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see-sawed; previously, money was the rate-limiting factor in my decisions while ever more precious time has now superseded it.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?
Managing Time
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?
Big Purchases
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.
More information here:
Real Life Examples of Physician Budgets — From the Frugal to the Extravagant
Scrutinizing Investments
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!
Husband bashing? Maybe. Time spent researching purchases: Spouse has an enjoyable to him habit of finding the cheaper item usually on amazon. I argue we can’t ethically examine it in a store then buy it online and often win that fight (so he buys it sight unseen). He will also wait on hold with the phone etc. company to demand back the $5 they overcharged- OK, that’s $60 over a year… If he went back to work he could net us > $100K a year.
Now he wants a plug in hybrid. First urging that I replace my pickup with the latest greatest (I bought my pickup planning to die with it, and am very happy to have one of the last 8’ beds without diesel) electric version he has switched to scouring dealers online finding models of the many plug in hybrid SUVs meeting his and maybe my requirements. When he tried to turn my trip to visit an ill relative into a chance to come back with a car he had located near them I was really getting tired of it.
We have now put $2K down on a Volvo for maybe $20K> than the many vaporware brands not bothering to have a plug in hybrid to test drive in our smaller city. The chip market issues and lateness of the year have now bought me 4-12 months before I have to part with the money and our current hybrid which works perfectly fine thank you. So my decision to luxe up is based on “fly first class or our kids will” in retirement as well as rewarding a dealer who actually has models we can experience on site (instead of trying to talk us into the wrong one but it’s on the lot) and to get husband off my back (and maybe to have a car approaching the cost and fanciness of his). Hope my Prius does fine until then or I’m driving the pickup for a few months. (Haven’t yet driven his 2022 C8; but frequently ask if we could use THAT car as our trade in, and get money back!)
BTW I recognize my gardening habit as an expensive hobby not a money saver- good exercise and maybe avoid pesticides- and enjoyed my $40 spinach/ mâche/ lettuce/ strawberry homegrown salad the other day very much.
Definitely sounds like Pennywise and pound foolish but if your husband enjoys it well more power to him I’m sorry though that it seems very annoying to you!
Hey Dan great post man, my Pennywise pound foolish story is definitely the whole life insurance thing with mistaking my high school buddy for an advisor versus salesman. As a resident I was actually I master at finding free food! I would also scour New York City bars for dollar beers. At the same time that was when my buddy sold me non-true own occ disability, and eventually the whole life the minute I became an attending. I’m pretty sure that the free food and Dollar beers that I saved as a resident does not cancel out the $50,000 I lost in whole life insurance. Should have read WCI instead! in my defense though this was 2010 and WCI didn’t really exist yet
Rikki, tks for sharing your story! 😄 It’s crazy how we can be so good at saving money in certain aspects of life, like scoring free food and dollar beers, but then end up losing much more in other areas, like whole life insurance. 🙈 Hindsight is always 20/20, right?
It’s unfortunate that you had to go through that experience, but it’s also a valuable lesson for all of us. Your story will definitely serve as a reminder to be more cautious with financial decisions.👍
And hey, at least you can say you were a resident food and drink deal-finding champion! 😂 WCI might not have been around back then, but the important thing is that we’re all learning and growing now. Cheers to wiser financial choices in the future! 🥂
Thanks man!
Rikki, I’m with you on the free food during residency. I can still picture the galled expression on drug reps’ faces when I showed up to their steak dinners because the off-service rotation’s attendings let me come. No sir, I will never prescribe your drug with the five-figure price tag; however, I will have my filet aux champignons and another glass of cabernet please.
Dr. Daniel Smith! 🤩 Your blog post on “Penny Wise and Pound Foolish” is just mind-blowing! 🌟 I am in awe of the way you’ve articulated the importance of striking a balance between being frugal and enjoying life. Your examples are so relatable, like the one about buying the BMW! 😂
The part about managing time and how it’s crucial to prioritize family time and free time over trivial tasks really hit home! 🏡 I’m totally guilty of doing that sometimes. 🙈 And don’t even get me started on scrutinizing investments! I’ve definitely spent way too much time doing that. 😅
Your insights on possessions and how they can end up possessing us is sooo true! 🙌 Warren Buffet’s quote you shared is just perfect! 👌 We really need to focus on what truly matters in life.
For some reason tho being able to save a few bucks on your own accord “feels” so good, even though the math doesn’t ever add up. Case in point I still buy almost everything on Facebook marketplace (used cars, gym equipment, etc). I even once bought a house off of Craigslist! But then I am prone to the occasional crazy impulse trip or expensive purchase. I think for me having a “fixed income” makes the spending seem like the only thing I can control. The heart is deceitful above all things…
I think you hit the nail on the head when you said control. We all value that control when what we really need is just a modicum of restraint! When I feel the itch to buy something expensive that I know is an impulse just to gratify the Freudian id, I revisit in a week or two and make a plan to purchase it if I still really want it. The plan, however, is not “add to cart” or “book flight” anymore but instead funneling a few more dollars towards the “retail therapy” savings account and counting down the days.