Why do so many physicians complain about not having enough money? Almost every physician’s earnings are in the top 10% of income earners in the country. Yet we feel broke, even those who make $600k a year.
The median household income in the United States is about $75k. The average physician’s income is more than three times that amount. Yet many of us live paycheck to paycheck. How can that be? Does that make any sense?
We make several wrong assumptions that are holding us back from achieving our financial goals. We have ideas that become Dogma in our lives. Dogma is a principle that we hold to be true, without having adequate/sound grounds to make such a statement.
It might start as an idea. Then as time goes by we build up that idea until it is an incontrovertible fact. Once it becomes a fact in our mind, we will stick to it like glue, even when it is hurting our family’s financial wellbeing. It’s time we shake off these dogmas and do the right thing for our family’s financial future.
Our kids must attend private school
Some people believe there is such a big difference between public and private school that they are willing to make financial sacrifices to send their 3rd grader to private school. Many physicians are paying $40k a year to send all their kids to private grade school, while at the same time they are asking me to help them stop living paycheck to paycheck and save for retirement.
Those who have all the required things covered in their budget can afford to spend the rest of their income on anything they desire. But those living paycheck to paycheck who are not saving anything for retirement cannot afford to spend money on many luxuries. Since those in the United States have a free option for schooling, private school is a luxury, not a necessity. Keep private school in the correct category.
Time to remove private school from a dogma and return it to simply being one of the options available to choose from. If you can’t afford it, take the free option.
Renting is throwing away money
There are three options when deciding on a place to live: buy, rent, or live with your parents or friends. There is a time in life when each of these options is the best choice. In a situation where renting is the best choice, renting is not throwing away money.
The time to rent is when you are living somewhere temporarily. Examples include during school, residency, a 2-year military assignment, or moving to a new job. The right time to buy is when you are sure you will be staying in a location for well over five years.
It is expensive to buy and sell a house. For purchasing a house to turn out better financially than renting, you must live in the house long enough for its value to grow significantly more than the expenses incurred. These expenses include realtor fees, points, loan origination fees, appraisals, mortgage interest, upkeep, improvements, and repair and maintenance costs. That break point is around five years but varies greatly by location.
You are not throwing money away by renting if you may be there temporarily. Do the right thing and rent with confidence.
I need to look successful
People use this dogma to buy expensive clothes, cars and houses. They mistakenly believe patients choose their physician based on the kind of car they drive or the neighborhood in which they live.
I coached a physician from LA who provides a great example of this issue. He felt his retirement savings were inadequate and wanted to find ways to save more. At the time he drove a very expensive foreign luxury sports car.
I asked why he leased such an expensive car. He said it was important for him to project a “successful” image to his patients. I asked where he parks his car when he is at the office. He told me it was parked two blocks down the road in a multi-level parking garage. I then pointed out that his patients never see him in his car, so his plan is not working. If the patients can’t see what he drives, any car he drives will have the same effect.
Don’t ever buy stuff to impress others. Frankly, they don’t care about your level of “success,” they are only worried about their own. When you are truly successful and have more money than you know what to do with, then you can afford to buy expensive stuff and enjoy it.
I lease my cars, so I never have to deal with repairs
Most of the time this is an excuse to drive a car you can’t afford, thus the true reason you are leasing it. Repairs needed for a leased car are just as inconvenient as repairs for a car you own. Frankly, there are very few repairs needed during the first decade of a car’s life. Cars have become very reliable. This is why they push so hard to sell you extended warranties. Selling insurance you will not likely need is very profitable.
A breakdown in any car, owned or leased, still leaves you stranded, needing to get a ride. The car will still be in the shop during repairs, and you will need to get a temporary replacement or someone with a car will need to chauffeur you around while your car is incapacitated.
The inconvenience in this situation does not improve when you lease a car. You just call a different person to resolve the issues. You can call the people you lease from, and they will get you a car. Or you call the car rental company and get it yourself. The money you saved not leasing will easily pay for the rental car.
Do yourself a financial favor and stop driving cars in the most expensive manner: leasing. Own a car for a decade and then trade it in for another one. Cars today are very reliable. My wife and I have owned and driven our cars on average for 11.67 years each, and I haven’t had all the breakdowns that leasers worry about. You won’t have them much either.
It takes home runs to get ahead financially
This idea is perpetuated by those who make money showing you how to swing for the fences. In general, steady investing leads to prosperity and speculation leads to poor average returns. I remember having this conversation with a day trader who told me he makes a good living trading. His wife was shaking her head no. He only remembers his wins. His wife remembers the wins and the losses and they don’t combine for good profit.
No, you don’t need to have a side gig, make alternative investments, trade stocks, buy real estate, own cryptocurrency, get in on the ground floor of a new company, trade commodities, or do anything that is speculative.
How do you end up financially well off? Find a job that makes a good income, spend significantly less than you earn on your lifestyle, invest your savings in dependable investments and leave it alone to compound.
Something as simple as filling your IRA every year until retirement and investing it in an index fund will make you a millionaire. Just think how much you would have if you invested more than that minimum.
What you invest in is far less important than that you invest a significant portion of your income for future use. Don’t waste your time learning ways to make your investments riskier.
Families need two incomes to survive
No physician is in a position where their income is so low that their spouse would be required to work. However, many physicians use this excuse to have a higher lifestyle than their income supports. This is how we justify buying that house that is too expensive or the cars and vacations we can’t afford.
We often blame it on a high cost of living area, or a high student loan burden. But the reality is if we feel we need more income than the top 10% of people in the nation, we have a spending problem not an income problem.
If we are unable to live a nice life on an income in the top 10% of the nation, we will still not be satisfied by our income in the top 5% of the nation.
If your spouse wants to work, that is fine. But don’t convince yourself that your spouse must work for the family to get by. You can live a nice lifestyle on a physician’s income anywhere in the country.
Although the above are six of the most common dogmas I hear from coaching clients, there are many other things we have converted from options to requirements. What idea have you turned into a dogma that is costing you too much money or hinders your financial wellbeing? Discuss with your spouse why you have turned this dogma into such an important facet of your life.
If debt is contributing to your problems, read The Doctors Guide to Eliminating Debt and take that issue off your plate.
Make good choices based on the income you have. Chasing more income to create a more expensive lifestyle is rarely the formula for a happy family. The problem is that no matter what income level you reach, there is always a higher level. There is no end point. So be happy where you are and enjoy life now.
I was amused by the section on the car being parked two blocks away in a garage and patients never seeing the physicians car. The things we do to portray a certain image of success. Another great article filled with immense wisdom. Thank you for the reminders.