Traditional financial planning speaks asset allocation, rates of return and compound interest
While rate of return is something we all want, our approach at White Coat says that financial success has much more to do with strategic, disciplined, and efficient cash-flow planning, rather than the traditional rate of return style of planning!
Prove it? OK!
"Physician A" takes the common approach and saves 8% of his $250,000 income, but gets in to an amazing investment vehicle that nets a 9% rate of return every year for 30 years! He gets a little sloppy with his tax strategies, pays off debt slowly and gets into a house that's way to expensive. "Physician A" would see that his investment account would grow to just a shade under $3,000,000. Not bad, right? No, it's not, but we would argue that it's not good enough!
$250,000 x 8% savings ($20,000) x 9% return over 30 years = $2,971,504
"Physician B" utilized our refreshing approach. She is savvy and takes advantage of the benefits of tax code, delays retirement planning for a couple of years chooses to be an animal about paying off high interest debt instead. This physician gets into the right sized mortgage payment and even enhances her travel budget. In the end "Physician B" saves 27% of her $250,000 income, takes about half of the risk (5%) and does this over 28 years. In this scenario, she has over $4,100,000 to spend and enjoy in retirement.
$250,000 x 27% savings ($67,500) x 5% return over 28 years = $4,139,283
That's a difference of almost $1,200,000 or 40% more enjoyable wealth, simply by making disciplined cash flow decisions and asking every dollar to work for her and she is to earn it.
Who would YOU rather be?
These are hypothetical examples and is not intended to suggest a particular course of action or represent the performance of any particular financial product or security.