The general consensus among physicians who have a solid grasp on their finances is that they are realistic about their earnings and expenses. Ins and outs. Just like in nephrology, except a net positive in your finances is considered a win. One would expect that doctors ought to be generally conservative in their expenditures, since medicine is a generally conservative profession. But life is unpredictable, and that’s why there are so many physicians in their 50s who still have unpaid medical student loans.
One of my guilty pleasures includes consuming stories on Refinery29, an online media outlet. I came across an article that outlines the weekly expenses of a high-income non-physician (executive director) family in Los Angeles. That’s right, down to the monthly car leases that all of the FIRE crowd cringes at. Head over if you’d like to pour through the details.
In summary, this household earns pretax combined income of $1.5 million at the age that many doctors are still getting lowball offers on their second jobs.
Acknowledge credit when deserved
We should all be impressed by the earning power of this couple. Some of us are secretly jealous of the relatively “normal” work hours compared to that of the average physician. You also have to realize that there are also far fewer high-income opportunities like this compared to hospitalist jobs, so not everyone can be a $1.5 million household living in the OC. There is undoubtedly blood, sweat, and tears that numbers simply cannot depict.
Big numbers make us uncomfortable
Big expenses tend to accompany big incomes. When I started earning a salary as a resident, I felt simultaneously rich and poor. There was a bi-weekly deposit in my checking account, but all of my student loans went into repayment mode. The ones I deferred started accruing interest, so I had expenses that did not exist previously. I was no longer eligible for student subsidized housing, so my living expenses also increased. I experienced the same transition as an attending. Do I still want to live in distressed living quarters in the questionably safe neighborhood around the hospitals? Do I want an apartment or a condominium? How about a detached house that affords a yard to enjoy? Now that I have a yard, I need a lawnmower and maybe a lawn guy. It’s interesting to see how lifestyle inflation self-perpetuates.
That’s one aspect that the financially independent crowd has successfully detached itself from. But big numbers may actually be less shocking that they appear. One of the line items on this expense report is the holiday expense:
Christmas shopping: $7,500
Did they mean $750 or $7,500? To take it into perspective, one of the doctors at the local hospital once declared that he spent $2,000 for Christmas activities since he had relatives from abroad visiting that year. As a hospitalist, his income was approximately $250,000. His holiday expenses were 0.08% of his pretax income. In comparison, the $7,500 Christmas shopping expenses only constitute 0.05% of a $1.5 million income! The executive director family actually spent a smaller percentage of their pretax income than the doctor!
Time to get critical
What the author of this article doesn’t mention is how long they have enjoyed the earning power. A neurosurgeon who earns $600,000 a year at age 34 is in a more precarious financial situation if he was only earning $60,000 a year ago as a resident. Given the career trajectory of executive directors, it is safe to assume that they have enjoyed at least several years worth of high earnings at age 34. Based on their numbers, it’s not clear how much total net worth they even have to their names. Are they millionaires yet? How much are they actually saving each year, and is it enough?
Assuming that the healthy earning potential continues throughout their working careers, this executive director family will do just fine. If they work until age 65, they will likely become multi-millionaires. If they wanted to quit their jobs at age 40 and move to Belize, they would still be fine if their expenses are reduced significantly.
Is there a moral to the story?
It is human nature to judge. As a physician who will unlikely ever experience the earning power of this executive director household, it is difficult to imagine how my life would be any happier with bigger numbers. When I showed this article to several of my colleagues who do have incomes in this range, they laughed at the fact that they only wished that they had the time to even spend their earnings.
Maybe it is better to strive to become an executive director with a C-suite rather than a neurosurgeon working 90 hour weeks.
“Smart Money, MD” is an ophthalmologist who blogs at the self-titled site, Smart Money MD.
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