The Biggest Wealth Creation Mistakes Doctors Make – Part 1
“Learn from the mistakes of others. You can’t live long enough to make them all yourself”. Eleanor Roosevelt
What are some of the biggest mistakes you should avoid to create wealth, achieve financial security and enable you enjoy your life more?
Below is a list of some of the key mistakes Doctors make with their wealth creation:
Procrastination
Poor choice of investment strategy
Not managing their emotions
We will look at these in turn over the next couple of newsletters, but let’s start with….
Procrastination!
“Start today, not tomorrow. If anything, you should have started yesterday.” Emil Motycka
Procrastinating can be a sensible short term strategy if you are unsure what the right course of action is.
However, the cost of procrastination can be enormous and very dangerous, if you want to live a great life and achieve financial security.
An illustration of this enormous cost is shown below in the graph which shows the significantly different outcome at age 70, by delaying your wealth creation by 10 years:
This is due to the exponential nature of compounding, which Albert Einstein described as the most powerful force in the universe, and also said:
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
Here is another example of the magic of compounding:
This illustrates:
$1 invested in Australian cash in 1900 would today be worth $240. If it had been invested in bonds, it would be worth $950, but if it was allocated to Australian shares it would be worth $593,169.
Although the average annual return on Australian shares (11.8% pa) is just double that on Australian bonds (5.9% pa) over the last 119 years, the magic of compounding higher returns leads to a substantially higher balance over long periods.
Yes, there were lots of rough periods along the way for shares – as highlighted by arrows on the chart – but the impact of compounding at a higher long-term return is huge over long periods of time. The same applies to other growth assets such as property.
So if it’s not already clear yet, you want to take action and start harnessing the powerful force of compounding as soon as possible!