[Editor's Note: This is a guest post from a regular reader and a pathology resident at the University of Arizona. Originally from Colorado, he is at home in the outdoors. His climbing time, however has been significantly hindered since starting residency, not to mention the impending arrival of twins. We have no financial relationship.]
I would submit the question, is there a single recipe for financial independence? Well, is there a single treatment regimen for (insert disease here)? Of course not, but there are principles which lead to success. With every potential treatment for every disease, we can think of exceptions to the rule, and that’s what makes us doctors. Physicians are expected to come up with innovative, sometimes novel ways to treat a patient. This comes so easily to some, yet I dare say that the majority of doctors lack either the knowledge, desire, or both to manage our own money. I hope to build on our interest in becoming financially independent; something I’m sure we all hope to achieve.
Principles of Financial Success
The financial giants in my life have taught me how resourceful thinking fosters success. These principles are demonstrated by all of the financially secure people that I know, and I think it would serve us well to apply them into our lives. I think that these examples of principles apply just as much to the undergrad pre-med student as to the experienced physician nearing retirement.
The Author taking a rare day off from residency
Early in people’s lives, they don’t have much earning power, but they do have the ability to be frugal. This brings me to a critical distinction between those who are thrifty/frugal and those who are miserly/cheap. I think that defining these terms is the best way to avoid common misconceptions, and so that we are all on the same playing field.
- Miser – a person who lives in wretched circumstances in order to save and hoard money.
- Thrift – economical management; economy; frugality.
Avoiding Wretched Circumstances
The definition of wretched circumstances is different for everyone. Thrift is getting quality products at a bargain. I have friends that I would consider cheap, they get garbage at a bargain. For example, one friend bought 50-or-so boxes of expired cereal, expired _2 years at the time of purchase, just because it was a $0.25 per box. That falls in the wretched category to me … I guess, one man’s garbage is another man’s treasure.
Most people would rather just pay the higher price for something, then put in the effort to think of creative ways to save money. I was that guy who wore old soccer shoes and rode my bike 15 miles every day to let my wife use the car. I sat in med school all day, and enjoyed taking a break to ride my bike home. I saw it as an opportunity to exercise and have fun rather than as a chore.
Is it miserly to avoid purchasing meals at work or school because you can bring homemade soup and a sandwich for a fraction of the cost? Just because it takes extra effort and it seems like no one else is doing it, doesn’t mean that it’s inherently cheap. Eating a homemade lunch everyday is probably healthier anyway and you get to choose what’s on the menu. It saves $6-12 per day, or $1,500-3,000 a year on lunch and doesn’t seem like a lot, but making two to three small, simple changes like this will more than fund a Roth IRA for the year.
I’m not saying to withhold all enjoyment. The Hobbit: Battle of the Five Armies comes out December 13, and my wife and I plan see it on the big screen. We only do this maybe once a year, Redbox works for all the other movies. Also, it might just be me, but the movie theater’s sour patch kids don’t taste any better than the kind I can get at the dollar store on the way home, but they do cost about 5 times as much. I can wait or go without them.
My wife and I were approved for subsidized housing during undergrad. Unfortunately, our cheap rent also came complete with upstairs neighbors that fought just about every night. They made up just as
loudly, albeit not as often. The police visited for domestic disputes monthly. This was definitely bordering on “wretched”, but taking advantage of this opportunity let us fully fund both of our Roth IRAs while still paying rent and tuition.
Saving Money on Tuition
Is there a difference between an ivy league education and a state university education? I think the ivy leaguer may have more renown, but it’s hard for me to believe that my friends got a significantly
better undergraduate education than I did, some of whom paid 5-10 times as much. We pretty much got college on sale. I made the choice between one of three universities. There were many factors in my choice, but in the end, it came down to cost. One school’s tuition in 2003 was $1,200 per semester + about $500 in fees + living at home. The other schools were both about $6-8k per semester + fees + living expenses. If the tuition stayed the same (ha ha), then I would be looking at $48-64k for a 4 year degree + fees + living expenses.
I attended the first school and the tuition more than doubled by my graduation in 2009, but my wife and I still only paid about $20k, with the help of scholarships, for two 4-year degrees. Today, my wife is just as successful as others in her field, and I’m just as much of a physician as any other resident in the hospital, we just paid less to get there. I definitely consider that thrift. The same principle applies to medical school and residency. These monetary concerns should be taken into consideration, but ultimately should never trump your personal happiness.
We worked part time at the university gym during school, which made our inexpensive tuition and cheap rent affordable. Working on campus gave us extra perks, including the ability to study during work, not having to travel far for a job, and seeing each other throughout the day. Some days we opened the gym at 5 am, went to school all day, closed the gym from 5-10 pm, and then had to be back at 5 am the next day. This was exhausting, and fortunately we only had this schedule for two days per week. We knew this was the best we could do in our situation. I considered this “working really hard” but not quite “wretched”.
In closing, I would say that we wouldn’t be in the position that we are in now if it wouldn’t have been for the kindness of others. It never hurts to ask for someone to make an exception, if it is truly warranted. These are just a few examples of how “resourceful thinking” can be used to your benefit.
Cliff’s Notes Version
- Be thrifty – get quality products you need at a bargain
- Be creative and save $15 per day – that will fully fund a Roth IRA for 1 year
- It’s okay to splurge, but keep it within reason and be able to quickly recover financially
- Go to, or send your kids to an inexpensive university where the
education is good - Work smart and don’t be afraid to work hard at the same time, it’ll usually pay off.
How have you used resourceful thinking to make your own future better? Do you think that it’s advantageous or outrageous to live in almost “wretched circumstances”? How do you make sure you're frugal, but not cheap? Comment below!
Thanks for a great post. Best wishes with the twins! For me I believe thrift is planning when and how I am going to spend money as opposed to miserly being hoarding for its own sake.
That’s a great description. If you never plan to spend/give it, you’re hoarding.
Its always hard to know about the ivy education. I will say that when my patients ask about my credentials or have looked up my credentials they always comment on the ivy. It has little to nothing to do with how well I perform as a physician and certainly isn’t as important as my fellowship, residency, or even medical school but for some reason they care about it. One of the funnier stories for me was once a previous medical school instructor came to me as a patient. He didn’t know ahead of time that he was my instructor earlier in life. When he came in for follow up, he brought his notes about students. For some reason he kept notes on everyone. The only thing he had written about me was the name of my undergrad which he underlined. I’m of course biased but I believe its helpful in getting into med school (likely need just a slightly lower GPA in my view) and if you don’t go into medicine then you might have better options (of course I didn’t go that route). Once you enter med school, it sort of trumps whatever college you attended. Going to an ivy might be an ace but it isn’t always an ace of the current suite for trump.
I feel I’ve commented on the ivy education aspect before. It really depends on what career path the child wants to pursue. For medicine, an ivy undergrad does not matter that much. Maybe even for law school as long as you go to a top 10 law school after. For jobs such as investment banking or the prestigious silicon valley jobs, it matters a ton. For a child that wants to go into business, or start ups, the ivy path will provide connections that will open doors as long as they leverage it. Its been awhile since I’ve been in an ivy and I still go to functions inaccessible to others non ivy.
Note that in Forbes 30 under 30, the majority of the folks are from Harvard. The potential of an ivy is for an ambitious young person to take advantage of the opportunities and really make a splash. One of my classmates started a successful start up in India, the other in her late 20s has a house in the hamptons, a house in NYC, and can afford to take crazy vacations because they pretty much earn millions at this point. So it really depends on the career path the child is interested in and how much of a hustler you think you child is.
I can relate to the author – we bordered on “wreched” by living in an unsafe area in residency. We didn’t know it at the time that it was bad, but in the first 6 months, we had multiple neighbors broken into and had to put in a security system, and never really ventured outside – no evening walks 🙁 and felt like if someone knocked on the door we needed a pistol…we left as soon as our lease was up and although it saved us maybe $300/mo, in comparison with the amount of student loan debt from dental and orthodontic training ($500,000) and business loan (1.2 million) – it seems pretty silly now in retrospect. BUT – it sure built character and appreciation. Learning to delay gratification has blessed us in our marriage and finances. All too often we see “Dr. Daddy did it for me” and they are living a much higher standard of living and we get tempted to justify stupid stuff. Facebook doesn’t help when you see friends hitting up Hawaii and you’ve never been. My only advice is trust your gut and think and communicate with your spouse about your plan and your hopes for the future. We used to love taking the kids and driving to the fancy neighborhoods and go on and evening walk and admire the houses.
One thing that was huge was budgeting. We used the program You Need a Budget. This software has rules like “give every dollar a job”. By having a plan on how much money we had and how each dollar would be spent , it empowered us to feel confident we know where our money was going and how much was available to splurge. We thought about future expenses, like travel for job interviews and saved for it so it wasn’t a big deal to immediately fly to a job interview. Back in the day we each had only $20/mo in “fun money” but it was good to know we had some money to spend however we wanted. We still use the same program now actually and it keeps us on track for our goals.
Wow, that was quite an education, didn’t go to Pacific did you?
I do want to second the idea of facebook etc. When I was in school blogs were the big thing and according to everyone’s blog, life was perfect. It made us feel that we were missing out or doing something wrong because our life wasn’t that perfect or fun. Now that I can look back it’s easier to see how fake the blogs were, or facebook etc, now. Staying frugal and on your budget is key when everyone else is spending and letting the entire world know how much fun it is.
I third the Facebook comparison issue. If you haven’t heard about the psychological experiment on emotional manipulation they did on their users, google about it.
My dental training was an in-state school. I left with $185,000 after 4 years, for ortho I matched at a private school and tuition was $50,000/yr for 30 months plus living expenses. I took out Cost of Attendance Stafford and GradPLUS loans. I was pretty frugal, didn’t even have a smartphone until I graduated in 2012! I also moonlighted as a dentist some and was on food stamps, medicaid – but still ended up with more debt than I would have liked, but you match where you match and orthodontics is ultra competitive.
It’s alot of debt, but I am in a great opportunity and make alot (over a million this year net) too – so I’m able to service the debt no problem, but LOTS of my classmates are struggling…
That’s great! I had some friends who did ortho at Pacific. Tuition there is now almost 100k/year, so between dental and ortho programs, plus the “fees,” it was about 550k. That didn’t even include living expenses, which are high in San Francisco anyways. I was lucky enough to match at a hospital program that paid like the medical residents and waived my tuition.
That’s great about the current income. I figured it must be up there with 1.2M for a practice, but if it’s the right one it can all flow very well.
Thanks for the post, and all of the great comments.
I am doing the “other” ortho, orthopedics. My wife is a dentist and had a roommate do orthodontics. In my residency, we are still paid through GME funds; I find it very frustrating for you guys that you have to pay for ortho fellowships. Dental school is expensive enough. I understand that it is training during the fellowship, but you are far from a student as a dental school graduate. We have had some of our attendings suggest that we should pay for our orthopedic training, and it has frustrated me and the other residents significantly (to put it kindly).
Has orthodontic training always required tuition? I understand the cost/benefit of your increased salary as a practicing orthodontist, but it is something I hope never happens to orthopedic surgery.
Thanks, Ben
Yea, paying for fellowship sucks. Of course, a $1M+ post-fellowship income kind of makes up for it! That’s a very small percentage of physicians with incomes like that.
I think you’ll understand your attendings’ reasoning for thinking residents ought to be paying for their training later in life. It takes more time and effort and risk to work with a resident than a resident saves you through scut, at least for the first part of residency. Much of medical training takes place only through the goodness of its practitioner’s hearts.
I dont understand why they would say that since they are not paying for it out of their pocket for one, and a whole team of residents allows a hospital to magnify their care and basically deliver the level of care we have. Many surgical attendings in the past used this to bill for 3-4 rooms running at once, although that happens a lot less now.
They also come from a background where the cost of undergrad/med school wasnt quite as oppressive as it is now. Thats just ignorance of a new situation.
I absolutely agree with what WCI says about training residents from an attendings standpoint, although that comes with the job and at times some of their pay is supposedly toward that effect (depends where you are). If they dont like it, or someone taking their calls at night/going to er, they should be in private practice. I can finish a case in 30mins by myself in private practice that was amazingly done in 90 mins during residency (sometimes academics are just slow as well). Residents do slow you down, the whole hospital is inefficient because residents are there doing scut work they never seemed to bother implementing simple systems private places have (why invest when your cheapest force can do it).
I really like this idea of “fun money” which I have seen in a number of posts here. I’d love to heard what people tag as “fun money” which you don’t have to justify to anyone, including your spouse. Particularly for people who have very different philanthropic and/or hobby interests, I can see that being good for budgeting and also for the relationship.
What do you all use this for, and what things are “fun” that don’t fall into the “fun money” category?
Well, last month mine went for a sand trap (used for canyoneering) and my wife’s went for a manicure or something.
I don’t use fun money for philanthropy, we have a separate part of our budget for that and my wife gets to pick where that goes.
I have an easier time spending my fun money. I usually use it for whatever hobby I’m focusing on. My wife usually lets hers pile up, then when we do a skiing trip, her favorite thing in the world, she splurges and doesn’t feel guilty.
Date night for us doesn’t come from fun money either. I don’t think there is a right or wrong, as long as it’s in the budget and isn’t taking from your bigger goals.
I always like the idea of spending money or not really spending, but not feeling horribly guilty about purchasing value on something you truly enjoy/love, and being frugal elsewhere.
For me its cycling related. I dont spend money every month, but if a sweet deal on a jersey pops up on ebay i snag it. Hmm, doesnt really sound like spending but trust me cycling is inherently costly to enter, not so much to do. Anyways, since graduating residency, and fellowship I only bought one thing, a bike last spring. First time i had a new bike, and built it up from scratch myself. It was no where near the most expensive, but it probably is the sexiest. Not to mention if its something that also contributes to your health.
Its the dumb small things you dont think about that add up over time, that you probably dont care about (similar to liquid calories). Like the article mentioned home food for lunch as if it could be considered cheap?! What, I have the best looking lunches on most days because we specifically make enough for leftovers…okay i also really like pbj, super functional and dont need refrigeration either. But leftonvers Im usually stoked about. Already this week I’ve had stuffed (black beans, corn, fake meat, rice, cheese) peppers and today an amazing homemade taco. Its great.
Call me cheap or frugal but the savings from bring so over your lifetime is enormous
The best way to save hundreds of thousands is to invest on your own properly and this will give you the lowest costs
Guess I am cheap. I reuse straws and plastic cups, and use both sides of copy paper and recharged my copier for 8 bucks bottle of powder
In private practice as a dentists, lots of ways to save a few grand yearly by buying non dental products used in our offices, like paper, plastics, etc etc
I think finding the right sweet spot between saving too much vs spending too much very hard to achieve. This is something I have been struggling with for a while now. On one hand I want to be able to work less and semi-retire at some point in the future, but at the same time I still want to enjoy my life today. I would hate to one day find myself regretting not taking advantage of some of that money for a fun experience or some item that would bring me joy for the sake of semi retiring 2-4 years earlier.
I think it all comes down to planning. I’m in the same boat as you, I probably won’t ever totally retire because I love what I do, but I want to be able to cut back and work less. I set out my ideal scenario and then worked back from there. Now that I pay myself first to fund those goals, anything left over can go into my fun budget. I would get in trouble if I funded my fun side before retirement though.
Saving more than your goal should be a priority as evidenced by these terribly low int rates thst affect retirees badly
Time is your greatest asset and for many md’s they start too lste
Mr. Money Mustache has a good post titled “Frugal vs. Cheap” from 2012, very relevant to this discussion:
http://www.mrmoneymustache.com/2012/10/24/frugal-vs-cheap/
I went to an Ivy for undergrad, for the record, but had no debt from that thanks to a generous radiologist father. I don’t regret my choice, although my lack of undergrad debt and my perception that it helped me land my current academic radiology gig may both color my view.