By Dr. Daniel Smith, WCI Columnist
Previously, I’d written about my financial mistakes and missteps as material for blog posts, and, while I’ve become more resistant to learned heuristics and biases, I’m still prone to pinching the occasional, unnecessary penny. Now that I’ve achieved attending income, my need to scrimp has lessened dramatically, but old habits die hard. The value of money relative to my time has dramatically see-sawed; previously, money was the rate-limiting factor in my decisions while ever more precious time has now superseded it.
While I’ve not hit the lottery nor developed a lucrative medical patent (yet), my life is assuredly much easier after some initial financial frugality combined with attending income. This brings up an important question: why do I persist in trying to accomplish everything myself as opposed to enlisting help?
Probably once a month, I’ll grouse to my wife, who works 1/2 FTE, about how I don’t have time to complete everything on my to-do list, to which she responds with the question, “How can I help?” As an aside, I wish that everyone had as patient a spouse as I have who offers help instead of correctly reminding me that I perpetually over-obligate myself. Now, whether it’s taxes, yardwork, ironing, or some other triviality, I inevitably work through the same mental gymnastics.
- I’m not going to ask my wife to do something that I can/should do because I promised that I would do it.
- Despite the fact that I am short on time, I’m not going to hire it out because it’s too expensive.
- I’m going to get it done in my “free time” (i.e. my hour or so in the evenings after my wife and kids are in bed).
Unsurprisingly to many of you fellow sufferers of can’t-let-things-go, the side task only gets done passingly well, or I sacrifice something else (usually my family time) to get it done. Despite the fact that I would objectively prioritize my family time and free time over almost any other task, I continually pack my agenda to squeeze in some marginal amount of productivity.
More information here:
The Happiness Index: Are You as Happy as You Could Be?
How many of you have set a budget to purchase a car or home, paid more than you really should have, and then agonized over the details? When I was a fourth-year medical student, I decided that, with my residency contract in hand, I was going to get a new car. The clutch was going out on my current car, and I rationalized to myself that I was practically a doctor now and that, in a few short years, I would be swimming in cash a la Scrooge McDuck. With the confidence of Wile E. Coyote chasing the Road Runner over a cliff, I strode into the BMW dealership and asked to see the new 1 series. After a test drive, I was smitten. As the salesman led me toward the financing desk, I imagine the word “sucker” must have blazed forth from my forehead in a garish, neon red that only those who sell overpriced products can correctly distinguish.
I accepted, whole cloth, that the price of the car was as listed on the sticker but that this polyester-clad vehicle vendor could get me the needed low monthly payment that would fit my residency budget. As an aside, the mere suggestion that a 26-year-old buying a BMW before the ink was even dry on his medical school diploma and who should have been focused on creating a budget is nothing short of tragicomedy. However, for the next four days (via email), I contended, compared, and cajoled this guy to the absolute lowest payment his boss’s boss would allow, just to drive away in that naturally aspirated in-line six-cylinder with six-speed manual transmission.
I argued fiercely about the interest rate since, me being no dummy, the rate dictated how much interest I would pay. I compared against other lenders and even got a quote from a dealership in Atlanta just to show the guy a rate one-eighth of a percent lower than what he offered . . . never mind that Atlanta was eight hours away and didn’t have the vehicle I really wanted. Finally, the salesman gave me the rate and payment I wanted, and I drove away in a vehicle I had absolutely no business buying.
I can only compare this to the time that my oldest son snatched up his still-too-hot lunch and burned his tongue despite my warning to wait for it to cool. I guess dino chicken nuggets and BMWs have more in common than I’d have imagined. Did I perhaps save a few hundred or maybe even $1,000 by spending hours and hours haggling over this car? Maybe. Would I have been worlds wiser if someone had given me the White Coat Investor book in medical school and I had just driven a beater for a few more years? Undoubtedly.
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Real Life Examples of Physician Budgets — From the Frugal to the Extravagant
I heard a pastor once say, “If it feels like I’m stepping on your toes, I’m not. I’m jumping up and down on your feet.” If you’re confused as to the meaning of this colloquialism from a southern baptist preacher, it means that the point is too important to miss, even at the risk of offending folks.
If you’re spending hours of time comparing expense ratios down to a basis point, chasing the 0.1% difference between a high-yield savings vs. money market account, or picking nits about what particular broad index your total stock market fund follows, then you’re wasting your time.
It’s like when Dr. Jim Dahle says “you’ve won the game” to a speak pipe question on the WCI podcast. If you’re asking those kinds of questions, then the answer to that question won’t move the needle. So, and I’m also speaking to myself here, stop spending so much darn time reading articles from Kitces or scouring the IRS code for an extra 0.1%. Happiness, satisfaction, joy, or whatever you’re seeking from life can’t be found there. John D. Rockefeller is purported to have been asked by a journalist “How much money is enough money?” The response: “Just a little bit more.”
Now, if you are a true hobbyist and the increase in investing knowledge is an end of its own, then knock yourself out! I love reading about financial history, especially when authors like Bill Bernstein and Fred Schwed are so pithy. However, if you’re slogging through piles of charts and figures just looking to try to short the next bubble, then I’ll remind you that there’s no trailer hitch on a hearse.
Possessions and Possessor
My family and I are about to move into what, in my town, would be a legitimate “doctor house.” It’s not the nicest house in the city by any stretch, but it is much nicer than our current home. It will be the nicest house in which I’ve ever lived. Because our success is due to many things outside ourselves—God, family, mentors, etc.—I try not to take for granted that we can move to a truly great neighborhood. However, it is a move that’s tinged somewhat bittersweet by the fact that this neighborhood will urge us to drive flashier cars (not that I need encouragement), take more luxurious vacations, and generally keep up with the Joneses.
My current vehicle is a 2017 Honda Ridgeline with a dent in the rear bumper and a scratch down the side, none of which bothers me at the moment. However, when I drive my truck (lifted El Camino?) in my future neighborhood, I can’t help but feel that I should get something a bit nicer, newer, or at least not as worn. But as a sports doc in Alabama, I’ll sometimes drive to towns where the local football stadium is located “first left off the dirt road, past the old Jenkins barn” and where carting around smelly braces, ice water tanks, and the occasional injured player (carefully) is an expected part of the job.
What to do? Warren Buffett once gave an interview where he told the reporter this delectable little quote: “I have every possession I want. I have friends with a lot more possessions, but in some cases, I think the possessions possess them rather than the other way around.”
More information here:
A Candid Conversation with My Physician Spouse About Burnout, Guilt, and Resentment
The Final Analysis
While I know that the last segment on possessions and possessor doesn’t quite fit with being penny wise and pound foolish, I think the sentiment fits with the general premise of being judicious about how we spend time, money, and energy. However, in the end, that’s what this whole column is about, becoming a student of how to invest your resources.
Neither profligacy nor parsimony suits a person well. As for me, I believe I will take a cue from my wife who, much more deftly than I, strikes that delicate balance.
I’d like to leave you with this thought by historian and philosopher, William James: “The union of the mathematician with the poet, fervor with measure, passion with correctness, this surely is the ideal.”
In what ways are you penny wise and pound foolish? Is that a behavior you're trying to change, or is it something with which you're comfortable? How do you achieve a comfortable life balance? Comment below!