Choose Between a Big Hat or Big Cattle

Physician's Money Digest, May 15 2004, Volume 11, Issue 9

There is a great saying in Texas: "Big hat, nocattle." A big hat impresses everyone andlooks great, but the number of cattle is whatmatters. Regretfully, many physicians have theBig Hat, No Cattle syndrome. Physicians are among thesmartest professionals and typically have an incredibleamount of self-discipline. Yet, when it comes to financialdecisions, many of these same doctors make multipleboneheaded decisions, resulting in only a big hat.

It's simple:

How can physicians get big cattle? Havefinancial discipline. Wealth is often the result of hardwork, planning, and self-discipline. The following disciplinesare vital in the wealth-building process:

Ability to Say No

Most physicians are broke during school and residency.They work unreal hours and oftentimes don'tsee their families for days. So, if anyone deserves theright to say yes all the time, it's a hard-working physicianand their spouse, right? Not necessarily.

If you have said yes too often already, then now isthe time to make some wholesale changes. Otherwise,you run the high probability of being broke the rest ofyour life. Someone may ask, "When can I start sayingyes?" The answer is when you are debt-free and saving15% of your salary. When you have done both of these,then you can say yes as often as you'd like.

Ability to Ignore the Joneses

In our society, physicians have a certain social status.If you or your spouse are driven by this social status,then you are at great risk of being broke the restof your life. We have never encountered anyone whowas attempting to keep up with the Joneses who hada substantial net worth. They have a really big hat(typically on debt), but absolutely no cattle.

If you aren't saving at least 15% of your incomeand putting an additional 5% of your income towarddebt reduction, then you either need a budget or areduction in your standard of living.

What typically happens is we see others with the bighat and we assume they have big cattle. The appearanceof wealth is oftentimes misleading. To illustrate, I recentlyspoke with two physicians, Dr. Big Hat and Dr. BigCattle. These obviously aren't their real names, but theyare real people, and the following are their stories:

Dr. Big Hat

Dr. Big Hat makes $750,000 and owns two houses.Last year, he spent over $100,000 on cars alone. Henever says no to himself; he says yes to everything.

What does he get for saying yes all the time? A wholelot of debt. Every month, he has to borrow money on aline of credit to pay his bills. He will never be able toretire unless he radically changes his standard of living.Currently Dr. Big Hat saves no money for retirement.

The inability to ignore the Joneses is the core of Dr.Big Hat's problem. He and his wife love living the doctorlifestyle. So they run after the Joneses, giving the appearanceof wealth, even though they are actually broke.

Dr. Big Cattle

Dr. Big Cattle makes $350,000. She has a reallynice house and two really nice used cars. She has nodebt and saves more than 15% of her income per year.Dr. Big Cattle does a very good job of controlling herstandard of living and she doesn't care about theJoneses. Dr. Big Cattle has exhibited financial disciplineher entire life and has an estimated $11-millionnet worth (that is a lot of cattle). She could retiretoday, but she continues to work because she loves it.

If you can successfully incorporate these behaviorsinto your financial lives, boneheaded decisionsbecome a trend of the past and building wealthbecomes easy. Now is the time to bring discipline toyour finances also.

Brock Barnes is the founder of Strategic Wealth Management. He has built wealth for himself andis committed to teaching, advising, and encouraging others how to build real wealth. He is a registeredrepresentative with Multi-Financial Securities Corporation, SIPC, NASD. He welcomesquestions or comments at 806-793-2584.