, I took action. I studied all of my investment accounts (I had one via my personal savings with a financial advisor and another through my hospital that I didn’t even know existed until after I graduated). And I was not in low cost, broadly diversified index funds in either account. I was in moderate cost, actively managed mutual funds. Actively managed mutual funds like the ones that I was in underperform passively managed funds (like index funds) 80% of the time. There is no way to know ahead of time which 20% of active funds will outperform.

So, I took the money out of my advisor investment account, opened a Vanguard account, and contributed to a Roth IRA retirement account, selecting broadly diversified low-cost index funds. I finally started paying attention to my investments.

And I still invest the same way. I use broadly diversified index funds according to my asset allocation, which I rebalance once yearly. I invest in a 403b, 457, Roth IRA, and taxable accounts. 

6) Using a “money person.”

Disclaimer: I do not have an issue with paying a fair price for good advice from a financial advisor. However, you must educate yourself enough to assess if you are getting genuinely good advice. Too often, financial advisors are actually commissioned salespeople that have a direct conflict of interest with your goal of creating wealth. 

The financial advisor that I was using is a great guy and very honest. He helped my wife and I understand complex concepts and encouraged us to become financially literate. However, once I learned how to handle my investments on my own, I just didn’t feel the need to pay for those services. Even a 1% fee is 1% less of your hard-earned investment money in your pocket. Especially if they are going to invest it in high cost products that are more likely than not going to underperform the market.

If you do want to use a financial advisor, make sure that you know how they are being paid.

If you want advice but not necessarily for them to actually invest your money, see if they offer a flat fee for that service. Most of all, make sure that you trust them and don’t feel like you are being “sold.” Good financial advice and good investments sell themselves. Bad advice and bad investments need to be sold.

7) Not having a written financial plan.

Selenid and I first wrote a comprehensive personal financial plan about one to two months after we began our financial education. 

This plan included specific goals and when we would like to reach them, our asset allocation and how we would rebalance, as well as advice for how we would handle a bear market (do nothing!), among many other things. Essentially, we laid out our financial philosophy and a “how to” guide with associated goals that we can always refer back to when needed. 

Having this financial plan is what really helped improve our financial well-being. You can find our actual financial plan in total right here. Selenid and I still follow that exact written financial plan today. 

8) Not developing a side hustle.

As we saw with the COVID-19 pandemic, job security is not guaranteed, even for physicians. Having other streams of passive income increases financial stability by decreasing the reliance on the income from your “day job.”

My perspective is that establishing passive income is a good move. However, it needs to align with your overall life goals, passions, and purpose. Otherwise, it’s hollow. 

I have a few side hustles. One, I feel very passionate about increasing financial literacy and well-being, which led me to start a personal finance blog. Two, Selenid and I have begun to pursue cash-flowing rental real estate properties. Neither of these pursuits paid off immediately, but we were passionate about them and enjoyed them regardless, so they aligned with our overall life goals. 

9) Having a scarcity mindset around money.

I have to admit, this is a hard one for me. I know it will take time before thinking in an abundance rather than a scarcity mindset will become more automatic. 

I practice the former by trying to focus on the big picture, which is easier to do when you have a financial plan in place. Before I had a plan, the big picture was blurry and I was sweating the small stuff. Now I am working not to.

And yes, I still struggle with this today. The form it takes now is difficulty being patient as things continue to grow, rather than what I was doing before — trying to hurry things along and making mistakes. But, overall, my money mindset is much healthier now.

10) Not learning.

Why did I not do this earlier? How could we go about fixing financial mistakes without learning?

The books are not long; the blogs and podcasts are entertaining. My colleagues, friends, and family were very interested in and receptive to discussing these topics. 

What was stopping me?! What is stopping you? Again, it seems simple to look back and say why not? 

But, the reality is that learning about personal finance is intimidating and looking our mistakes in the face can be scary. That is what held me back. However, once I took that first step, I never stopped. I think you will find similar excitement and interest upon starting as well. 

Time is another concern that many people will cite, including my past self. We are all busy and there is never a perfect time to start. But the same way that we can always save more money, even when it seems we are at our limits, we can always find time. It’s a matter of what we prioritize — and your own financial well-being and future is definitely worth prioritizing! To start, buy a book or open a blog and just take 10 minutes to read the first chapter or post. Then, set a goal for continuing financial education like trying to read one new financial book a year.

I hope that I’ve been able to share some actionable steps that you can take on your path to financial well-being, no matter where you are starting from. I’m excited to be on the journey with you! What financial mistakes have you corrected? Share in the comments! Jordan Frey, MD is a plastic surgeon in Buffalo, NY at Erie County Medical Center and the University of Buffalo. His clinical focus is on breast reconstruction and complex microsurgery. He is also the founder of The Prudent Plastic Surgeon, one of the fastest growing finance blogs. There, he shares his journey to financial well-being with a goal of helping all physicians reach financial freedom, practicing on their own terms. Image by GoodStudio / Shutterstock