Do Doctors Save Too Much Money? How to Get Comfortable With Spending
- 11 hours ago
- 8 min read
This article is going to flip the script on a discussion we often have in our online social media communities for doctors - the question of how much of the money that you earn that you should be saving. Occasionally, we see physicians grappling with the other side of that equation - getting comfortable with spending their money or never feeling like they have enough money saved even though they have way more than enough to live the lives that they want. There’s very little that gets Physician Community more abuzz than the 45 year old physician with 8 million dollars in investments asking if they are on track financially! While this may seem like a first world problem (which it is), it’s an important one to explore, as equally important that you enjoy the life you’ve worked so hard to build. Below, we’ll talk about growing past the medical student and resident mentality and how to get comfortable with spending your money and the occasional splurge, and why it could be the best investment into career longevity that you could make.
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How much of your paycheck do you need to save to be financially responsible and set yourself up for a solid financial future / retirement?
In case you haven’t seen the general rules of thumb out there, we are going to start with what you should be doing to be financially responsible. We’ve all seen the physicians who make high 6 figure salaries but still seem to be living paycheck to paycheck. We do think you should avoid being that physician because tomorrow is never guaranteed, and you don’t want to find yourself regretting the financial decisions you made earlier in your career and not being able to retire well or afford to provide for your family in the way that you’d like.
So, general rule of thumb for physicians is to save about 20% of what you earn in post tax dollars. For a more nuanced discussion of this by stage of practice and life situation, read this article on how much of your paycheck should you be saving.
Do doctors save too much money, or focus too much on saving, at the risk of not enjoying the journey?
While we could all name off doctors who don’t save enough money, we could all probably also name off physicians that never break free of the scarcity mentality that they develop in medical school and residency (which we get! It’s hard!). These are the doctors who are saving huge percentages of their paychecks, despite maxing out their retirement savings and tax advantaged accounts, contributing to their children’s educational funds, investing in the market, having paid off mortgages, and more.
It’s one thing if you’re saving a lot of your paycheck because you just make much more than what you need to be happy, but it’s another if your desire to save money prevents you from doing things that actively make you happy, such as:
Taking vacations because of the opportunity cost of not earning revenue then
Taking vacations because they cost too much
Staying at the same hotel chain you stayed at for medical school interviews even though you can afford (and want) a nicer hotel
Driving an older (and potentially more unsafe) car even though a new car might make you very happy
Living in a house that your family has outgrown simply because you don’t want to spend more money on housing
Getting the tasting menu at the restaurant you’ve been dying to try because you can’t stomach the price (which you can actually comfortably afford)
Continuing to clean your bathrooms yourself even though you hate it because you don’t want to spend money on a cleaning service
Are you saying all physicians should live a life of luxury to prevent burnout?
Not at all. These are just examples of situations we’ve seen in our discussions with physicians struggling to spend more of their money. The point here is not that all physicians should be spending money on these things, but rather that if something makes you happy or gives you a life memory, AND if you can afford it, you should not be refraining from doing it simply to save money. By all means, do NOT spend money on things that don’t bring you happiness or convenience or save you stress. It doesn’t make sense to buy a luxury car if you it doesn’t bring you happiness.
What we ARE saying is that you’ve worked hard, and you should enjoy the fruits of your labor. We as physicians know better than most that tomorrow is never guaranteed. You’ve already sacrificed a lot of your 20s and 30s while your classmates from college were having fun in a library or a call room, so when you can afford to have experiences or conveniences, don’t feel guilty about having them.
Die with Zero is a great book that delves into this mindset if you need this driven home more. While many of you may want to leave money for your children, for most doctors, it is possible to do that while still living very enjoyable lives.
How do I get comfortable with spending money when it’s not in my nature?
Map out your financial future so that you’re comfortable with where it’s heading, and figure out your coast FIRE number
Many physicians make the mistake of feeling that they just need more, without mapping out where their savings will lead. If you’re 40 years old with 3 million dollars already in your investment account, with historical returns, you will likely retire at 65 with an 8 figure net worth - even if you don’t deposit any more money into savings.
We recommend actually figuring out what your ‘coast FIRE’ number is - this will tell you how much money you need to have saved after which you no longer need to save any more money to have the retirement that you want. Here’s how to calculate your coast FIRE number.
Most physicians who have been huge savers for a decade or two are shocked to realize that they could literally spend all the money that they make and still retire very comfortably. This often gives people the ‘permission’ that they need to start letting loose.
Even if you haven’t hit your coast FIRE number yet, if you can map a pathway to getting to it with reasonable savings every year, it will likely allow you to start spending more comfortably.
Set guidelines that determine whether a splurge is worth it, and put the purchase in perspective
It’s also very helpful to objectively develop a set of guidelines that determine whether a splurge is worth it based on your life goals and things that make you and your family happy. Ideally you make these rules this outside of the context of a particular purchase, so that they’re truly objective measures that you can weigh individual decisions against. That way, when a big purchase presents itself, you can run the checklist and feel confident in your decision, whether it’s a yes or no. Some questions we suggest putting on that checklist are:
Can I afford this without it getting in the way of my financial goals and my desired pathway to financial independence?
When I look back on this 10 years from now, am I going to be so happy I spent the money on this thing or experience, or am I going to regret it?
Does this purchase, donation, or other expense make me feel like my hard work is worth it?
Is being able to afford things like this part of the reason I work as hard as I do?
[For outsourcing or convenience type expenses]: Would this expense make something in my life easier, and contribute to my career longevity?
If I die with [x amount] more in my bank account, will it make a difference to my heirs, or would they treasure that money as much as I would treasure this item or experience?
This framework will help you put most purchasing decisions into context. We are big believers that starting your day with a cup of coffee from that nice coffee machine, or ending your day under that plush blanket (see our discount through our affiliate partnership link with CozyEarth for our community favorite blankets!) is worth so much more in terms of happiness and burnout protection than the dollar amount you spend on it.
What if I'm still stuck and worried about if I can spend more money while still hitting my long term financial goals? What about saving for a rainy day?
Chances are, if you are asking this question, you're somebody that's probably already saved for a rainy day and have a healthy emergency fund to cover most financial situations. That said, if you're still worried about it after going through the steps above, you may not have fully mapped out your financial plan. This is where it may be helpful to either talk to a financial advisor and/or create a more fully developed financial plan that includes not just looking at if you're on track for retirement, but also things like asset protection, estate planning, saving for college, and more.
PSG Resources:
Learn more about emergency funds and where to keep the money.
Personal Finance courses for doctors: This PSG affiliate partner offers CME for some of their courses as well!
Conclusion
We get it! It’s hard to spend money freely after being in scarcity mindset for so long after training. But you have to remember that you deserve to enjoy the fruits of your labor, particularly if the purchase doesn’t get in the way of your financial stability and plans. You can’t take the money with you when you pass away, so it’s important not to deprive yourself of a life full of memories and experiences if you can afford it.
Additional financial and FIRE (financial independence, retire early) resources for physicians
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