A common mistake that many new physicians make when their earnings increase is, instead of increasing their savings by the amount of increase, or at least a proportionate amount, they add their pay increase to their lifestyle. Typically, people who don’t have a “purpose” for the next dollars they earn will likely give into the cultural tendency towards “more is better” with the expectation that it will make them happier to make relative improvements to their lifestyle. The reality is that the happiness of consumption is fleeting and does little to improve a person’s sense of overall well-being. Designing a good life for young physicians is sometimes more difficult because money and the pursuit of more often gets in the way.
A good-life narrative is not built from having more money; rather, it’s from knowing how much money is needed to produce the situations that result in a good life. That requires having clarity in your beliefs and values, but more importantly, it needs to be placed in a context that clearly addresses the question, “but for the sake of what?” What is it that you believe, value and care for – these are the primary elements at the heart of a good life that differentiate it from a philosophy of “more.” If you don’t understand what it is you’re after, you can’t put any kind of math to the plan. For a good life today, money can produce certain situations. But a good life today isn’t enough as you need to be able to develop a strategy for living a good life for the rest of your life.
A Good Life Reality Check
After years of endless study and enduring 15-hour shifts, the transition from intern to full-time MD seemed like a blur to newly-minted obstetrician, Dr. Kyle Wilson, whose income more than tripled to $225,000 almost overnight. After relocating to Orlando, Florida to join a private practice, Dr. Wilson immediately engaged one of the top realtors in the area to find him a house to buy. He had saved up $30,000 for a down payment and he set his parameters based on what he thought he could comfortably afford – a $300,000 mortgage with monthly payments of $2,000.
The realtor, who typically works with affluent home buyers in the million dollar market, convinced the young doctor to go upscale because it would be a better investment. He would “live among other professionals and enjoy the country club lifestyle that he richly deserves.” He rationalized the bigger mortgage and $4,500 monthly payment with his expectation of higher earnings in the near future. With 25 percent of his income going towards housing, Dr. Wilson had little available for savings.
While his income did increase over the years, so did his lifestyle, and so did his tax bite. Now at the age of 47, with a family of 4, he is still contributing far less than 5 percent of his income to his retirement plan. Realizing that he will have to continue working until at least until age 65, and that he will need to contribute at least 30 percent of his income towards retirement going forward, Dr. Wilson is forced to make some difficult lifestyle choices.
Designing a good life for young physicians requires constant reality checks, before you become too enslaved to debt or lifestyle. It is, therefore, important to envision your professional life cycle in stages, and plan for each one. By planning around your professional life cycle, you can avoid the issues and pitfalls faced by those who simply react to the evolving circumstances.