The Money Mustache Community
Around the Internet => Antimustachian Wall of Shame and Comedy => Topic started by: PhysicianOnFIRE on January 18, 2016, 08:38:12 PM
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Wow. http://www.fiercepracticemanagement.com/story/most-docs-cant-afford-save-retirement/2015-12-03 (http://www.fiercepracticemanagement.com/story/most-docs-cant-afford-save-retirement/2015-12-03)
According to the article, half of physicians have a savings rate of 9%. When you don't even start collecting a doctor's salary until you are in your 30's, you're looking at retiring never with that high spending / low saving mentality. I see it all the time though, unfortunately.
I am proud to say I am at the other end of the spectrum, with a gross savings rate > 50%, net savings >75%.
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Think of the medical training as a virtual pile of money sitting there next to the actual pile, and it seems a little more intuitive.
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Millionaire Next Door talked about how doctors are generally really poor accumulators of wealth..
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It's true, doctors are notoriously clueless about money:
http://www.nytimes.com/2011/08/27/your-money/investment-advice-for-doctors-first-do-no-harm.html
Observing my partner's colleagues, I've noticed there tends to be little financial middle ground; they're either really good with money or spectacularly bad with it. And there are a lot of financial advisers, insurance salespeople and real estate agents who profit neatly from their guilelessness.
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It's true, doctors are notoriously clueless about money:
http://www.nytimes.com/2011/08/27/your-money/investment-advice-for-doctors-first-do-no-harm.html
Observing my partner's colleagues, I've noticed there tends to be little financial middle ground; they're either really good with money or spectacularly bad with it. And there are a lot of financial advisers, insurance salespeople and real estate agents who profit neatly from their guilelessness.
Another good article. Even the AMA sponsored advisor sounds FOS.
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Great quote from the NYT article: “There is a high barrier to entry in the medical field and a low failure rate,” he said. “All they have to do is systematically put 20 percent or more of what they make in nice, dull investments, and they’re set for life. Why kill themselves to hit grand slams when they’ve already won the game?”
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Some of the language in the article is confusing:
As a result, nearly half of physicians (48 percent) in the analysis of 13,330 physician workplace savings plans are saving less than Fidelity's recommended 15 percent of their income for retirement, with an average savings rate around 9 percent.
... Despite earning an average of $300,000 per year...
If you earn $300k per year, you can't put even 15% in your "workplace savings plan", assuming they follow the same rules as 401k's. That'd be $45k a year. $18k is only 6% of a $300k income, and would max out a 401k.
48 percent are not maxing out their contributions to a qualified workplace plan
Curious that this matches the percentage not hitting 15% exactly. Not sure what this means.
What's more, the report found that 71 percent of physicians are not contributing to non-qualified plans, such as a 457(b), outside of work
I suppose this includes IRA's and HSA's? Hard to believe but maybe.
Overall, 45 percent of physicians participating in the study said they cannot afford to max out their employer's retirement plan.
Just ridiculous if true. They should look at my journal. :D
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I think this is how it works:
1. Take on huge loan for medical school, maybe also for undergrad too.
2. Loan to buy into a practice or start one.
3. Need a big house coz that's what MD/DO slums in.
4. Spouse be flashy, gotta pay for that bling somehow.
5. Private schools for kids. Only the best for your offspring.
6. Cars... gotta have a luxury SUV, a sedan, maybe a truck if you have watercraft, then other toys.
7. Getting sold shitty investment products (annuities, loaded investment funds, etc.)
8. Paying a ton for malpractice insurance (at least in FL)
9. Ain't got time to read White Coat Investor since you've to do hospital calls before and after practice hours, and on weekends. If weekends are on rotation, you go to a CME event and get peddled more financial investment crap.
10. There's more but I can't remember right now... but it includes "Uncle Sam is a bastard who keeps on robbing me" or "IRS is the devil"
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Years ago when we lived Florida, we fell in with a group of new doctors ( we were near the same ages and after college and a four year enlistment starting our careers) Every one was buying a large house while paying student loans because the spouses assets were protected from malpractice suit. It was a way to protect net worth. All the fancy "Doctor" cars belonged to the spouse or were leased And any spouses and or children had 529's with as large a balance as could be managed. It wasn't bad with money in that group, it was just protection.
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I'm a tech in medical care and work with lots of doctors. It is very expensive up front costs to go through school, but the pay is pretty damn high once out. I work with some reasonable doctors who are like the average joe who save money and live within their means. On the other hand, I work with some doctors who have the big expensive house, go on several big expensive trips per year, own the porsche and the big SUV, private school for the kids, etc.
I think this kind of mentality gets started early in their medical career. I see residents who are freshly minted doctors, not getting paid much, but already getting expensive cars, going out to big expensive meals several times a week. It is keeping up with the Dr. Joneses. They see other residents and attendings doing the same and feel like that is the right of passage for a doctor.
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I think this is how it works:
1. Take on huge loan for medical school, maybe also for undergrad too.
2. Loan to buy into a practice or start one.
3. Need a big house coz that's what MD/DO slums in.
4. Spouse be flashy, gotta pay for that bling somehow.
5. Private schools for kids. Only the best for your offspring.
6. Cars... gotta have a luxury SUV, a sedan, maybe a truck if you have watercraft, then other toys.
7. Getting sold shitty investment products (annuities, loaded investment funds, etc.)
8. Paying a ton for malpractice insurance (at least in FL)
9. Ain't got time to read White Coat Investor since you've to do hospital calls before and after practice hours, and on weekends. If weekends are on rotation, you go to a CME event and get peddled more financial investment crap.
10. There's more but I can't remember right now... but it includes "Uncle Sam is a bastard who keeps on robbing me" or "IRS is the devil"
Sounds par for the course. Don't forget stays at the Ritz Carlton and Four Seasons. On the other side of the world. With an adjoining room for the children and nanny.
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I think that many of the doctors I know simply just don't budget or have an idea how much they spend. Many of them make a ton of money and have what they think is good enough saved. But if you're making something like $700k annually, and spending nearly all of it, then $2M isn't going to be enough to retire off of. I've also learned to keep my mouth shut about planning to FIRE because they have the strongest opinions about how stupid it is without a few million in the bank*.
*Exception being a cousin who works on Wall Street, but I ignored him because he probably pays more in property tax on his brownstone than I spend annually on everything.
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I think that many of the doctors I know simply just don't budget or have an idea how much they spend. Many of them make a ton of money and have what they think is good enough saved. But if you're making something like $700k annually, and spending nearly all of it, then $2M isn't going to be enough to retire off of. I've also learned to keep my mouth shut about planning to FIRE because they have the strongest opinions about how stupid it is without a few million in the bank*.
*Exception being a cousin who works on Wall Street, but I ignored him because he probably pays more in property tax on his brownstone than I spend annually on everything.
Yeah MgoSam, you can't retire on a few million if you're on a doc's lifestyle. You don't relate to their lifestyle because you don't live their lifestyle. Stop it now! /sarcasm
Doctors have a mentality that if you make a lot, you have to spend big too. There's a ton of peer pressure. My MD uncle largely resisted it, which afforded him the option of starting an outpatient surgery center with other colleagues. His first car was a Chevy Caprice, in late 70s. Then always had a Toyota Camry, except for a Lexus ES300 once (poor doc's car). He did a good job putting money into Florida pre-paid tuition programs, 529s, and then into SEP IRAs, etc. But he made the classic mistake of listening to his CPA and buying a NW Mutual whole life policy/ annuity, and high ER, loaded mutual funds. The best thing he did was tell his sons and nephews to live within your means and save a lot, don't rely on SS income. The offspring of his doctor friends: 3 out of 4 are spoiled brats, don't know how to apply for jobs, mooch off their parents. The three generation story in real life... 1st to save and send kids to college, 2nd to make a ton of money, 3rd to piss/party it all away.
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I think that many of the doctors I know simply just don't budget or have an idea how much they spend. Many of them make a ton of money and have what they think is good enough saved. But if you're making something like $700k annually, and spending nearly all of it, then $2M isn't going to be enough to retire off of. I've also learned to keep my mouth shut about planning to FIRE because they have the strongest opinions about how stupid it is without a few million in the bank*.
This
*Exception being a cousin who works on Wall Street, but I ignored him because he probably pays more in property tax on his brownstone than I spend annually on everything.
I assume you're referring to somewhere in NYC? We actually have really low property taxes (see https://smartasset.com/taxes/new-york-property-tax-calculator). The average tax rate is 0.7-0.8% (and I don't know if this even includes things like 421a tax abatements). So even a $1 million dollar brownstone only pays about $8k in property tax. It's New Jersey and Westchester County where the property tax rates tend to be killer.
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I only know one doc well enough to comment on his lifestyle and savings. He is near traditional retirement age (~60) and is thinking about going to PT in the next 5 years. I don't know if he will ever fully retire.
1. Grew up well off but not super rich. Both he and his brother became docs.
2. Saved a ton, lived in a nice but modest (compared to other docs in town) house. Never upgraded the house, he bought it straight out of residency.
3. Did a lot of expensive renovations, but still savings compared to a new McMansion, and its paid off.
4. Saved A TON to fully pay for kids college and grad school. 3 kids, all went to state schools, but still I'm guessing 200K plus just for education.
5. 2 of 3 children failed to launch, he continued to support them both for ~5 years each. This one was a huge cash drain as the educational savings had been alregly used, so he was cash flowing 3 households, basically.
6. Buys new Toyotas every ~4 years (switching off between he and wife) so could be much worse, but we are talking the top of the line Sienna for probably over 40K.
7. Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.
8. One child is still not financially/socially/employment-wise launched, she currently covers her expenses but is "going back to school" for the millionth time and I think he is still covering at least some costs.
I know he has retirement savings, and I know he can afford all the excess. But it is still sad, because the switch the electronic medical records killed him (is still killing him), like many other older docs. He just could not adapt. So he still charts on paper, then spends 20+ hours a week laboriously putting everything into the echarts. But he won't/can't high a scribe, and he "can't" retire because his expenses are so high that he needs the income- even though relative to most docs his expenses are probably quite low.
The stuff like the switch to e-charts being insanely difficult, thats the kind of unpredictable thing (I mean, its been predicted for a while, but it wasn't at the time he was in med school) that makes me want to front load savings as much as possible.
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So many of these stories involve support of failed adult children. One of my biggest fears in life is raising (able-bodied) kids who still need parental support in their 20s (and beyond). How do I make sure my kids aren't like so many of the upper-middle class and upper-class brats I met at college?
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7. Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.
You sure about this? That just seems... unbelievably high...
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DW and I are physicians, and right out of residency we hired an advisor (which in retrospect I wouldn't do, but at the time we appreciated the hand holding). His experience with physicians told him that the fatal financial mistake was the purchase of a vacation/second home, and would repeatedly bring that up at each of our face-to-face meetings. While I can certainly see that, I think what some of you have detailed above makes more sense regarding children. It does feel like there is a lot of "economic outpatient care", usually children, sometimes other relatives.
So many physicians seem so focused on raising high-achieving kids, but I came to a realization a few years ago (I don't know that my wife agrees with me yet). Physicians often represent a very small a somewhat select group of people who typically perform extraordinarily well in college/high school, as well as combine a few other selective personality traits. I make no judgment about whether these attributes are in any way superior, and of course there is a fair degree of variability amongst individual doctors, but my experience suggests that with the way the system is set up currently favors a somewhat specific and small group of people. To expect that my kids are going to have all that it takes is kind of ludicrous, even if some of this can be passed via genetics and upbringing. So I've absolved myself of the responsibility of raising another generation of doctors/lawyers/etc. If their achievements hover around the mean, I will be very happy and consider myself a success. This certainly extends to finances. It's just so damn easy to buy them things, experiences, trips, and so easy to justify it as "I never had it, so I'll give them a little bit of what I missed", and I can't say I've completely succeeded, but I am so wary of the paths away from independence for my children. Already, with a 6, 4, and 2 year old, we started with sports, swimming, gymnastics, and that's now expanded to piano for the oldest (and the next wants to try to). Second language lessons seem on the horizon for some peer families, and I just wonder if this is how it starts, relatively innocent little things, things that we can easily afford, and by themselves seem favorable and virtuous...I digress, but if there is one thing I worry about with my family, it's that we're headed down that path and can't even see it.
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7. Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.
You sure about this? That just seems... unbelievably high...
We are talking a week in Hawai'i over Christmas (peak time) in a fancy place. 4 hotel rooms @ 200-300$ a night, 7 nights, is 5600-8400. Flights for 7 are probably 7K, maybe more from small midwest airports. Fancy excursion-type activities like renting off road jeeps, flights between islands, all meals eaten out at nice places. Dinner for 7 at a fancy restaurant with alcohol is probably 300-500$, right? They have also done Europe trips. We are not talking MMM style vacations, and for 7 people it adds up fast. Maybe 30K is high, I'm not totally sure since that is not how I travel, lol.
They also go out West and ski for a weeklong trip most years at places like Aspen. I can only imagine that is 100$/day at least for lift tickets, and probably 1000$/night or more for accommodations. I haven't priced out an Aspen vacation lately either ;)
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So many physicians seem so focused on raising high-achieving kids, but I came to a realization a few years ago (I don't know that my wife agrees with me yet). Physicians often represent a very small a somewhat select group of people who typically perform extraordinarily well in college/high school, as well as combine a few other selective personality traits. I make no judgment about whether these attributes are in any way superior, and of course there is a fair degree of variability amongst individual doctors, but my experience suggests that with the way the system is set up currently favors a somewhat specific and small group of people. To expect that my kids are going to have all that it takes is kind of ludicrous, even if some of this can be passed via genetics and upbringing. So I've absolved myself of the responsibility of raising another generation of doctors/lawyers/etc. If their achievements hover around the mean, I will be very happy and consider myself a success. This certainly extends to finances. It's just so damn easy to buy them things, experiences, trips, and so easy to justify it as "I never had it, so I'll give them a little bit of what I missed", and I can't say I've completely succeeded, but I am so wary of the paths away from independence for my children. Already, with a 6, 4, and 2 year old, we started with sports, swimming, gymnastics, and that's now expanded to piano for the oldest (and the next wants to try to). Second language lessons seem on the horizon for some peer families, and I just wonder if this is how it starts, relatively innocent little things, things that we can easily afford, and by themselves seem favorable and virtuous...I digress, but if there is one thing I worry about with my family, it's that we're headed down that path and can't even see it.
This is exactly the scenario for the guy I am talking about.
One of his kids is in residency now. That kid did not receive economic outpatient care, beyond having college paid for.
The other 2 were raised with these high-achieving parental expectations for success, and then when they "flopped" to a more normal level of success they just totally could not handle it. Plus, they had been raised with fancy vacations, nice clothes, nice everything, and could not/would not/were never taught to function living like normal people making a median income.
The child who eventually got off economic outpatient care became a teacher but married a very high earning woman, so still maintains the high standard of living.
The one who is still on economic outpatient care to some degree is, I think, getting old enough and self aware enough to be embarrassed to be on parental support, so she is trying to get off it, but struggling mightily with what her income actually allows her to have, in terms of housing, possessions, experiences, etc. And not shockingly given that her successes in llife are not in line with her own perceived value (aka that of her father) she is having no luck finding a significant other.
It is really sad.
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One of my closest friends is a plastic surgeon married to an ER doc. Their spending habits baffle me. Some highlights:
- Astounding 8K engagement ring (when they were both still students)
- Laughing about paying for their wedding with their "free money" (student loans)
- Building their 1.5 million dollar dream house in a city being hit hard by the drop in oil price. When I brought up my concerns about this (when they were in the planning stages), she replied "I'm not worried about the economy. Doctors will always have jobs".
- 3 fancy cars, all leased
- Live-in nanny (though I don't really begrudge them that since traditional daycare would not work with their schedules)
- At least 3 fancy vacations per year (Hawaii, Disney, etc)
They are wonderful people, but it scares me when I think about it.
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One of my closest friends is a plastic surgeon married to an ER doc. Their spending habits baffle me. Some highlights:
- Astounding 8K engagement ring (when they were both still students)
- Laughing about paying for their wedding with their "free money" (student loans)
- Building their 1.5 million dollar dream house in a city being hit hard by the drop in oil price. When I brought up my concerns about this (when they were in the planning stages), she replied "I'm not worried about the economy. Doctors will always have jobs".
- 3 fancy cars, all leased
- Live-in nanny (though I don't really begrudge them that since traditional daycare would not work with their schedules)
- At least 3 fancy vacations per year (Hawaii, Disney, etc)
They are wonderful people, but it scares me when I think about it.
Hey, most of this is pretty much my parents. And their combined income was $100-200k before their divorce. At least these guys can afford it.
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7. Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.
You sure about this? That just seems... unbelievably high...
Half of that could be round trip tickets to europe, nice but not luxurious hotels for a week or two and you are up to 30k pretty fast.
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One of my closest friends is a plastic surgeon married to an ER doc. Their spending habits baffle me. Some highlights:
- Astounding 8K engagement ring (when they were both still students)
- Laughing about paying for their wedding with their "free money" (student loans)
- Building their 1.5 million dollar dream house in a city being hit hard by the drop in oil price. When I brought up my concerns about this (when they were in the planning stages), she replied "I'm not worried about the economy. Doctors will always have jobs".
- 3 fancy cars, all leased
- Live-in nanny (though I don't really begrudge them that since traditional daycare would not work with their schedules)
- At least 3 fancy vacations per year (Hawaii, Disney, etc)
They are wonderful people, but it scares me when I think about it.
Hey, most of this is pretty much my parents. And their combined income was $100-200k before their divorce. At least these guys can afford it.
I personally don't think they can afford it, given their massive amount of student loan debt.
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One of my closest friends is a plastic surgeon married to an ER doc. Their spending habits baffle me. Some highlights:
- Astounding 8K engagement ring (when they were both still students)
- Laughing about paying for their wedding with their "free money" (student loans)
- Building their 1.5 million dollar dream house in a city being hit hard by the drop in oil price. When I brought up my concerns about this (when they were in the planning stages), she replied "I'm not worried about the economy. Doctors will always have jobs".
- 3 fancy cars, all leased
- Live-in nanny (though I don't really begrudge them that since traditional daycare would not work with their schedules)
- At least 3 fancy vacations per year (Hawaii, Disney, etc)
They are wonderful people, but it scares me when I think about it.
Hey, most of this is pretty much my parents. And their combined income was $100-200k before their divorce. At least these guys can afford it.
I personally don't think they can afford it, given their massive amount of student loan debt.
Wouldn't a plastic surgeon and ER doc combined make about $600k? Under that assumption I don't think any of the spending sounds very outlandish apart from using student loans on a wedding (and also I think leasing cars is stupid no matter what).
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So many of these stories involve support of failed adult children. One of my biggest fears in life is raising (able-bodied) kids who still need parental support in their 20s (and beyond). How do I make sure my kids aren't like so many of the upper-middle class and upper-class brats I met at college?
My thoughts:
1) don't jump every time they cry
2) don't buy them anything they want
3) make them do chores with you
4) teach them to value experiences and learning new things
5) talk to them about money and work
6) make them get a job as soon as possible
7) make them pay for more and more of their own activities and things
8) talk to them about money, work, ethics, etc
9) talk to them about how they intend to pay for college or other secondary school
10) talk to them about what they want to do in life and how they are going to support themselves
11) teach them about finances
12) make them do their own taxes and other financial forms (with supervision but let them do them first)
13) make sure they understand you will NOT support them once they are adults
etc...
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One of my closest friends is a plastic surgeon married to an ER doc. Their spending habits baffle me. Some highlights:
- Astounding 8K engagement ring (when they were both still students)
- Laughing about paying for their wedding with their "free money" (student loans)
- Building their 1.5 million dollar dream house in a city being hit hard by the drop in oil price. When I brought up my concerns about this (when they were in the planning stages), she replied "I'm not worried about the economy. Doctors will always have jobs".
- 3 fancy cars, all leased
- Live-in nanny (though I don't really begrudge them that since traditional daycare would not work with their schedules)
- At least 3 fancy vacations per year (Hawaii, Disney, etc)
They are wonderful people, but it scares me when I think about it.
Hey, most of this is pretty much my parents. And their combined income was $100-200k before their divorce. At least these guys can afford it.
I personally don't think they can afford it, given their massive amount of student loan debt.
Wouldn't a plastic surgeon and ER doc combined make about $600k? Under that assumption I don't think any of the spending sounds very outlandish apart from using student loans on a wedding (and also I think leasing cars is stupid no matter what).
Maybe I should have specified that they have only been real doctors (as in not residents) for less than a year, and all of these financial decisions were made while they were still students.
Anyway, I'm sure they're not living paycheque to paycheque, but I still think they're making some pretty terrible decisions.
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I "get it" to some extent:
- A doctor goes to school all those years and is 30-something before he really starts collecting on the investment he's made in his education.
- To some extent, he's lost those prime investment years; that is, he wasn't able to sock away money for retirement in his 20s because he was still working his way through school.
- He probably owes student loans for all those years of education, so the whole paycheck isn't his to keep; thus, even if he practices moderate frugality, he may not really have loads of cash in those first years.
- His same-aged colleagues who went into the business world have already started working and are starting to show signs of having "made it". He feels behind the curve.
- He's tired of being poor, and he figures it's okay to spend -- after all, he's earning now and will continue to do so!
But, on the other hand, I strongly suspect the urge to spend, to keep up with the Dr. Joneses, and to live large because "he can now afford it" would certainly be strong. All of the above may be part and parcel of the career he's chosen -- but curbing the urge to spend is within his control.
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Physicians are an unusual creature...speaking from personal experience. The title is wrong though. Doctors choose not to save for retirement, it's not that they can't save for retirement. When residency is over and and the fire hose of ridiculous cash starts spraying their way, there is this huge pent up sense of entitlement and delayed gratification that gets unleashed. Yeah, student loans are a factor, but the bigger problem is not embracing saving and reasonable frugality. Physicians also fall into the trap of being pretty smart, so they think this translates to investing and money skill. No. Definitely not.
I need to write about this...
Wow. http://www.fiercepracticemanagement.com/story/most-docs-cant-afford-save-retirement/2015-12-03 (http://www.fiercepracticemanagement.com/story/most-docs-cant-afford-save-retirement/2015-12-03)
According to the article, half of physicians have a savings rate of 9%. When you don't even start collecting a doctor's salary until you are in your 30's, you're looking at retiring never with that high spending / low saving mentality. I see it all the time though, unfortunately.
I am proud to say I am at the other end of the spectrum, with a gross savings rate > 50%, net savings >75%.
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Physicians are an unusual creature...speaking from personal experience. The title is wrong though. Doctors choose not to save for retirement, it's not that they can't save for retirement. When residency is over and and the fire hose of ridiculous cash starts spraying their way, there is this huge pent up sense of entitlement and delayed gratification that gets unleashed. Yeah, student loans are a factor, but the bigger problem is not embracing saving and reasonable frugality. Physicians also fall into the trap of being pretty smart, so they think this translates to investing and money skill. No. Definitely not.
I need to write about this...
Wow. http://www.fiercepracticemanagement.com/story/most-docs-cant-afford-save-retirement/2015-12-03 (http://www.fiercepracticemanagement.com/story/most-docs-cant-afford-save-retirement/2015-12-03)
According to the article, half of physicians have a savings rate of 9%. When you don't even start collecting a doctor's salary until you are in your 30's, you're looking at retiring never with that high spending / low saving mentality. I see it all the time though, unfortunately.
I am proud to say I am at the other end of the spectrum, with a gross savings rate > 50%, net savings >75%.
Indeed, the headline of the original article is misleading. If doctor's can't save for retirement, who on earth can? The fact is that many choose shiny status symbols instead. Lenders love to see that M.D. degree.
It's a shame that most physicians take no time to educate themselves in personal finance. Why bother when you can hire your colleague's "money guy" to worry about that stuff for you. You can hire out all kinds of tasks as long as you keep the paychecks rolling in, right?
I was helping a physician friend put his bed back together after it had been disassembled and moved so the carpets could be replaced. He was wishing he would have offered the carpet guys an extra $50 to do the job for us. Like, put a few screws in and put the mattress on, which took us all of 10 minutes. I'll never understand that mentality.
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I think that many of the doctors I know simply just don't budget or have an idea how much they spend. Many of them make a ton of money and have what they think is good enough saved. But if you're making something like $700k annually, and spending nearly all of it, then $2M isn't going to be enough to retire off of. I've also learned to keep my mouth shut about planning to FIRE because they have the strongest opinions about how stupid it is without a few million in the bank*.
This
*Exception being a cousin who works on Wall Street, but I ignored him because he probably pays more in property tax on his brownstone than I spend annually on everything.
I assume you're referring to somewhere in NYC? We actually have really low property taxes (see https://smartasset.com/taxes/new-york-property-tax-calculator). The average tax rate is 0.7-0.8% (and I don't know if this even includes things like 421a tax abatements). So even a $1 million dollar brownstone only pays about $8k in property tax. It's New Jersey and Westchester County where the property tax rates tend to be killer.
Except a brownstone in Manhattan is at least ten million.
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Physicians are an unusual creature...speaking from personal experience. The title is wrong though. Doctors choose not to save for retirement, it's not that they can't save for retirement. When residency is over and and the fire hose of ridiculous cash starts spraying their way, there is this huge pent up sense of entitlement and delayed gratification that gets unleashed. Yeah, student loans are a factor, but the bigger problem is not embracing saving and reasonable frugality. Physicians also fall into the trap of being pretty smart, so they think this translates to investing and money skill. No. Definitely not.
I need to write about this...
Wow. http://www.fiercepracticemanagement.com/story/most-docs-cant-afford-save-retirement/2015-12-03 (http://www.fiercepracticemanagement.com/story/most-docs-cant-afford-save-retirement/2015-12-03)
According to the article, half of physicians have a savings rate of 9%. When you don't even start collecting a doctor's salary until you are in your 30's, you're looking at retiring never with that high spending / low saving mentality. I see it all the time though, unfortunately.
I am proud to say I am at the other end of the spectrum, with a gross savings rate > 50%, net savings >75%.
Indeed, the headline of the original article is misleading. If doctor's can't save for retirement, who on earth can? The fact is that many choose shiny status symbols instead. Lenders love to see that M.D. degree.
It's a shame that most physicians take no time to educate themselves in personal finance. Why bother when you can hire your colleague's "money guy" to worry about that stuff for you. You can hire out all kinds of tasks as long as you keep the paychecks rolling in, right?
I was helping a physician friend put his bed back together after it had been disassembled and moved so the carpets could be replaced. He was wishing he would have offered the carpet guys an extra $50 to do the job for us. Like, put a few screws in and put the mattress on, which took us all of 10 minutes. I'll never understand that mentality.
That example would be funny if it wasn't so sad...and absolutely typical!
Nice blog :)
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I think that many of the doctors I know simply just don't budget or have an idea how much they spend. Many of them make a ton of money and have what they think is good enough saved. But if you're making something like $700k annually, and spending nearly all of it, then $2M isn't going to be enough to retire off of. I've also learned to keep my mouth shut about planning to FIRE because they have the strongest opinions about how stupid it is without a few million in the bank*.
This
*Exception being a cousin who works on Wall Street, but I ignored him because he probably pays more in property tax on his brownstone than I spend annually on everything.
I assume you're referring to somewhere in NYC? We actually have really low property taxes (see https://smartasset.com/taxes/new-york-property-tax-calculator). The average tax rate is 0.7-0.8% (and I don't know if this even includes things like 421a tax abatements). So even a $1 million dollar brownstone only pays about $8k in property tax. It's New Jersey and Westchester County where the property tax rates tend to be killer.
Except a brownstone in Manhattan is at least ten million.
First of all that's not true. Here's ten between $2 and $4 million: http://ny.curbed.com/archives/2013/08/13/the_10_cheapest_manhattan_townhouses_for_sale_right_now.php
But there really aren't many brownstones in Manhattan. I'm a Brooklyn resident and when someone says they're buying a brownstone it's usually assumed they're looking in Brooklyn, as that's where the majority of brownstones are. Typical price would be $1-2 million, although you can find some cheaper and of course some more expensive.
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As the daughter of a physician and now wife of a physician, I can relate to so much that's been posted. I got lucky in finding a frugal spouse who refuses to "upgrade" his car to something flashy--"that's just a status symbol," he says. Surgical techs drive fancier/more expensive cars than he does. DH was the one who kept a very strong line when we bought a house--"b/c we still have my student loans," he said, when I would have gone a wee bit higher on the initial mortgage.
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A major factor in a physician's ability to save is the expectations their family, especially a spouse, has after suffering through several years of medical school and residency. They give up a lot to support the physician, and many expect a certain lifestyle once the physician's salary is able to "support" that. I've seen this play out with some of my friends who are done with training, and it can be difficult to settle. I'm lucky because my wife is also a physician, and has the same goals as I do. Also I've been training so long she doesn't even remember what it was like before med school!
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A major factor in a physician's ability to save is the expectations their family, especially a spouse, has after suffering through several years of medical school and residency.
I never thought about it, but I've seen that dynamic starting in my late 20s friend group, as well. Not a crazy expectation, I suppose. I always feel sort of bad for my ex-bf that stuck around through law school since he never gets "credit" for that in my earnings.
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As the daughter of a physician and now wife of a physician, I can relate to so much that's been posted. I got lucky in finding a frugal spouse who refuses to "upgrade" his car to something flashy--"that's just a status symbol," he says. Surgical techs drive fancier/more expensive cars than he does. DH was the one who kept a very strong line when we bought a house--"b/c we still have my student loans," he said, when I would have gone a wee bit higher on the initial mortgage.
Good for you and your husband. No doubt you'll be in great shape if FI and RE are among your goals.
I can think of 2 different traveling surgical techs that drove cars WAY better than mine. I guess when your housing is paid by the hospital and you've got the per diem, what else are you going to do with that money? One bought a Jaguar. The other, a Ford F-150 SVT Raptor.
It's one thing to spend 1 or 2 years' salary on a home. To spend that on a rapidly depreciating vehicle is another.
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So many of these stories involve support of failed adult children. One of my biggest fears in life is raising (able-bodied) kids who still need parental support in their 20s (and beyond). How do I make sure my kids aren't like so many of the upper-middle class and upper-class brats I met at college?
My thoughts:
1) don't jump every time they cry
2) don't buy them anything they want
3) make them do chores with you
4) teach them to value experiences and learning new things
5) talk to them about money and work
6) make them get a job as soon as possible
7) make them pay for more and more of their own activities and things
8) talk to them about money, work, ethics, etc
9) talk to them about how they intend to pay for college or other secondary school
10) talk to them about what they want to do in life and how they are going to support themselves
11) teach them about finances
12) make them do their own taxes and other financial forms (with supervision but let them do them first)
13) make sure they understand you will NOT support them once they are adults
etc...
My kids are an interesting case study on his topic. We followed a philosophy pretty close to the ideas outlined above. Our boy is 26, and a successful engineer. He bought the program from day one, and by the time he was 15, was busting his ass at a local diner, washing dishes until midnight, many week nights in the school year. He landed an excellent job, three months before graduation. He was working as an assistant heavy equipment mechanic for a equipment manufacturer, and caught the attention of a company owner, who hired him as the health, environment and safety director for an oil services contractor. The other is 24, and two years out from graduating with a bachelors in journalism and English. This one fought most of our attempts to follow the path. She is stubborn and sees the world in her own way, often struggling with the fact that reality doesn't suit her. For example, she decided that any type of math wasn't going to be something to waste time on. She struggled mightily through public school, and needed constant tutoring to get through to graduation. She would use the tutor to get her through a test, then forget everything she learned, as she just didn't want to be involved with anything math related. Her SATs were outstanding in the writing section, and were so bad in math I almost seemed like she had never been exposed to it.
Once she watched all of her friends jumping with joy, college acceptance letters in hand, she new she had a problem. She quickly discovered that no school had any interest in her, and she decided to actually learn some math skills. She spent a few months with the same tutor and brought her score up by a hundred points. She was still rejected repeatedly, but got a "we will take you in January, once the freshman herd thins" letter from a local State University. By the time this one was entering her teens we had made it clear that she was not ever going to be a Peter Pan, "failed to launch" young adult, sponging off mommy and daddy. When she decided that she was not following in her brother's footsteps and getting a job at 14, we drove her to the public library every weekday, for an entire summer, where she "volunteered" 4-6 hours a day, and hated every minute of it. Soon after, she got a job with a local grocery chain and worked there, part time, until she was nearly done with college.
Bottom line for her? At the moment she is making a living doing social media and website work for a large construction firm, and is fully self supported. After school she wobbled a bit, and ironically enough, settled into a short period of living with her boyfriend, while they both pretended that they were some kind of little trust fund snots, awash in money. Even though reality was quite the opposite. ( two early 20's "adults", no income, apartment, gym memberships, lots of first run movie tickets, hanging in cafes, two cars, trying all the trendy restaurants, several Apple toys.........WTF?) Since she was heading for a cliff, her mom and I decided that we needed to be as tough as ever. I told her to get quotes for health and car insurance and to buy policies for both. I then transferred a nice used Toyota into her name, as a gift. She had been driving it while in school. We sat her down, explained that we were not happy with her choices, and were not willing to support them in any way. We prepaid three months of her health and auto policies, and told her that she need to snap out of the Peter Pan bullshit, grow up, and find a job, ASAP. It's been a year now, and she might not be setting the world on fire, and probably never will, but she is an independent adult.
Having watched many other parents totally screw this entire process up, I have no regrets in how we handled raising our kids. I took a lot of flak from other parents, and even my own mom, which was stunningly ironic, since she was a total failure in that department. In fact one of the biggest motivations for the whole tough love model we developed as parents, was my sister. My sister was in her late forties, unemployed, and seeming permanently attached to the couch at my mom's house, when my mom passed. My mother and father both died early, at 66 and 60 Y.O. I have no doubt that the stress of dealing with 25 years of continual failure in raising my sister greatly contributed to their early demise.
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I think that many of the doctors I know simply just don't budget or have an idea how much they spend. Many of them make a ton of money and have what they think is good enough saved. But if you're making something like $700k annually, and spending nearly all of it, then $2M isn't going to be enough to retire off of. I've also learned to keep my mouth shut about planning to FIRE because they have the strongest opinions about how stupid it is without a few million in the bank*.
This
*Exception being a cousin who works on Wall Street, but I ignored him because he probably pays more in property tax on his brownstone than I spend annually on everything.
I assume you're referring to somewhere in NYC? We actually have really low property taxes (see https://smartasset.com/taxes/new-york-property-tax-calculator). The average tax rate is 0.7-0.8% (and I don't know if this even includes things like 421a tax abatements). So even a $1 million dollar brownstone only pays about $8k in property tax. It's New Jersey and Westchester County where the property tax rates tend to be killer.
Except a brownstone in Manhattan is at least ten million.
First of all that's not true. Here's ten between $2 and $4 million: http://ny.curbed.com/archives/2013/08/13/the_10_cheapest_manhattan_townhouses_for_sale_right_now.php
But there really aren't many brownstones in Manhattan. I'm a Brooklyn resident and when someone says they're buying a brownstone it's usually assumed they're looking in Brooklyn, as that's where the majority of brownstones are. Typical price would be $1-2 million, although you can find some cheaper and of course some more expensive.
The less expensive listings on curbed are in Hamilton heights. So Harlem. Considering the average one bedroom in Manhattan costs over 1 million, it doesn't make any sense for brownstones to be around 2-3 million for four plus bedrooms.
I agree with you that most brownstones are in Brooklyn. And good luck finding a one million brownstone unless you're open to living in an undesirable neighborhood far from the subway.
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Agreed on brownstones. My neighbor sold his decrepit four-floor + garden brownstone in Harlem (that needs serious, serious work and is uninhabitable legally) which someone was shot and killed in front of 3 years ago nearly 2.5 million a year and a half ago. I have one half of one floor in a less-cool harlem area, and it costs ~600K.
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So many of these stories involve support of failed adult children. One of my biggest fears in life is raising (able-bodied) kids who still need parental support in their 20s (and beyond). How do I make sure my kids aren't like so many of the upper-middle class and upper-class brats I met at college?
My thoughts:
1) don't jump every time they cry
2) don't buy them anything they want
3) make them do chores with you
4) teach them to value experiences and learning new things
5) talk to them about money and work
6) make them get a job as soon as possible
7) make them pay for more and more of their own activities and things
8) talk to them about money, work, ethics, etc
9) talk to them about how they intend to pay for college or other secondary school
10) talk to them about what they want to do in life and how they are going to support themselves
11) teach them about finances
12) make them do their own taxes and other financial forms (with supervision but let them do them first)
13) make sure they understand you will NOT support them once they are adults
etc...
My kids are an interesting case study on his topic. We followed a philosophy pretty close to the ideas outlined above. Our boy is 26, and a successful engineer. He bought the program from day one, and by the time he was 15, was busting his ass at a local diner, washing dishes until midnight, many week nights in the school year. He landed an excellent job, three months before graduation. He was working as an assistant heavy equipment mechanic for a equipment manufacturer, and caught the attention of a company owner, who hired him as the health, environment and safety director for an oil services contractor. The other is 24, and two years out from graduating with a bachelors in journalism and English. This one fought most of our attempts to follow the path. She is stubborn and sees the world in her own way, often struggling with the fact that reality doesn't suit her. For example, she decided that any type of math wasn't going to be something to waste time on. She struggled mightily through public school, and needed constant tutoring to get through to graduation. She would use the tutor to get her through a test, then forget everything she learned, as she just didn't want to be involved with anything math related. Her SATs were outstanding in the writing section, and were so bad in math I almost seemed like she had never been exposed to it.
Once she watched all of her friends jumping with joy, college acceptance letters in hand, she new she had a problem. She quickly discovered that no school had any interest in her, and she decided to actually learn some math skills. She spent a few months with the same tutor and brought her score up by a hundred points. She was still rejected repeatedly, but got a "we will take you in January, once the freshman herd thins" letter from a local State University. By the time this one was entering her teens we had made it clear that she was not ever going to be a Peter Pan, "failed to launch" young adult, sponging off mommy and daddy. When she decided that she was not following in her brother's footsteps and getting a job at 14, we drove her to the public library every weekday, for an entire summer, where she "volunteered" 4-6 hours a day, and hated every minute of it. Soon after, she got a job with a local grocery chain and worked there, part time, until she was nearly done with college.
Bottom line for her? At the moment she is making a living doing social media and website work for a large construction firm, and is fully self supported. After school she wobbled a bit, and ironically enough, settled into a short period of living with her boyfriend, while they both pretended that they were some kind of little trust fund snots, awash in money. Even though reality was quite the opposite. ( two early 20's "adults", no income, apartment, gym memberships, lots of first run movie tickets, hanging in cafes, two cars, trying all the trendy restaurants, several Apple toys.........WTF?) Since she was heading for a cliff, her mom and I decided that we needed to be as tough as ever. I told her to get quotes for health and car insurance and to buy policies for both. I then transferred a nice used Toyota into her name, as a gift. She had been driving it while in school. We sat her down, explained that we were not happy with her choices, and were not willing to support them in any way. We prepaid three months of her health and auto policies, and told her that she need to snap out of the Peter Pan bullshit, grow up, and find a job, ASAP. It's been a year now, and she might not be setting the world on fire, and probably never will, but she is an independent adult.
Having watched many other parents totally screw this entire process up, I have no regrets in how we handled raising our kids. I took a lot of flak from other parents, and even my own mom, which was stunningly ironic, since she was a total failure in that department. In fact one of the biggest motivations for the whole tough love model we developed as parents, was my sister. My sister was in her late forties, unemployed, and seeming permanently attached to the couch at my mom's house, when my mom passed. My mother and father both died early, at 66 and 60 Y.O. I have no doubt that the stress of dealing with 25 years of continual failure in raising my sister greatly contributed to their early demise.
Thanks for taking the time to share your story. Our boys are 5 and 7. They've got a few chores, but we've got years to go before they will eligible to work.
It's fascinating to see how 2 children growing up in the same home with the same upbringing can have completely different life paths. I see it with my brother and I, my wife and her brother, etc...
It will be interesting to see how my boys will feel about working to make money in high school when their parents are retired and no longer working. We can tell them that we got to retire early because we started early, I guess. On the other hand, I look forward to the opportunity to have some great adventures with them in the summers. A month-long trip visiting national parks, backpacking, kayaking, all that fun stuff that you can't do when tied down to a job. If I retire just when they get to be old enough to work a summer job, that won't happen. I won't be facing that dilemma for about 8 or 9 years, and I hope to be retired before that. But I do think about it from time to time.
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My husband's family is rotten with doctors. I don't think any of them will have to eat cat food in retirement, but many of them aren't great with savings.
I agree with others that they generally have huge amounts of debt by the time they are out of med school, and they just get to a point where they aren't going to delay gratification any more. They tend to hang out with other doctors, and everybody joins the club, gets a boat and has a vacation home.
One thing that does need to be pointed out is that there is a gigantic difference in salaries depending on specialty and location. You tend to make much more if you move away from well populated, major metropolitan areas with good existing healthcare infrastructure. Also, some specialties, like family practice and many pediatric specialties, actually don't make enormous salaries as compared to fields like surgical specialties or radiation oncology or dermatology.
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You guys would be AMAZED at the doctors in my group.
I have doctors begging me to work my night and weekend shifts because of all their overwhelming expenses.
I told one that I need about 25% of what I make in order to live very , very comfortably and he literally fell out of his chair. I certainly don't try and educate because I need more suckers to work my crappy shifts.
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Overspending on their children gets a lot of the doctors I know in financial trouble.
Their kids "can't" go to a public school.
Their kid have to have a brand-new car as soon as they turn 16.
And so on, with fancy vacations, camps, clothes, etc.
One doctor I work with is delaying retirement for 4 more years (she is already in her 60's), since she "has to" pay for her son's college tuition, "so he doesn't have to take out loans"!
(BTW, I'm a single childless pediatrician, preparing to retire by age 50)
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I told one that I need about 25% of what I make in order to live very , very comfortably and he literally fell out of his chair. I certainly don't try and educate because I need more suckers to work my crappy shifts.
What you make post-tax? Impressive. I've never thought of it that way. I think I live on ~20% of this year's pre-tax salary, but post tax is a different story.
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Overspending on their children gets a lot of the doctors I know in financial trouble.
Their kids "can't" go to a public school.
Their kid have to have a brand-new car as soon as they turn 16.
And so on, with fancy vacations, camps, clothes, etc.
One doctor I work with is delaying retirement for 4 more years (she is already in her 60's), since she "has to" pay for her son's college tuition, "so he doesn't have to take out loans"!
(BTW, I'm a single childless pediatrician, preparing to retire by age 50)
Meh, we're also planning on paying for our kids' college tuitions. Our parents helped us graduate debt free, and if it's something we can do for our kids, we're doing it.
And we aren't physicians, but teachers.
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You guys would be AMAZED at the doctors in my group.
I have doctors begging me to work my night and weekend shifts because of all their overwhelming expenses.
I told one that I need about 25% of what I make in order to live very , very comfortably and he literally fell out of his chair. I certainly don't try and educate because I need more suckers to work my crappy shifts.
In my experience there are three major reasons for physicians self destructing financially:
1. Divorce.
2. Feeling the insane urge to build a 4000+ square foot custom house when their kids are 5 years away from leaving the house.
3. The equally insane idea that they must save for and fund college/grad school/med school for their kids regardless of the cost.
:)
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Overspending on their children gets a lot of the doctors I know in financial trouble.
Their kids "can't" go to a public school.
Their kid have to have a brand-new car as soon as they turn 16.
And so on, with fancy vacations, camps, clothes, etc.
One doctor I work with is delaying retirement for 4 more years (she is already in her 60's), since she "has to" pay for her son's college tuition, "so he doesn't have to take out loans"!
(BTW, I'm a single childless pediatrician, preparing to retire by age 50)
Meh, we're also planning on paying for our kids' college tuitions. Our parents helped us graduate debt free, and if it's something we can do for our kids, we're doing it.
And we aren't physicians, but teachers.
Us too. I don't find that frivolous either. I'm happily working extra years to send our kids for 4 years at a public college so they can start out debt free. Our priorities are such that if we hadn't been willing to do that we wouldn't have had kids. It is a privilege they have to earn by not screwing up. They will probably end up with some debt from professional programs.
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I asked one doc that was having a difficult day why he was still working, his answer, "three stock market crashes that's why."
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In my experience there are three major reasons for physicians self destructing financially:
1. Divorce.
2. Feeling the insane urge to build a 4000+ square foot custom house when their kids are 5 years away from leaving the house.
3. The equally insane idea that they must save for and fund college/grad school/med school for their kids regardless of the cost.
:)
I feel like #2 and #3 would be achievable if the rest of lifestyle was reasonable.
Of course #2 has a fairly strong correlation to lifestyle inflation...
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You guys would be AMAZED at the doctors in my group.
I have doctors begging me to work my night and weekend shifts because of all their overwhelming expenses.
I told one that I need about 25% of what I make in order to live very , very comfortably and he literally fell out of his chair. I certainly don't try and educate because I need more suckers to work my crappy shifts.
In my experience there are three major reasons for physicians self destructing financially:
1. Divorce.
2. Feeling the insane urge to build a 4000+ square foot custom house when their kids are 5 years away from leaving the house.
3. The equally insane idea that they must save for and fund college/grad school/med school for their kids regardless of the cost.
:)
lol, that is doctor starter home size...
try 6000 with a 200 acre ranch or any other extravagance you can imagine. They believe because they are saving the world the deserve something that could be on MTV cribs.
as an aside I was joking to our doctors in the family that if we won the lottery we could go 'crazy' and travel the world spending $20,000 a week on hotels and fancy dinners (the conversation was for 7 people traveling), they had funny looks on their faces when I said that.
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You guys would be AMAZED at the doctors in my group.
I have doctors begging me to work my night and weekend shifts because of all their overwhelming expenses.
I told one that I need about 25% of what I make in order to live very , very comfortably and he literally fell out of his chair. I certainly don't try and educate because I need more suckers to work my crappy shifts.
In my experience there are three major reasons for physicians self destructing financially:
1. Divorce.
2. Feeling the insane urge to build a 4000+ square foot custom house when their kids are 5 years away from leaving the house.
3. The equally insane idea that they must save for and fund college/grad school/med school for their kids regardless of the cost.
:)
lol, that is doctor starter home size...
try 6000 with a 200 acre ranch or any other extravagance you can imagine. They believe because they are saving the world the deserve something that could be on MTV cribs.
as an aside I was joking to our doctors in the family that if we won the lottery we could go 'crazy' and travel the world spending $20,000 a week on hotels and fancy dinners (the conversation was for 7 people traveling), they had funny looks on their faces when I said that. I am guessing they spend about $20,000 a week when they go on vacation.
Haha!
The thing that gets me is usually when they start building these houses are about the time the kids have only a few years left in school. I really couldn't imaging living in a 6000sf house with only two people.
The old mantra for physician financial freedom:
One job
One house
One spouse
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@bb11 (reply 6).... You noted the incongruity between docs not being able to max out their tax-advantaged savings plans versus their salaries and said "assuming they [their] plans follow the same rules as 401ks [capped at 18k or so]." Their plans likely don't. Likely not even close to a 401k. Most docs are likely partners of a medical firm and treated as self-employed small businessmen. When you visit a doc at a hospital, the patient interaction feels like you're dealing with an employee of the hospital, but you're likely not. You're likely dealing with a partner of a medical practice that is, from the point of view of the hospital, an independent contractor leasing space, etc. from the hospital. This is why when you have a baby you get separate bills from (1) the hospital, (2) the doctors, (3) the other set of doctors, (4) etc. I am a lawyer and law firms work similarly to medical practices. If you're an associate lawyer, you are an employee, you get a W-2 and your tax-advantaged savings are basically limited to (i) 401(k), (ii) IRA and (iii) HSA. If you make partner, you are treated as an owner of a small business, you get a K-1 instead of a W-2 and your tax-advantaged savings potentially open up (depending on whether your partnership takes advantage of this stuff or not). In my case, by being a partner in my firm I am currently obligated by contractto (A) save $35,000 a year into a 401(a) profit sharing plan and (B) save $8,000 a year into a cash-balance pension plan. Because this is mandatory at my firm, those amounts are sucked straight out of my paycheck and I never see the cash. On top of that, I still can do 401(k), IRA (self and spousal) and HSA. Mandatory savings nut = $43k. Voluntary tax advantaged savings nut = $35.5k. Total tax-adv. savings opportunity = $75.5k. To take advantage of all my tax-adv. savings would be 25% of my gross income. I'm trying to do that, but am still feeling my way. Conservatively, a third of my income goes to taxes. That's a big chunk. I have to either get a different - much less profitable - job, or spend a certain amount of money on clothes and cars. I need a passable suit* and I need good shoes.** I need a decent car and need to keep it clean to be presentable.*** I don't have student loan debt because I went to lesser-ranked state schools for both undergrad and law school based purely on money (full academic scholarships at both shops, so no debt but much, much less cachet at cocktail parties). Most docs have a ton of student loan debt.
* The bar for a passable suit is pretty low. For 99% of American men, owning a well-chosen suit from Jos. A. Banks (~ $300) would serve them for a lifetime. Every suit I own is from Jos. A. Banks, except for one from a UK company that is similar. But, if you go below this level of quality the cost/benefit equation shifts pretty quick (i.e., if you're not going to buy a suit of this quality, just opt out altogether, because the clothes will make you look bad).
**If you don't have to wear dress shoes for work, please let me know if there are openings. I have to and I hate it: they're not comfortable and the whole concept bothers me. With that said, my current reality is my current reality, so.... Men's dress shoes are uncomfortable and expensive, but in certain lines of work they are required. They are required in my line of work. They are a tool. Probably shouldn't be a tool, but I'm not going to spit into the wind about how life works. If you're in a job that requires a certain kind of dress shoe, I recommend Johnston & Murphy as a good (relatively) cheap supplier of good business dress shoes that will work in 99% of situations. If you wear dress shoes ALL THE TIME, I recommend that you eventually think about buying Alden shoes and shell cordovan. Alden is a company, and they make very, very good shoes. Shell cordovan is a type of very tough and very attractive leather. If you wear dress shoes every day, you should buy two pairs of these shoes (you need to let shoes rest) and know that if your kid has the same foot size, he will be wearing them in 50 years. Great shoes.
***My decent car is a Hyundai. Give me what face-punches you will (just to rile you up, I bought the car new). But in my environment, to drive a Hyundai is an insane giant spit in the face.
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*Exception being a cousin who works on Wall Street, but I ignored him because he probably pays more in property tax on his brownstone than I spend annually on everything.
I assume you're referring to somewhere in NYC? We actually have really low property taxes (see https://smartasset.com/taxes/new-york-property-tax-calculator). The average tax rate is 0.7-0.8% (and I don't know if this even includes things like 421a tax abatements). So even a $1 million dollar brownstone only pays about $8k in property tax. It's New Jersey and Westchester County where the property tax rates tend to be killer.
Fair enough, I don't know precisely how much his property taxes are, but him and wife come from both money and are very high earners too boot and I can imagine them having a house that costs many millions. I believe they live in Long Island, but I may be mistaken.
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As one with family and friends in healthcare as well as having worked in that industry for a few years, it's really sad to watch so many doctors self-destruct their financial lives.
- HUGE schooling debts that seem to be overlooked
- Massive overspending to keep up with the other doctors
- Malpractice insurance is through the roof
- Poor business sense. Opening up their own practice with a medical degree that includes no actual business training. Sometimes they'll be wise enough to hire practice managers, but the lack of business experience bites them there too with all too frequent bad hiring decisions.
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As one with family and friends in healthcare as well as having worked in that industry for a few years, it's really sad to watch so many doctors self-destruct their financial lives.
- HUGE schooling debts that seem to be overlooked
- Massive overspending to keep up with the other doctors
- Malpractice insurance is through the roof
- Poor business sense. Opening up their own practice with a medical degree that includes no actual business training. Sometimes they'll be wise enough to hire practice managers, but the lack of business experience bites them there too with all too frequent bad hiring decisions.
I agree with all of the above. I'm a pediatrician and thankfully, I don't keep up with the Joneses and my school loans were paid for by the hospital I worked for. But I see so many of my colleagues, people who are so smart with regards to medicine, act so foolishly with their finances.
And the practice managers that doctors hire? They are usually, in my experience, a family member of the doctor who owns the practice. A family member needs a job? Hire them as practice manager! Most have no experience in either business or medicine.
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Many biglaw lawyers end up falling into this same trap, and it's even more ridiculous for lawyers to do it (at least before they make partner), since it's starkly up-or-out with a massive burnout ratio (i.e., at least doctors can, with reasonable certainty, keep working for the high pay if they need to--not true of lawyers). Plus, we don't get paid as much as docs (though we also tend to have somewhat lower loans and we finish school more quickly).
Very sad to see.
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The Doctor-versus-lawyer debate is fascinating...
1. I don't think many lawyers feel like they've been screwed over by the Gov't (the way many doctors seemed to feel was happening with the Affordable Care Act),
2. Many lawyers saw younger lawyers suffer through the great labor market collapse of 2009-2012,
3. The ramp-up time to making big money is much longer for doctors (who then make much more money). I suspect us non-doctors would be shocked at how much money doctors truly earn.
I have good friends who have become both. Strangely, I have many more JD friends who have opted out of labor entirely (often young women who are married to other lawyers or--more often--doctors.
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The many doctors in my extended family were feeling screwed over by "the system," in particularly by insurance companies and lawyers, long before the ACA came along.
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One bought a Jaguar. The other, a Ford F-150 SVT Raptor.
It's one thing to spend 1 or 2 years' salary on a home. To spend that on a rapidly depreciating vehicle is another.
I get what you're saying, but check your math on that "rapidly depreciating Raptor." A coworker was buying a used F-150, and we were giving him a hard time that he should buy a Raptor...looked on AutoTrader, Raptors with 50k miles were still over $40k! These things actually hold their value like you wouldn't believe. Might've not been a bad purchase for him.
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My dad was a surgeon. He never retired ... though not because he couldn't. He just loved being a surgeon. He worked until he was 86, though limiting his practice to just do assists and teaching the young guys. (He worked the last 10 years at a loss... because he could.)
But that said... I totally see how the original article has merit.
* Dad bit on every stupid get-rich-quick scheme there ever was
* He was scammed by an investment advisor over many, many years. This guy eventually lost his securities license and was sued for big bucks. (He was run out of our home town before that.) Most of the investments lost money and most of the losses were disallowed by the IRS many years later. They had to be paid back plus penalties/interest.
* Dad paid well over a million in economic outpatient care to my oldest sibling. She never learned.
His saving graces:
* He was a cheapskate. He bought a 1985 Chevy Blazer new. He was still driving it up until he died. He bought a very nice house (but not over the top) by 1964 standards, paid it off over 30 years and never looked back. He still had it when he died. Ne never bought in to the hoity-toity country club life.
* He mostly did pay-as-you-go for education. He got a loan from his little brother (that was working a paper route!) and paid it back.
* He got in on the ground floor of medicine in our small town, which grew to a pretty good sized town where medicine was pretty much the main industry
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7. Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.
You sure about this? That just seems... unbelievably high...
Half of that could be round trip tickets to europe, nice but not luxurious hotels for a week or two and you are up to 30k pretty fast.
This, I was just talking to a friend about my upcoming trip to New Zealand I'm thinking it's be about $6k all in with 1/2 of that being airlines and a month long car rental. She mentioned a sister that was thinking of going to Australia until they realized the month long trip would cost $40k for 2 people.
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7. Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.
You sure about this? That just seems... unbelievably high...
We are talking a week in Hawai'i over Christmas (peak time) in a fancy place. 4 hotel rooms @ 200-300$ a night, 7 nights, is 5600-8400. Flights for 7 are probably 7K, maybe more from small midwest airports. Fancy excursion-type activities like renting off road jeeps, flights between islands, all meals eaten out at nice places. Dinner for 7 at a fancy restaurant with alcohol is probably 300-500$, right? They have also done Europe trips. We are not talking MMM style vacations, and for 7 people it adds up fast. Maybe 30K is high, I'm not totally sure since that is not how I travel, lol.
They also go out West and ski for a weeklong trip most years at places like Aspen. I can only imagine that is 100$/day at least for lift tickets, and probably 1000$/night or more for accommodations. I haven't priced out an Aspen vacation lately either ;)
Yeah, I looked up the cost to go to Hawaii for a week at Christmas or Spring break. Family of 4 was $5000+, and that is *one* hotel room, and relatively "budget".
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Lawyer, not doctor. IME I agree with the comments earlier about pent-up delayed gratification/spousal expectations, keeping-up-with-Joneses, big loan repayments, etc. But I also have to say, the big incomes are equally big targets for really anti-Mustachian financial advice. Some of that I saw mentioned above as "asset protection," i.e., put your money into a giant house or big things in your spouse's name in case you get sued. But the other aspect is tax-avoidance -- it can take only once or twice seeing how much you fork over on April 15 to make tax minimization sound appealing. I have heard pitches for both whole life and annuities as great "investments" because of their tax-deferral/avoidance features. And then of course if you are set up as your own business you can giant behemoth vehicles as a business expense and write them off.
The problem is that by focusing so much on tax avoidance, you've got the tail wagging the dog. The key isn't how much you pay in taxes -- it's which approach will leave you more cash in your pocket at the end of the day. And I'll put my investment returns (Vanguard index fund minus LTCG) against their "tax-free" whole life any day. But I see people not thinking gee, do I need this giant vehicle; it's "but I can deduct it." There is just no concept that "saving" 28% on taxes means you are spending the other 72%. And of course when everyone around you is hearing the same advice and doing the same thing, it just feels normal.
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7. Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.
You sure about this? That just seems... unbelievably high...
Why? plane tickets alone to Hawaii alone could be over $10k for that many people. Add in 10 nights for a several hotel rooms at a 4 or 5 star beachfront resort, meals, wine, spa visits and a bunch of expensive activities later and you are well over $30k..
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I'm just a registered nurse, but looking from the outside, I can't say I blame the young doctors for going nuts out of med school and residency. After spending seven years in med school and residency, many are still broke with almost 200k in student loans and still pulling eighty-hour work weeks.
I would probably do the same.
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7. Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.
You sure about this? That just seems... unbelievably high...
Why? plane tickets alone to Hawaii alone could be over $10k for that many people. Add in 10 nights for a several hotel rooms at a 4 or 5 star beachfront resort, meals, wine, spa visits and a bunch of expensive activities later and you are well over $30k..
My family is going to Hawaii next week, for 2 weeks, 1 week of which is on a cruise. 7 people. Probably right around $25k for airfare, hotel rooms, and cruise passes. Does not include meals or other activities/"excursions".
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I don't have data to prove it, maybe someone's come across a source, but anecdotally it feels like traveling expenses really bottomed out during the Great Recession, and have experienced an impressive bounce back. In a form of hedonistic adaptation, my wife and I got used to several trips a year at very cheap prices, and now when you factor in the rebound in costs plus the fact that we we had 3 kids in the interval, the same quality and frequency of trips has really mushroomed (and gotten out of control in my opinion frankly, I think we're starting to turn this around a little in my family). So the costs of travel mentioned above seem perfectly in line with what I've seen recently.
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I don't have data to prove it, maybe someone's come across a source, but anecdotally it feels like traveling expenses really bottomed out during the Great Recession, and have experienced an impressive bounce back. In a form of hedonistic adaptation, my wife and I got used to several trips a year at very cheap prices, and now when you factor in the rebound in costs plus the fact that we we had 3 kids in the interval, the same quality and frequency of trips has really mushroomed (and gotten out of control in my opinion frankly, I think we're starting to turn this around a little in my family). So the costs of travel mentioned above seem perfectly in line with what I've seen recently.
I had planned on volunteering for a special event just a few hours from home. Well, then I did the math and it was going to be at least $1000 (I hadn't even finished adding in all the expenses yet at that point). Called that trip off. Used to do similar ones for ~$500-600 not too long ago. Hotel prices & food costs seem to be up dramatically since then. Car costs have stayed pretty flat.
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I don't have data to prove it, maybe someone's come across a source, but anecdotally it feels like traveling expenses really bottomed out during the Great Recession, and have experienced an impressive bounce back. In a form of hedonistic adaptation, my wife and I got used to several trips a year at very cheap prices, and now when you factor in the rebound in costs plus the fact that we we had 3 kids in the interval, the same quality and frequency of trips has really mushroomed (and gotten out of control in my opinion frankly, I think we're starting to turn this around a little in my family). So the costs of travel mentioned above seem perfectly in line with what I've seen recently.
Somewhat depends on where you're going. For many domestic or Caribbean destinations I would agree but Europe can be dirt cheap right now. We've got a $316 RT flight to Amsterdam coming up in a few weeks and paid $450 RT to spend NYE in Budapest. Pretty reasonable hotel\airB&B prices too and food\drink in Budapest can be crazy cheap. ($0.90 wines, $0.75 pint, $4 meal eating out, $2 stopping at the grocery)
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the dollar is strong right now, travel abroad while you can, guys!