By Dr. James M. Dahle, WCI Founder
Anyone who has been around the physician financial blogosphere has probably heard someone cite the “one house, one spouse” rule of thumb. In 2015, I expanded the rule with a blog post called One House, One Spouse, One Job. We've run that post again at least once since then. While the intentions behind a rule of thumb like that are good and while the rule is mostly accurate, there are exceptions to it. It can even be offensive to some people (although not as offensive as a similar rule of thumb—”If it flies, floats, or flirts, rent it, don't buy it!”).
Today, we're going to talk about the exceptions to the One House, One Spouse, One Job Rule.
One House
The meaning behind the “One House” rule is that swapping houses is expensive. The typical round-trip cost of selling one house and buying another is in the 15% range. Meaning if you sell a $500,000 house and buy another $500,000 house, the total cost of that change is about $75,000. Costs include realtor fees, repairs, attorney fees, title fees, loan fees, upgrades, and more. Add in moving costs for a big move, and the sum is likely even higher. Note that $75,000 is more than many physicians save for retirement in a year, and $75,000 compounded at 8% for 3o years is $755,000. Lots of people (including more than 12% of physicians) retire on less than that.
The rule also refers to the costs of purchasing multiple homes, including timeshares. If you think maintaining just one house is expensive, try to maintain two or three. Too many docs think of second homes as investments, but the second homes are acting far more like a consumption item than an investment.
Exceptions to the One House Rule
There are exceptions to the rule, of course. One is simple geographic arbitrage. If you realize that earning $200,000 a year while living in a California house worth $2 million and paying California taxes is not helping you build wealth, you might choose to move to Nevada or Texas, earn $300,000 a year, live in a $500,000 house, and pay no state income taxes. Hard to argue you should stick to “one house” in a situation like that.
Here's another exception. What if you live far from your job and have a nasty commute? Time and time again, studies have shown that commuting reduces happiness more than just about anything else. While it may cost you some money, you're likely to be dramatically happier if you cut that commute in half.
Maybe your neighborhood has become dangerous, maybe you have kids that would benefit from a better school district, or maybe you have come into a large inheritance and want to upgrade your lifestyle. Moving to a different house would make sense in those situations.
Even a second home isn't necessarily a terrible financial decision, assuming you can afford it. If it dramatically increases your happiness, why not buy it? The goal isn't to be the richest doc in the graveyard.
More information here:
Is Renting Better Than Buying?
One Spouse
The “One Spouse” rule is simply a reflection that divorce is really expensive. Typically, divorcing docs end up cutting their income and assets in half. Do that two or three times, and it's easy to see why 12% of docs in their 60s have a net worth under $500,000. The misogynistic (but also cleverly rhyming) version of this rule is “It's Cheaper to Keep Her.” Date nights, vacations, and marriage counseling are expensive, but they're a whole lot cheaper than divorce. I have often told doctors that date night is the best asset protection move out there, as they are far more likely to lose wealth to their spouse than their patients.
The rule also reflects the fact that, statistically speaking, married people tend to build more wealth than single people, as long as they stay married. That likely reflects the effects of sharing costs and having two people working together toward a goal, whether or not both of them are actually working for pay. Naturally, if both ARE earning, it's a no-brainer that two incomes and one house will financially outperform one income and one house most of the time, despite the higher tax bill and household expenses.
Exceptions to the One Spouse Rule
“One Spouse” may be the most offensive part of the rule of thumb. Lots of people are single, like being single, and plan to stay single. Maybe they are aromantic or asexual. Maybe they like to play the field. Maybe they simply don't want to put their assets at risk of divorce. Maybe they just haven't met “the one” yet. Perhaps they are already divorced or widowed. To suggest they MUST have a spouse to build wealth is absurd.
Likewise, imagine someone in a toxic or even abusive marriage. To suggest they should stay put because of the One Spouse rule is obviously silly (and potentially dangerous).
Then, there are people who are polyamorous, polygynous, or polyandrous. If two people can build more wealth than one, what about two, three, or four? I don't know of a study that has ever looked at this, other than this one from Tanzania, which suggests it is at least possible among the very poor.
More information here:
One Job
The “One Job” portion of this rule simply points out that changing jobs can be expensive. This is particularly true when you own your job. I have two good friends who had to go through an EM sweat equity partnership track twice when they changed to our group. That cost them some money (although they'll both likely come out ahead in the long run). It's even worse if you have to close one practice and open another. You may end up fire-selling your equipment and furniture at one place and buying it all again at the new place. Or having to buy and outfit a new building (see transaction costs above). Or contracting with payors again. It takes a while to fill back up your clinical or surgical schedule, too.
Exceptions to the One Job Rule
Exceptions to this rule are becoming more and more common. The trend away from physician and dentist practice ownership and toward employment continues at a rapid pace. Only 26% of physicians now own their own practice. It's been less than 10% of doctors in my specialty of emergency medicine for some time now. Some democratic partnerships are now having trouble hiring because young doctors are so afraid that the partnership won't exist a year or two from now when they make partner.
When you are an employee (or a hospital-based independent contractor), the cost of changing jobs (especially within the same local area) is dramatically less than when you are a practice owner. In fact, in many professions, changing jobs actually increases your income. It is standard practice in the tech world to change jobs every 2-5 years. In medicine, changing jobs too frequently was once viewed as a black mark by credentialing committees. I suspect that this viewpoint is slowly fading away.
If you are an employee and haven't interviewed for another job in the last two or three years, there's a good chance that you're being underpaid. You don't have to actually change jobs to get higher pay; simply having a legit job offer in hand dramatically improves your bargaining position when it's time for a raise. At my hospital, it seems to be the main—if not the only—way nurses, techs, and clerks ever get a raise. Lots of them apply for other jobs with no intention whatsoever of leaving their current job. I suspect medicine will soon be the same way.
More information here:
16 Ways to Earn More Money as a Doctor
Every rule of thumb has exceptions. That doesn't make the rule useless, but remember that you can take what you find useful and leave the rest.
What do you think? What other exceptions to the One House, One Spouse, One Job rule can you think of? Comment below!
Very much appreciate the critical look at the “one job”. As a millennial in medicine and an early-ish career attending (5 years out), I’ve had just enough time to watch a handful of colleagues have their livelihood ripped out from under them as a hospitals play chess (monopoly?) with contracted physician groups, and politics with people.
My mantra:
Job diversification, job diversification, job diversification!!!
I have one W2 at 30h/week, another per diem inpatient gig that I can flex up and down as I need (work anywhere from 0-36h/week), and another 1099 on Saturdays that brings in a couple grand per day worked. If anything were to happen to any one or two of them, I’d be ok.
Additionally, having the diversification allows me to have “pseudo-FU money” (aka options) even while my portfolio is still relatively small, if any of them turned sour.
This is the stability of future IMO.
The end of restrictive covenants by the Biden administration will give us employee doctors a lot more salary leverage, which will increase job churn. I am not sure such churn will benefit patients in fields that depend on longitudinal relationships when their doctors are bouncing around ( but this already happens when insurers change coverage). So your addendum to your “one house, one spouse” is probably doomed.
Except for the fact that job changes often come with house changes.
I believe the wording put forward by the FTC suggests that nonprofit organizations will be exempt from the proposed noncompete restrictions. As a large proportion of healthcare workers inclusive of docs are employed by nonprofits, the potential benefit for the job market will be somewhat reduced compared to other industries.
The end of restrictive covenants has not happened yet and we may never get there. If we do, it might force employers to change in ways that keep their jobs competitive. If you cannot force people to leave the area to find better employment, then you will need to entice them to stay. The situation could settle down with stability similar to now or greater with employers kept in check by the local market.
The one spouse part I always interpreted as recognizing the fact that divorce can be expensive, not that it should be a consideration in whether to stay married.
On the other hand, I do not know whether “date night” is really a factor. It is important for couples to do what works for them. For some a weekly date night may be critical. For others it may be a waste of time. I know some couples in which both work long hours, travel for work and see relatively little of each other. But they have been doing this for many years and seem happy.
Zero spouse or one former spouse no others works as well to avoid the divorce tax. Docs (or anyone) with 3 alimonies (back when that was a thing) or now child support for more than one household don’t have as much room for retirement savings and should sort out how to enjoy flirt (you cleaned that phrase up IIRC, Dr. Dahle) without adding one more ex-spouse to their harem.
Great insight on the partnership tracks. I interviewed at two democratic groups (EM) this past year. The recruiting doctor commented on how the new docs are preferring to sign on as a 1099 IC option than join the partnership track. I think it just comes with the millennial generation, gone are the days of committing to a job for 30-40 years. I ended up doing a partnership track but question it every day. I know I can do locums or other gigs for more money instead of sweating through 3-4 years and hope they vote me in as partner before they lose a contract or PE buys them out.
Always exceptions to the rule! I got divorced and it was costly. So I moved to an apartment, went back to living like a resident. I got rid of debt, married an incredible woman, took care of my kids, paid off my alimony. I’m happy, healthy and am FI, but I continue & enjoy my work which is part time. Would never trade it for more money yet misery.