Never forget these two axioms:
Money frees us, but its pursuit may enslave us.
It’s not about how much you have at the end; it’s how much you could have made.
In our ongoing series of physician archetypes, I submit to you the guy/gal sadly we all know…and likely loathe…
Dr. Spend It All
“It’s not about how much you have at the end; it’s how much you could have made.”
An axiom I never forget.
The “Physician, Wealth Thyself” (henceforth PWT) Corollary to the above axiom is the following:
“It’s not how much you make, it’s how much you spend.” AKA RULE # 2
Another axiom I never forget.
Pro athletes who are fortunate enough to play for multiple years, particularly those who beat all the odds and play beyond their league’s average, still have a bankruptcy rate up to 80% five years after last paycheck as a professional athlete.
Think about this phenomenon for a second.
In the extreme worst cases, you have guys that made over $100 million that had to declare personal bankruptcy only a few short years after playing.
The pattern repeats itself often with lottery winners. That bankruptcy rate is nearly 70%!
How in the world does this happen?
RULE # 2 is how it happens.
“It’s not how much you make, it’s how much you spend.”
Win $20 million? Hey, now, I can spend $10,000 a day and never run out!
Uh…no.
You can’t even make it six years at that rate.
At the physician level, we probably all know people who live very well—beautiful home, great cars, private school for the kids, amazing vacations, second/vacation home (Ugh!), maybe even a boat, etc. We may wonder how they’re doing it. Maybe their practice is doing extremely well. Maybe they are an extremely shrewd investor. Maybe they have another revenue stream. Maybe they have “come from money.”
Lots of maybes, no definites.
Maybe…just maybe…
They’re massively in debt or living from paycheck to paycheck.
We associate that situation with poorer people and the uninformed. Well, I hate to break it to you, but that’s physicians to a large extent.
We are debt ridden from school loans as we start off in training and then unavoidably add to that debt burden with a house and cars (and hopefully nothing else).
As physicians, we are the very antithesis of the instant gratification society (i.e., the good ol’ US). We go to college/medical school for nearly a decade (or longer), then go into relatively lower salary years of training for three-nine years (or more if you’re a masochist), and only then start earning an income finally commensurate with the level of debt accrued.
This is not a path that you fall into, chance into, luck into, try for lack of anything better to do, or is one for the faint of heart. It’s hard—on purpose. There is a lot of stress, doubts, recriminations, sacrifices, and even guilt long the way.
So, inevitably, when you make it to the exalted status of being an attending, it’s natural to want to enjoy the finer things in life. You’ve worked extremely hard for likely decades, sacrificing many things along the way, and feel like it’s time to FINALLY enjoy yourself.
It especially holds true when everyone around you is seemingly buying BMW’s, Mercedes, and the like to drive, living in fabulous homes in the poshest neighborhoods, and are traveling in high style at a frequent rate.
I firmly believe Facebook, AKA everyone’s personal life highlight reel, has only worsened this situation. Now, you don’t even have to see people to know they went to Hawaii or bought teak furniture. They humble brag about it on social media. Hell, for some of these idiots, it’s half of the reason they did it anyway. And you’re now getting it shoved in your face constantly making it seem as if everyone around you is living the high life…except for seemingly…you and your family.
Add the above to the urge of finally tasting a little bit of the sweet life after decades of a spartan existence…and then you may have the perfect storm to spend unwisely.
As I often remind people, “the easiest way to appear rich is to be poor.”
In other words, finance everything, own nothing, be leveraged to the hilt, and be massively in debt.
Just make sure you smile and tell everyone how great your life is.because as we all know it’s stuff like Maseratis and Viking ranges that make life worth living.
Ultimately, no one knows anyone else’s debt structure unless you have seen their statements yourself. Everyone else who isn’t close family or true friend could just be a liar who is closer to bankruptcy than a net worth of ten million dollars (which is, by the way, the US Census Bureau definition of rich—the other criteria fulfilling this is making $1 million/year).
It’s OK to spend money and enjoy yourself. Do it. It’s the journey, not the destination.
Just two simple things to remember.
1.) Pay yourself/your family first. In other words, don’t let your spending (i.e., paying others) interfere with your investing (i.e., paying yourself/your family).
2.) Get value for the money you spend. WE ALL MAKE MISTAKES. But, once you realize you’ve made a mistake, don’t continue it out of pride (“I never make stupid mistakes…and admitting this would be just that”), self-rationalization (“Yeah, it looks like I’m wasting money, but you don’t get it…), or simply because of lack of analysis.
{RLE # 6: An acquaintance from training bought an overpriced lot in a great area of town to build a gorgeous home that is arguably too expensive and large for their small family. Surprise: That’s all fine in my opinion. The problem ensued after the house was built…and then renovated…twice…in seven years…and then completely refurnished…three times in less than a decade. That’s not value; that’s reno hell.}
Early in my career, I heard conversations all the time from nurses about being anxious for their next paycheck and couldn’t believe it. Now, I feel that I hear these conversations more and more often among physicians (though I still hear it even more often among nurses).
I can’t imagine how terrifying it must be to be living from paycheck to paycheck knowing that half of the next one is already spent and that much of your waking hours is wasted on plotting how to make more (rather than spending less) to meet your expenses. I’d have an ulcer and never be able to sleep at night.
I’ve never been that person and never will be.
Do the same.
You’ll be much happier in the long run.
I’d love to hear from any and all of you about your thoughts, so we can all learn from one another.
Talk to you soon.