Ignorance Debt: Your Most Expensive Expense

We all carry ignorance debt. We don’t even know how much we carry. What is ignorance debt? Well, ignorance debt is the cost of missed opportunities, lost gains, and wasted time.

Here are common examples:

• Delaying career advancement

• Forgoing financial literacy

• When opting for comfort delays an inevitable outcome

• Repeating mistakes

We all know nurses who ask about the path to becoming a CRNA. They ask for recommendations such as the necessary experiences and certifications. I’m up front about what to do and what to expect. Then I say, if you want it, apply. Worst the program can say is, “no.”

I’m yet to have someone say, “I think I’ll apply to a CRNA program after work today.” There are always excuses. This is their ignorance debt. Missed income as a CRNA. Hundreds of thousands of dollars per year for their entire career. Literally tens of millions of dollars.

It’s a coworker that’s always talking about taking one of those high pay locum assignments, but never actually takes one.

It’s a CRNA that pays a financial advisor 200 basis points (2%) of assets under management (AUM) to manage their portfolio. This leads to chronic underperformance of the stock market.

It’s a CRNA not taking advantage of tax-advantaged accounts.

It’s a CRNA who self-manages with the advice of r/wallstreetbets going YOLO on 0DTE options.

None of us will EVER have a perfect run. There will always be ignorance debt. It’s a matter of how much debt and how to manage it.

Evaluating Ignorance Debt:

Is it reasonable to earn $1M annually? Is it reasonable to see 60% returns annually? For some individuals, this is reality. For most, it’s not.

The difference between what you could have earned and what you actually earned is your debt. The difference in annual portfolio returns is your debt. Comparing your current self to what you could have been. Could have achieved.

It’s unrealistic for all of us to achieve these massive marks. And that’s okay. As much as it pains me to say this, none of us are perfect. The idea is to minimize the difference.

Paying Off Ignorance Debt:

Become a strong provider. Put in the work to make yourself marketable. Find the point of diminishing returns. Where a strong effort provides a strong income. Don’t work 365 days per year to close the debt when it means career burnout. That will only increase future debt load.

Educate yourself. Becoming financially literate will allow you to speak the language. Compare the performance of your brokerage and IRA to the S&P 500 (the benchmark for investors).

Is your financial manager outperforming the target date fund in your 401(k)? Are either of them outperforming the market AFTER fees?

Is a trend of over/underperformance developing? What are you going to do about it?

If your brokerage manager is Jim Simons (rest in peace), give him all of your money. Because Renaissance Technologies is second to nobody regarding annual returns, they set the mark for ignorance debt.

Did your 401(k) return 16% to the S&P’s 24% last year? Did it underperform in 2023 as well? If so, I’d look for a way to move capital. W-2 for life and you are limited in your tax-advantaged avenues. There are limited investment options within the typical employer 401(k).

Working as an independent contractor provides an out for your old employer 401(k)s. This could be good or bad. Financial literacy tells you what to look for and what to do about it.

Knowledge Problem vs Execution Problem:

A knowledge problem arises when we fail to identify potential solutions to a problem. If the budget doesn’t balance, we must identify multiple ways to increase income and/or decrease expenses.

An execution problem is knowing that working an extra week as a locum will provide the income, but you aren’t willing to leave your family or travel to earn those dollars. Something must give or the problem will persist.

Examples of my Ignorance Debts:

I had a short path to becoming a CRNA. Could I have become a CRNA quicker? Would a different career offer more opportunities (RN vs AA vs CRNA vs MDA)? Are there entrepreneurial endeavors I overlooked?

Be mindful of the potential downsides of different actions. Some actions have unknown outcomes. Here are some debts I won’t get back.

Had I learned about low-cost, passively managed index funds earlier, I would have graduated CRNA school with no debt and $300,000 in investments. The way it was, I exited with $10,000 to my name.

Had I attended a shorter or more cost-effective program, my current finances would look different.

Had I known about (and properly executed) dollar cost averaging, I would have noted far greater returns during the 2020 market correction.

These outcomes can be proven. VTI is an investment I would have reasonably made knowing what I know now. If I had invested A dollars in B stock in C year, my portfolio would be worth $X in Y year. Probably cost me $100,000 there. Feels bad man. It wouldn’t have been the return noted by Renaissance Technologies, but better than what I noted.

One could go farther and consider investments in real estate, IPOs, or new cryptocurrencies. Sure, potentially greater ignorance debt, but I don’t know that I would have gone that route.

What I did about it:

Well, I started reading about finance and investing. I read classic investing books such as The Little Book of Common Sense Investing and The Intelligent Investor. I read debt averse books from Ramsey Solutions. I read debt loving books such as Rich Dad Poor Dad. And I read the book that I recommend most, The Simple Path to Wealth. More books can be found on the must-read page.

Then I started reading books about negotiation which I regularly draw from during contract negotiations. I read books on psychology and motivation. All of these in an attempt to educate myself to limit my ignorance debt.

That’s where The Financial Cocktail came from. No use in all of us making the same mistakes. Life is not a zero-sum game. This blog is a compilation of my learnings. My course is a 7-hour chronological guide to go from major student loan debt to a positive net worth to understanding investments to financial independence. All to limit ignorance debt within the CRNA community.

Hopefully this page provides guidance and motivation to be the best version of yourself. Thanks for reading.