Setting physician money goals is important, especially after completing training and receiving your first large paychecks.
Setting physician money goals is important, especially after completing training and receiving your first large paychecks.

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Is more really… more?

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5 ways to limit lifestyle creep

IN THE WEE HOURS OF THE MORNING, amid the beeping of IV poles and the clicking of computer keyboards on an overnight shift as a resident, I remember taking a moment to dream of better days to come. Everything about being an attending seemed so rosy from that perspective: being my own boss, setting my own hours, putting an end to 30-hour shifts, and of course, the increase in pay — four to five times what I was making as a resident. Oh sweet day when I would have everything I wanted

I didn’t know then, as I do now, about a famous French philosopher named Diderot, who similarly came into a large sum of money and wrote an essay about what happened when he did. When Diderot received his windfall, he thought he would treat himself and bought a very fine scarlet robe. But, as he put it on and looked in the mirror, it dawned on him how out of place the fine scarlet robe seemed in the rest of his humble surroundings with his straw chair and tired old paintings. Suddenly, he had the urge to upgrade his surroundings to match the luxury of his robe. His one upgrade turned into many, many upgrades and his windfall of money turned into a mountain of debt.

I am sure many of you have seen the Diderot Effect in action around you. Many, including this writer, have fallen prey to it. The effect is most dangerous to new attendings. A higher paycheck may lead one to upgrade to a nicer house, which lends itself to be filled with nice things. Of course, the garage then needs a car to match the opulence of the neighborhood, and the driver needs clothes that match the opulence of the car, and so on. So, how do we turn the tide around and get off the wave of uncontrolled lifestyle inflation?

1 Start with the end first

Sit down with your household team and decide what your major physician money goals are. Do you want to max out your retirement accounts every year? How much do youneed to contribute to college funds? Do you want to try to retire early? What percentage of your income do you want to save every month? Once you have the big goals hashed out, it will be easier to know how much you need to save to achieve them.

2 Keep a budget

Once you have set your larger goals, allot money toward those first. Then, account for all your fixed and necessary expenses. The money that is left is your spending money. It is easier to see this when you are tracking spending monthly as a household team. An accurate budget is a powerful tool to curb wasteful spending and encourage value-based decisions instead.

3 Make the difference between needs and wants really clear

When lifestyle starts to improve, the line between wants and needs starts to blur. Bring the focus back to distinguishing between the two every time you make a purchase. Is that new sweater a need or a want? Will it serve your long-term goals? Also, it is the things that we do every day that make the most impact on long-termgoals. Is that lunch out at a nice restaurant an occasional treat or a daily habit?

4 Watch online spending

Institute a 48-hour “wait and evaluate” period to curb impulse online spending. Put the item in your cart and make yourself wait. If you still want or need that item after 48 hours, buy it. Often, a frivolous purchase will be forgotten in this waiting period. As a plus, many companies start sending discount opportunities when they see items in carts that have not been purchased. If you decide to buy, go ahead and take that frugal win!

5 Track your progress

Just as it is important to track spending, it is also important to track your progress. Seeing net worth growing or debt going down is a powerful motivator to make good money decisions.

When I was a resident in my call room all those years ago, I would never have dreamed that being mindful about my spending would be even more important as an attending than it was when I was a resident. A physician’s salary is a powerful tool. Use it mindfully, and it will be a blessing, not a curse. •

DISHA SPATH, M.D., writes about personal finance, money-saving hacks, and investing to help doctors and other high-income professionals get out of debt and design their ideal life at The Frugal Physician. She is a podcaster and ambassador for The White Coat Investor.

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Disha Spath, M.D.

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