I have a confession to make. I'm not frugal. I used to be. In fact, I was pretty frugal for a good portion of my life. Maybe I still am in the view of many physicians, since I drive a 13 year old car I bought for $4K four years ago. But I don't see myself as frugal at all. However, what I am, and what most physicians need to be if they hope to be financially successful, is to be relatively frugal. Luckily, being relatively frugal requires far less discipline and deprivation than actually being frugal.
There are dozens of books in the library (since frugal folks don't actually buy books) and blogs on the internet that encourage you to be frugal. They teach you how to find coupons, how to reuse dryer lint, how to pay for cheap dates, how to get a deal on a used car, how you can set your thermostat at 86 in the summer and 62 in the winter by using fans and sweaters, and how to reuse paper towels and sandwich baggies. Some, such as one of my favorites, Mr. Money Mustache, even advocate that being frugal will not only make you happier and healthier, but save the planet at the same time. The Mustachian philosophy is basically that you should teach yourself to desire less so you can be happier.
Buying Happiness
The problem with that philosophy is that it isn't true. Spending less DOESN'T always make you or me happier. Now, don't get me wrong. I'm a huge advocate of spending your money on what makes you the most happy. If you care about having nice cooking equipment but don't care if your bicycle is a beater, then you know where to spend the money. If you like eating out but don't enjoy expensive resort vacations, then spend your money in your local restaurants. However, spending money properly can pay huge happiness dividends.
As regular readers know, my wife and I spent a couple of weeks in France this summer celebrating our anniversary. We had a wonderful time. We spent with reckless abandon. We took a direct flight. If we wanted to do something, we did it. If we wanted to eat something, we ate it. Instead of taking cheap trains and staying in hostels, we drove (paying a small fortune in rental fees, gas, tolls, and speeding tickets) and stayed in bed and breakfasts and nice hotels (well, except for one in a small town in the Alps.) The psychology literature is pretty clear that spending on shared experiences with people you care about does make you happier. So let's quit pretending it doesn't.
I also bought a fancy new, expensive mountain bike this year. Compared to my twenty-year old aluminum hardtail, riding this bike is like an entirely new sport. The bike practically drives itself over rocky obstacles. Riding it really makes me happy. I'm sure other people feel the same about their luxury cars or clothes. Sometimes stuff makes you happy too.
You also don't get to take your money with you when you go. When was the last time you saw a hearse with a trailer hitch? I'm sure I'll leave some money to my heirs and my favorite charities (not to mention I also give to others and charities as I go along.)Â But it seems a shame to make a physician salary and spend 80 years living like you're a resident. Luckily, you don't have to do this to be financially successful. What you do have to do, however, is be relatively frugal.
Relatively Frugal
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Being “relatively frugal” means being frugal relative to your income. If you're putting away 20-40% of your gross income toward savings, retirement, college, and other long-term goals, then it's okay to spend the rest. Take a doc making $400K who has paid off all of his student loans, has his mortgage half paid off, wouldn't dream of carrying a balance on a credit card, and is putting $100K toward retirement each year. He might be paying another $80K in taxes and giving $20K to charity each year. That still leaves him with $200K, or $16,667 per month with which to do whatever he likes. You can buy a heck of a lot of stuff and experiences with nearly $17K a month.
If he hates his job, he can live on a third of that and put the rest toward becoming financially independent by 40 or 45. If he enjoys his job, he can spend it all and shouldn't feel a bit guilty about it since he's still on track for an early, comfortable retirement. Relative frugality. That's the key. And it works whether you're making $50K, $150K, $250K, or $750K. So residents, young attendings, and their spouses, fear not. Make the right decisions early on and eventually you can be “relatively frugal” instead of “just frugal.”
What do you think? Are you frugal? Why or why not? Are you frugal relative to your income? How did you decide how much of your income to spend? Am I an idiot for spending more on my bike than my car? Comment below!
Great article. I do think that everyone should try a little dose of extreme frugality, preferably during school, even before residency. Like many things, it’s fun to try for a while,while knowing there is a light at the end of the tunnel. Some people really like it and continue with the super frugality, (even if MMM says it’s not frugality at all.)
My family still has great memories of those times, but I’m glad to be where we are now. Although, some would still consider us super frugal, I don’t think we are. We spend on what makes us happy, and save money by not spending on things that don’t. Let’s us enjoy life, and put away a large percentage.
Indeed, as Allan Roth says “There’s no point in being the richest guy in the graveyard”.
I fully agree with the premise of your post, but the numbers are much more complex than the numbers you use at the end. 16,667 per month to spend on “whatever you want”…If what you “want” and what makes you “happy” is health insurance, malpractice insurance, homeowners insurance, umbrella insurance, disability insurance, life insurance, electric bill, water bill,etc.(you get where I’m going). Don’t get me wrong, even after all that is accounted for you will likely still have more left over than many Americans make in a month. But, for those who may read this and are not physicians, lets not advance a myth that most physicians have 16k a month in disposible income to do with as we wish.
As always, great website, keep up the good work.
There is no doubt that physicians have very different salaries. Some make a million a year. Some make $150K a year (or even less.) Obviously one making $150K a year isn’t going to have $16,667 a month in disposable income. Now, do I have many months where I have that much in disposable income? Yes I do. Why? Because I have a very good income and I have kept my fixed expenses pretty darn low. Are there lots of other doctors out there like me? Almost surely. The doc in the example, like many specialists, has an income of $400K, about twice that of the average physician these days. So if that figure seems high to you, it is probably because your income is closer to average.
Think of it this way. $400K a year (let’s assume that’s after malpractice) is $33K a month. Take out 8K for taxes and we’re down to $25K. 20% for retirement knocks you down to $18K. A couple thousand in insurance and you’re at $16K. $3k for a mortgage on a pretty expensive house and another $500 in utilities and another thousand in food and you’re still well into the 5 figure amounts. So…$5K, $8K, $10K, $17K….whatever it is. A physician who is relatively frugal should have a heck of a lot of disposable income each month even if it isn’t $17K.
There is many a week when I am on my 50th hour of work and think to myself. “I could have done ER… I love the ER…. twice the pay and less hours”.
You should do a post on the pros and cons of picking specialty’s.
I do love Family Medicine but I do feel I am underpaid by about 25-50K compared to the amount of work I do.
There’s not a lot to say about it, and what there is is in my book.
Basically, do what you love, but realize that ten years out of residency lifestyle and pay will be dramatically more important to you than they are as an MS4. If you love two things equally, for heaven’s sake pick the one with the better pay/lifestyle!
If only one could predict that the current pay and lifestyle of a specialty would remain (inflation-adjusted) unchanged for the length of one’s career. 15 years ago ER was not such a great gig and radiologists made nearly twice what they do now, working fewer hours with less call.
Check if you meant to say “86 in the summer, 62 in the winter.”
The most shocking thing to me in this article was the example of the $400k physician paying $80k in taxes. I know this isn’t a tax reduction article, but even after maxing the 403(b), still sitting in the 36% neighborhood. Is there and article I missed on this topic? Where is this 20% voodoo?
Yes, and I think he meant “reusing drier sheets” not “reusing drier lint”, but maybe I am wrong here, too.
To be honest, in my frugality, I rarely use drier sheers at all, except in the depths of the driest part of the winter.
This is a man that doesn’t do his own laundry 😉
Why do laundry at all? Total waste of money. 🙂
Ouch!
I’ve seen people using both! Dryer lint is reportedly a great fire starter.
I agree that I can’t see how $400k income results in only $80k in taxes. Perhaps this is possible for the self-employed guys? With an income in that range, I am definitely paying 1/3 if not more in taxes (effective tax rate). Perhaps this was just a casual underestimate by WCI?
Two unrelated-employer self-employed IRAs, each maxed out?
While it certainly helps to have lots of available retirement accounts, and some people are just in a lame tax situation, if you’re paying 1/3+ in taxes, there is almost surely something you can do about it. You might not want to, of course (move to a lower tax state, save more for retirement, buy a big expensive house on a big mortgage, get married etc.)
I’m in the top tax bracket as a W2 employee, so I pay a ton for taxes (federal, no state income tax). I max out my 401(k) and do a backdoor Roth every year, have a $500k mortgage, and a stay at home spouse.
Not sure wha else I can do? Quitting isn’t really an option.
Well, you’re in the top bracket. A doc grossing $400K isn’t. That starts with a taxable income (married) of $465K (that’s after all deductions.) Sorry, that’s the pain of being a highly paid employee. You can lobby for more retirement plans.
Getting married actually increases your combined total tax rate if your spouse is also a highly paid physician. It would only decrease your tax rate if your spouse didn’t have any significant income.
Ben-
That is why one should marry a nurse. financially makes sense. and you may have someone that can stay home when the kids are sick. my two cents.
Thanks for the correction. You’re right of course.
As I’ve mentioned on my tax posts in the past, I think 20% is pretty high. I made a lot more than $400K this year and only paid 23% in federal, state, and payroll taxes. More details here:
https://www.whitecoatinvestor.com/what-i-learned-from-doing-my-2014-taxes/
I can’t for the life of me figure out how you’re paying 36%. Are you a single renter in Manhattan making $800K or something?
WCI almost all of us are paying in that range, who make income in that range. Its only you who pays less as you can put more money away due to your individual 401k. But you are working two jobs too.
That’s because it takes two jobs for me to get into that income range. 🙂
Not that paying little tax is the goal, but taxable income of about 320K would be about 80k in taxes, if married. It would be much easier if you are self employed, but can be done others also.
Spitballing it, even a married physician with NO deductions at all will only pay 108K in taxes, or just over 25%.
I think your confusing tax bracket and taxes paid.
A married physician with no kids making 400K and taking the standard deduction and maxing his 401K (17K) would only have a tax liability of $98,000 (just under 25%). So basically anyone else would have less. 20% total (federal) is not unreasonable.
jpn-
I am not a physician but I have dated a couple; and befriended more :). anyway, i would not pick at the tax numbers too much. But I will mention a couple things, if you are still at the 36% bracket (i.e. effective rate) then you are not planning your tax dollars properly. For one, the 403b is not the only way to “hide” taxable income. A mortgage is another big one (first and even more so, a second home). I assume Docs still pay for health insurance. High deductible insurance is the way to go for healthy people. daycare costs, and then there are some other tricks. if you are sucked into AMT you may have a tougher time but it would be to your advantage to seek out more tax advantages. get a CPA or spend time reading and using Turbo Tax. I am mid six figures and regularly stay at 13%. One trick that helps with hiding money is decreasing your withholding first. increase those W4 exemptions and sock away more money. Good luck. Remember the more money you have the more options you have. or to say it in a more pessimistic way, if high six figures was an issue with paying too much in taxes the tax code would have been fixed a long time ago. Tax Lobbyists and CPA Execs usually make a lot more money than you guys. do the homework. one other trick – home office expense. new laws in 2013 are much more user friendly for people who find taxes daunting. a huge tax savings. and dont you guys have to pay for those white coats yourself? deduct if you itemize, everything! If I made 400k, I KNOW I would pay practically nothing in taxes relative to my income but I have a tax degree so. So many options with money, a second home in Vail I would “rent” out. can knock of 10% in taxes EASILY without trying. One last comment. 403b? eww. work somewhere else. that is probably much of the problem. IMHO. and yeah frugal people set their thermostats that way; tough on a female in the winter but you may like it in the summer. ok I am done now, for realz.
Hypothetical question: let’s say 5 years from now, Medicare decides they want to pay us 75% of what they pay now. Assuming all else stays equal, meaning you decide not to work any extra shifts or do anything else to maintain the old income, would you be able to proportionally reduce your lifestyle spending to maintain relative frugality?
I think it would be very difficult to do this. I save about 50% of my gross income so that in the event I do get hit with a huge pay cut, I can still save a large amount and not have to dial back any of my discretionary spending.
Well, keep in mind that Medicare is less than 20% of my patients. So 75% of 20% is only a 5% pay cut. Very doable. At any rate, by living like a resident for 4 years after residency, and then growing slowly into my income (and thus far increasing my income each year) I’m at the point where I don’t actually have to save any more money for retirement if I’m willing to work until standard retirement age. So I could reduce my retirement savings too rather than decrease lifestyle spending and just work longer. More details here:
https://www.whitecoatinvestor.com/the-concept-of-being-done-saving/
I mean, you don’t have to save 50% of your gross income for very many years before your retirement savings is pretty much done.
Frugality is always a relative concept and defined exclusively by the individual such that every doctor I know claims that he or she is frugal and most are not. We all can claim to forego an expensive item (like a late-model luxury German car, in the case of the WCI) and rationalize the purchase of another expensive item (like a new mountain bike, for the WCI or $150+ running shoes, for yours truly).
Rather than parsing what defines frugality, how we spend money, it might be better to revisit the concept of the prodigious accumulator of wealth, popularized by Stanley in his iconic Millionaire Next Door series. It is how efficiently we convert our income to wealth that is important, not whether I blow $175 on a new pair of Hokas or the next guy $60k on a BMW 550.
The drier lint gets reused as kindling in your wood stove or fireplace, etc. This is a good time to note that drier lint is incredibly flammable and a major source of residential fires when not cleaned out regularly, so clean it out of the trap and put it next to your fireplace, then go tooling around the neighborhood in your Maserati knowing your house won’t burn down while you’re out.
Thanks! I did not know that.
Can I use drier lint to fuel my Prius? 😀
Perhaps if one is considering gross income, before $50k+ knocked off for a retirement plan contribution and then also ignoring the employer’s side of payroll tax (which the doc also pays if he/she is in a private group), and if the docs has large deductions (mortgage intetest, charitable contributions, etc.), one can get to $80k.
All right, you guys are killing me on this tax thing. Take a gross income of $400K. Contribute $50K to tax-deferred retirement accounts and HSAs (could be more, could be less obviously.) Assume another $50K in deductions, exemptions etc. That leaves you a taxable income of $300K. If you’re married,
First $18K at 10% = $1800
Next $57K at 15% = $8550
Next $76K at 25% = $19,000
Next $80K at 28% = $22,400
Last $70K at 33% = $23,100
Total = $74850.
Let’s assume 5% on state taxes on that $300K, or another $15K. Let’s pretend you’re an employee. So SS tax is $7316 and Medicare tax is $7150. I got to $105,000, or 26%. How are you guys getting to 36%? You’re either single, not putting anything into tax deferred accounts (some employees get hosed that way), making a lot more than $400K, living in New York or California, or have no deductions (mortgage interest, charity, kids, etc.)
WCI,
I also am unfortunate enough to fall into the >30% effective rate with a combined income slightly less than yours (on paper). My spouse’s income is essentially equal to mine, and we are both employees. Factors that bring up the effective rate include extra Medicare and payroll taxes for 2 employees, no kids yet, no house, only one 401k since the employer requires a certain duration of employment before contribution, and no other tax-advantaged space. We don’t live in the greatest state on earth either. 😉
What this ultimately means is that we either find greener tax pastures or bite the bullet and stay Mustachian a little longer while we build up the nest egg.
For sure the two working spouses thing is painful-many docs face a marriage penalty, and if nothing else, the payroll taxes get you. The one 401(k) thing sucks too. I’m sorry.
I’ll second that comment. It’s certainly a good problem to have, but we are a dual physician household, each employed and making approx. 800K total each year. Very few places to squirrel away funds: we’re both maxing 401k, backdoor Roths, and funding a 529 plan. We have about 200K in loans but at a fixed rate <2%. Many deductions get phased out at this income level, so our taxes become very simple. I'm estimating we will pay out close to 30% in federal alone this year, plus an avg state income tax, extra Medicare tax, SSN, etc.
Like I said, it's hard to whine about a great income, despite how aggravating it is to fork over more than a quarter million in taxes every year. Hopefully an early retirement, and/or switching to part-time in our 50s will be in the cards. Thanks again, WCI, for all that you do.
dual physician couple, W2 employee, renting (so no itemized deductions); did my taxes yesterday and my overall tax rate is 32%. Sucks.
At least your state taxes should be itemized deductions. Nothing to charity? Medical expenses or unreimbursed employee expenses above the caps?
WCI, no state taxes, not enough medical expenses (and that’s a good thing!) or unreimbursed employee expenses above cap. Charity would have to be over $20k to even swing the needle.
Ugly tax situation to be sure. Looks like your values are different from those of Congress! At least you’re in an income-tax free state. That’s $20K for me this year, despite all my deductions and 529s.
State tax deduction helps some. Medical expenses won’t apply, and hard to have enough unreimbursed employee expenses when employed to clear the cap. We do charity, but as noted by Gasman, it’s more for our own satisfaction–doesn’t move the tax needle by much.
Wish there were more ways we could put away money in a tax-advantaged acct, rather than a taxable acct. Maybe I need a second business on the side 🙂
I highly recommend that second business- more write-offs, more income, more retirement accounts. Only downside is less time….
Simple, but expensive. There’s not much you can do at your income other than lobby your Congressmen! When half your income is at 39.6% (+ medicare, + state, + extra medicare) you’re just not going to be able to get down to 20%. But there’s a big difference between $800K and the $400K example, much less the $200K average doc.
This person may have to pay AMT, also negating many of the deductions…
It would be a very advantageous situation for an employee to contribute 50k into retirement, and improbable. An employee in the example should only be able to contribute 18k (the match is what accounts for the balance, and would be from the employer, and not tax-deductible for employee). It would also be unusual for the employer to be that (32k) generous.
This is definitely a situation where it is better to be self-employed (independent contractor), or business owner (solo or partner) – then one would be matching their own contributions. Not only one could find more things to deduct, but also to decrease taxable income by increasing retirement plan contributions.
My one suggestion to those who are maxing out their 401k is to look into if after-tax contributions are allowed (I believe you cannot exceed the total 50k, but if employer doesn’t do the entire match, then you could do some yourself – if the plan is set up that way). It is not every plan that allows it. Also it does nothing for current taxes – only for future taxes at withdrawal.
Your plan gets even better if you can turn it into a Mega Backdoor Roth.
At any rate, while I agree that the retirement plan situation is in general better for self-employed, I disagree that $50K for an employee is improbable. There are many employees whose retirement accounts are set up to hit $53K. Even in an academic center there is often a 403b+457b+401a that gets you into the same neighborhood. Some docs are stuck with just $18K, and that’s unfortunate, but it certainly isn’t the norm. Also, be sure you look into whatever your spouse is offered. It doesn’t make sense for one spouse to be investing in a taxable account where the other isn’t even maxing out a 401(k). It’s all fungible.
yeah, I’m making my better half to megabackdoor this year, and his spending allowance has been much reduced (no more apple products, new bikes, or new cars). at least we are lucky that he has this option. at the same time I would gladly take even the 18k w/ 3% employer match in 401k rather than the only thing available to me the SIMPLE 12.5k w/ 3% match. I’ve not worked in an academic setting or been a hospital employed physician after residency – last time I had 401k/403b available to me, I didn’t have resources to contribute beyond 6k or so – so I did not know those plans could match that high for an employee…
I agree with WCI, you have to spend money where it makes you the happiest. We get caught up in the the “scarcity mentality”, where were constantly comparing our lives to others and feeling like life is always lacking something. So we buy to compensate.
Our biggest struggle right now is getting out of debt. We dug ourselves a hole about 600k deep, but were on track to be completely debt free at the end of the year including house, student loans and business loan. It’s so hard to see the money were making and watching it go directly to the bank to pay down debt, while we watch our friends enjoy life…. but we trust the system we created to get to our goal.
We hope to soon get to WCI status and splurge a little on things that matter to us, as well as giving more to those we care about.
early congrats on getting out of that massive debt – you are doing the right thing!
Thanks! We need all the encouragement we can get. It’s a lonely path that we find very few md friends taking. We have converted some along the way though.
That’s really impressive. What did you guys do and how long did it take you?
If I had to sum up our strategy:
1) Get a job that pays you the most for your skills. This may mean going solo as it did for us.
2) Live like a resident, maybe even a college student
3) Listen to dave ramsey podcasts to keep you motivated
4) Make keeping a budget as a habit. You won’t get it perfect, and that’s okay. Jut get in the habit of having one, eventually you’ll see where all your money is going and start to cut back!
5) Finish it as quick as possible. As dave says, “scorched earth”. You don’t want to drag it out or you’ll run out of steam. It’s difficult seeing your friends spend like crazy.
This will be our 3rd year. We fiddled around with paying down some debt before that, but weren’t serious enough to make much headway.
Oh yeah, 6) Read WCI and sign up for newsletters 😉
Love this. My wife says I listen to Dave to much, but it keeps me motivated. He is right that common sense is not common, even for me sometimes!
One thing I will say about MMM. He’s never avoided getting in peoples face regarding the “save the planet” problems that he believes we must all deal with at some point. In fact, I think that as he relentlessly points out all the ridiculous ways that modern man goes about his business, that his underlying motive is all about fear for our collective future on this planet. Does he go to far? Perhaps. He has certainly made me rethink the way I live…
Me too. I’ve got another post coming up on him soon (June I think.)
Looking forward to this post. MMM and WCI are the only 2 blogs that I regularly read. My wife rolls her eyes every time I forward her a post.
There is a good synergy between both for docs that are looking at being financially independent. There is the MMM message about the need to cease comparing yourself to all the other upper middle class earner’s spending habits, and how cutting long term spending is a really a double return on investment. WCI has the education and specific advice to the unique physician situation financial situation. I regularly refer docs to both blogs. FWIW, I don’t think a MMM philosophy would object to your splurge spending if it brought you TRUE happiness (which it seems to), and you weren’t paying for it by working at a job you didn’t like (trading life happiness)for it. Although MMM cashed in his chips after 10 yrs of work to be ‘early retired’, financial independence really can be about making work optional, and allowing you to pursue career paths that are more personally rewarding–even if they aren’t the most cash lucrative. I think a lot of driven physicians couldn’t imagine ‘doing nothing’ after working only 10 years post residency, or would crack up if they tried.
I submitted him a guest post a long time ago about how docs could do the MMM thing too. He liked it but never published it. Maybe I’ll run it on this site sometime. The one coming up is a bit more anti-MMM than that one. But it’s hard to be too anti, since I agree with the vast majority of what he’s preaching.
I also like that he doesn’t apologize for the way he is. He says “this is who I am, I’m happy with myself so there.” With a few choice words in for show. I don’t like it when people start to change who they are because it’s not what’s popular, or PC. I was worried that WCI would change his style after that post about the bad review on amazon. I’m glad he is sticking to what he knows best, and letting others contribute on what they know best.
I also couldn’t believe MMM spent $75 on gas all last year… that’s a couple weeks for me.
I was spending more than that on a single tank a year ago.
“how you can set your thermostat at 86 in the winter and 62 in the summer by using fans and sweaters,”
Typo? Or do I need to learn something?
Setting your thermostat at 86 in the winter and 62 in the summer would be quite expensive.
Plus you’d have to really keep that fan going all winter.
Napoleandynamite-
You have that backwards, dude. Read the article again. It is quite dooable and the frugal way to go.
You are late to the party, Steven. The power of editing…
lol, Gee thanks Joseph. after I figured that out I was hoping someone wasn’t going to call out my deductive reasoning skillz. 😀 yep. i realized after I hit send. where is the power of deleting my own comments. not that i am complaining about the the website, just sayin’
The ability to edit is one reason I keep most of the controversial and personal stuff I publish right here on my own website where I can modify/delete it as needed in the future.
This post really hits home for us as we basically have the same philosophy. I graduated about 8 years ago with 500k in student loans then bought a practice 5 years ago for about 700k. Just finished paying everything off last year (writing that last check didn’t feel as good as I thought it would) and we are finally starting to enjoy some of our money on travel (after putting 30-40% for retirement of course). Still drive a beater but I do not reuse my dryer sheets. I have been reading MMM’s blog and and as much as I respect his philosophy, I can’t live on 25k a year for the next 50 years.
For us, it is a balance approach to saving and spending that makes us content and happy. So, having said that, thanks for this post WCI! It really re-affirms what we believe in as well 🙂
Wow, such a great accomplishment! We keep hitting milestones in our debt payoff, and I agree with you, it doesn’t feel as good as you think. It just happens, and not much really changes afterwards. Owning and running a solo practice, you do see a lot of cash flowing… nice to imagine it eventually flowing in our direction someday!
Hey Justin, thanks for the kind words – looks like you are doing awesome yourself! We lived very frugally while paying back the debt and to be perfectly honest, it wasn’t the best feeling in the world. it actually felt pretty crappy for us. It was really difficult seeing the extra saved money just disappearing into a hole that was our debt. I am in my late 30s and we are just starting to enjoy the fruits of our labor. Having said this, keep up the good work yourself – it will be worth it (at least, that’s what I keep telling myself).
For me, running a solo practice is tough – especially managing the staff. The currency that flows in has to pay all the bills first, taxed, then whatever is left over is ours. Taxes really hurt. 🙂
I hear ya. The best advice we ever got was to spend a tremendous amount of time upfront in finding the right person. Investing in time upfront, helps tremendously in finding the right people so we don’t have to manage as much on the back end. That also meant having to train people from the ground up. We tended to hire on attitude and trainability, less on previous experience. Were also in a rural area so finding Ophthalmology trained staff wasn’t going to fly anyways!
we are the same – rural area and hire on attitude and training potential! 🙂
We were expanding for a couple years, but cash flowing the expansion. Sadly, it’s not all deductible the year you pay it so for years I looked at my tax return and asked where all this money was as I never saw it. This year was the first time it was the reverse, was able to bring home more than what the tax return showed due to at the depreciation schedules. Finally was able to FEEL like it was worth it, instead of just see numbers telling me it made sense.
The line between saving and spending on things that may make you happy is sometimes a very tough one to find. Especially if you are used to being very frugal or a spend thrift.
I often contemplate if maybe selling my current house and moving into something smaller is a good idea. Maybe selling the paid for in cash German car and getting a beater is best. Maybe work harder and help pay down the house and school loans quicker.
On the other hand. I’m already saving $100K+ a year and paying extra into my 3% school loans. Why not spend the extra money and live in the nicer house, have the nicer car and take that nicer vacation?
But where is that line. At what point am I just wasting money prohibiting me to retire or semiretire early. By making just a few changes in my life would allow me to semi retire in just 2 years instead of 7-9 years.(longer if we hit our next bear market during that time.) This really makes me want to just spend less and buy myself my freedom.
I can continue like this for hours. Realistically any physician if played their cards right can retire within 10-15 years of work. It all depends what is important to you. Is it that nicer home and new car or boat vs spending more time at home with your family and friends.
Yes, and when you have these options and are making a rational choice, I think that’s when you’ve won the game. I wish more doctors were dealing with this dilemma.
Your thermostat quip makes no sense…perhaps you meant to write it the other way?
Ugh, you finally linked over to MMM. I love your website because you keep it clean. I can’t get though a couple sentences of any of his articles. The language is too coarse and just totally unappealing.
However, this post is exactly what we find to be at the core of “living the good life”. At some point, you have to choose to live. Finding the correct work-life balance is by far the most difficult concept for me to master. I’m sure that I am not alone.
Yea, totally blew the thermostate bit.
WCI mentioned that he was frugal most of his life. Which means that man put in his dues. Some of us didn’t, we spent like ballers. For myself, I was in the latter group so it’s important to me at least to start back clean. I’m 6 years out of residency and have moved to a cheaper state, have gone car-less, I cook all my own meals and rarely eat out. There is a happiness here that I never experienced before, I would call it stability or the feeling of being financially secure. Once you have that you never want to let it go. Perhaps when I reach certain financial milestones such as paying off my student loans, developing solid savings in my investment accounts and being more comfortable with frugality then I will slowly add the things that bring me more materialistic/tangible happiness. Great post as always.
Great Post!
This philosophy is what will allow my wife and I to be able to retire at age 40 on salaries far less than physicians (physical therapist and math geek) without ever experiencing perceived sacrifice.
At times peers will poke fun of us b/c we drive older cars, don’t have cable TV and finally traded in our flip phones only b/c we switched over to smart phones using combo of wi-fi and an Airvoice wireless plan costing $10/month which actually saved us money on the old phones.
However, the trade-offs are well worth it. We regularly log 20+ ski days/year, have traveled the world and even attended big ticket items like the Super Bowl (twice actually). It is truly amazing how much waste is in the average American’s spending by simply being unaware. While you can’t have everything, there is certainly enough money to have everything you truly want if you think about what that is and pursue it, especially for a reader in this audience.
Amen. I like to say you can have anything you want, just not everything you want.
I am pretty frugal on an absolute scale but I have always been relatively frugal. Why I am more frugal than most is because most of the things I enjoy really don’t cost that much. One exception is my desire to live in Fl. rather than where I currently live. That will cost in a more expensive house, and higher living costs. Sunshine and salt water swimming are not free, no matter what they said in my youth.
are you kidding? Stay away from major metro centers (Miami, Tampa, Orlando) and you’ll find excellent cost of living without state taxes. we live on the “space coast” and pay no state/local income tax, 1.25% property taxes, 6.5% sales tax and have excellent schools, roads, parks, beaches, and public services! Plenty of areas like this in FL
Shop for all goods and supplies you need in your office
One of my frugality pleasures was learning to recharge copier cartridges for 8 bucks a pop plus a piece of duct tape and buying many dental supplies from non dental companies like paper and plastics
Always better off owning autos and get off the lease treadmill
Docs think they need to exhibit their wealth but the public resents it
Once had a photographer come to my home in a Benz- was not hired before I even saw him
We’ve always considered ourselves relatively frugal. Our total spend is approximately the median household income in our area, but as our income has grown, it now equates to less than 25% of our gross. If we think something will make us happy – truly genuinely happy – we spend. So in 2014 we found ourselves doing things like buying SCUBA certifications, extending a work trip to Australia, and impulse buying a vintage car on ebay. But balancing that is our aversion to spend on things that don’t bring us happiness that other people would consider “normal expenditures” for folks with our income like cable, a HOA, lots of mall shopping.
Malls still exist?
By HOA you mean homeowner association? If so, pretty wise of you to include that in your list of fruitless expenses.
Not all HOAs are worthless. My neighborhood has a $36/month HOA, and much of that fee goes toward the numerous parks (too numerous to count–3 within 2 blocks of our house as reference) and community pools. There are 6 outdoor pools last I checked, very well attended in summer months.
I think there are good ones too, but they are about as common as good finanial advisors. When we were looking at buying homes, the HOA fee’s ranged from $50 to maintain one weed infested green space, to $160 a month for one pool and they did the from yard landscaping (the houses only had a 10ft setback from the road so it was a small front yard.) We settled in the middle and it’s been ok, but the HOA police get annoying. Currently fighting them on painting the house simply because it’s “time.”
In most states HOA’s actually don’t have nearly the rights they think they do. Still a bad HOA sucks.
My HOA is $55 bucks a month, wont’ kill me but higher than I would like. We have one community pool for about 200 homes but we are adding another 200 homes and a 2nd pool. Only one small park area but I am told there will be 1 large or 2 small in the other phase. I expect my HOA to go up to $60 and then probably drop a little in a few more years. We have lots of ponds so they are trying to create a reserve fund to maintain those down the road….
I am shocked when I see some of those home shows with HOA fees of 400-600 a MONTH. Usually includes lawn care but really I don’t mind doing my lawn if it saves me 500 a month…
Thanks for the great post. I’m an avid MMM reader in addition to WCI and definitely struggle with balancing frugality (ie the stuff from MMM) and enjoying some of the financial rewards of being a physician. Call me a pansy but riding my bike to work in the dead of winter just doesn’t seem that fun :). That being said, I totally relate with being “relatively frugal.” My wife and I are both physicians and a year out of training have paid off our student loans, have no debts except a small mortgage, put away 30+% of our gross salary as savings, and do frugal things like cut the cable cord/fix our own appliances/don’t buy new clothes too often/still get furniture from Craigslist etc. Yet, we aren’t afraid of spending money on things we enjoy like international travel, fine dining, and experiences like scuba diving or a helicopter ride. Overall, it feels pretty good to be disciplined about saving for the future/financial independence yet not worrying too much about spending a little bit here or there.
Hi WCI,
I have been reading your blog regularly for over a year now and love it! I liked this post, it reminds me to loosen up. I too often am drawn to the advice of MMM and others to be extremely frugal which I luckily don’t have to be.
Sorry I got my local library to buy your book:
http://encore.barriepubliclibrary.ca/iii/encore/search/C__Swhite%20coat%20investor__Orightresult__U;jsessionid=F0AAB98B2F17B40C71B578A9AE72376E?lang=eng
It was a great read though!
Keep up the good work.
Your library bought my book? I was told my book couldn’t be put in libraries due to how I went about publishing it. That makes me really excited actually.
I was surprised they bought it is well but I happened to bump into the CEO of our libraries and mentioned how please I was with the fact they purchased the book. He said that they are trying to be progressive in a new market place with purchasing books and media that people want rather than what they think they want. I guess the libraries have to evolve as well.
Actually 21 libraries worldwide have your book, including one in Auckland, New Zealand
Without a cited reference, this calls to mind that 78.4% of all statistics are made up….
I assume he has access to a database of some type.
Cool!
Good post. I was just having a conversation with my wife about this exact issue and about “loosening the purse strings”.
Nice to see that your book has made it into a library across the northern border. Do you find that you have a lot a Canadian followers?
Too bad we don’t have a canadian version of white coat investor up here, as some of the issues around taxes, retirement accounts, investing etc… are a bit different.
Hopefully, one of your canadian followers will be brave enough to start their own blog!
Keep up the great work!
Frugalcanuck
It’s only about 1% Canadian readership unfortunately.
Long time Canadian reader here. Took the plunge and bought the book. We certainly could use a WCI for the GWN.
I love the GWN!
https://www.youtube.com/watch?v=yZCI39NWZ5g
Speaking of spreading the word. I was telling one of my really stellar med students whose suffered under me for 3 years about you and the WCI book/website and she already knew about it! I was so proud 🙂 I was gonna buy her a copy, she just matched into a great IM program. She’s brilliant so I’m sure she’ll WCI her way through her loans and onto an amazing life/career.
speaking of frugality, have any of you tried to “cut the cord” and get rid of cable? I’m looking at the line item budget and trimming away, and the $137/mo cable internet seems ripe for the picking.
But then I called around and, lo and behold, the rate for internet alone is $78/mo (35Mbps). I was planning to add Netflix and SlingTV to this to round out my actual needs (kids TV shows from Netflix and ESPN from SlingTV). But that gets me to $106/mo, saving a measly 30 bucks a month.
I’m all about being frugal (relatively at least!), but the convenience of DVR and a bazillion other channels may be worth it at that slim savings rate.
Anyone have more success?
I have come to a similar conclusion. I keep calling comcast every 12 months for a better deal. Currently at 50Mbps and a cable package above the standard offer for around $125 tax included. Last time I had cable and satellite the cable alone was around $75-80 tax included. I thought about adding Netflix or the upcoming apple TV bundle but it would come out to around $100-110. Not much savings overall…
$30/month over 30 years invested at 5% real returns is equivalent to $25K. How many days do you need to work to get that cash after taxes? That is how much sooner you can retire by saving $30/month.
Every dollar counts. You cant make $1 million dollars without adding in $1 at a time to make that million.
not vulcan Alex–I appreciate your point that every single dollar counts. I used to think that way and hoard every dollar when I was a poor college and med student and resident, but I have since relaxed the reins a bit. To answer your question, it would take me approximately 60 days of work to make that cash after taxes.
Gasman,
Maybe the extra 60 days of work to pay for something you say you clearly don’t need is worth it for you. That is a personal decision on what makes you happy, and $30 a month can be the difference in making that decision. BTW, it is actually worth more than 60 days of work. Because if you are paying the extra $30/month now, you will also plan on retiring with it. That means you will need a retirement nest egg to support that extra $30/month. At a safe withdrawal rate of 4% you will need an extra $9000 nest egg at retirement to support the increased monthly expense. That adds up to having to work an extra 21.6 days or 80.6 days total.
It all adds up, $30 here, $20 there, another $20 somewhere else and before you know it, you find yourself wasting a few hundred to a few thousand a year. Maybe it is worth something to you, maybe it is not. Those are the little decisions of personal finance that make it all so personal.
I’m sure having CSPAN and the Oxygen network isn’t going to break the bank for you 🙂
well I never said I “clearly don’t need it”, but your point is taken–I think the only two channels I watched over the last couple of months from my selection of 150 were ESPN and Disney for the kids. But you are assuming I am keeping this $30 expense for the next thirty years when you make the calculations–everything sounds big when you stretch it out over a period of time. Of course, I also know everything adds up–you don’t want to see my daily Starbucks tab. Like you said, its the little personal finance decisions. I can still sleep at night with my ungodly Starbucks tab, and a temporary extra $20-30 month in expenses for live sports (until I figure out a better deal).
The nice thing about this blog is that most of the readers don’t have to be frugal to be successful, only relatively frugal. Most of us can blow not just $20 a month, but $200 or $2000 a month and still reach reasonable financial goals. We just have to learn not to blow $20,000 a month.
+1
brendan,
I was in your exact same situation. I canceled cable only to save $22 bucks a month with the addition of netflix. The way I look at it is this – yes, saving every dollar counts but depending on the local economy/factors outside my control, my practice’s yearly collection may go up or down 100k-150k. Taking that into account and the fact that I am putting 30-40% away for retirement every year, I have learned to loosen the purse strings and enjoy life a bit more.
For me it came down to squeezing every dime, stop watching so much TV and still have access to HD (over the air). In the end, it came down to learning to live without CNN and ESPN; but quite honestly, where there is a will, there is a way. So now I get everything I need (and more – free HD movies less than a year out; Walking Dead, current season- umm sometimes in 1080 HD). But if I take into account love for HD in every room I am saving a “mint”. But from a pure dollar value it is over 60 bucks. I think you have to squeeze out as much monthly payments as possible or it is just not worth it in my mind; but i am a recovering couch potato. or at least for like a year try to squeeze out more. you can. easily. for example all i have is-
My numbers are 56.99 (current year deal)
internet 50MB speed +
8.29 Netflix +
7.99 HuluPlus =
73.27
Which is a savings over 65 bucks/mo (800+/yr) from what I was paying with HD in two rooms on DirecTV. 20-30 bucks savings I may not have made the leap. Free HD on local networks was the key to switch for me. I hope you do have over-the-air; some Cities have better selection than others. some people are hooked on DVR, I guess, so similar in that regard maybe. I miss CNN and ESPN though (my wife, Bravo) but like I said where there is a will there is a way. And I work too damn much to watch half of my programs anyway. i would rather be doing than sitting unless it is for reading, good conversation or sleeping.
Hi,
This post helped me a lot to clarify the thoughts that i am having these days. This post was right on time for me.
Another similar comment from bogleheads that helped is:
“Enjoying your money a bit now instead of backing up all dollars for later is also a kind of diversification.”
Thanks.
I like that.