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Budgeting Versus Income

Budgeting Strategy Versus Income Strategy Towards A Secure Lifestyle

I was thinking about which of these strategies has been more potent, learning how to budget or working on earning a higher income. It might be different for some but I want to talk about my personal experience with these 2 strategies. Hopefully in the process the reader will reinforce whichever method they lean towards.

 

Budgeting

I started budgeting in 2012 when I discovered YNAB. The free courses they offer on their website was so eye-opening that I completely redefined my understanding of money and the value I placed on experiences.

I started budgeting at first by cutting out the things which I was spending money on that weren’t returning any extra benefit to me. These were mostly spontaneous expenses or perhaps monthly recurring expenses which I had signed up for at some time and was too lazy to cut out.

As more time went on and I continued to budget, I spent even more time thinking about value. I came up with my own actuarial table of placing value on things.

I had pared my budget down from well over $15,000/month to $10,000/month which was a huge accomplishment. At that time, I didn’t think there was anything else I could do in order to cut that down further – I had plateaued. I was ecstatic but stagnant.

Through budgeting I learned how to pay off debt. I had plenty of debt to pay off so I got a ton of opportunity to practice. There were student loans, personal lines of credit, business credit, auto loans, mortgages, credit cards and I had to borrow money from family at some point.

The value of knowing how to get oneself out of debt in the most efficient manner possible is worth a lot more than increasing my monthly income by $1,000 or $2,000. The latter might help me make a bigger dent in the debt but it won’t prevent me from taking on more debt.

I remember it was August 2013 when I decided that I was done with home ownership (for a while) and decided to sell my condo in downtown San Diego and move to a tiny studio apartment. I made a few other budgeting changes, of course, but was able to get my monthly expenses as low as $4,700/month.

$4,700?! Are you kidding… I never thought I could reach this. I had only been budgeting for less than a year and I had turned a skill which cost me $5/month (cost of YNAB) to acquire into a $10,000/month savings.

I took a short break from budgeting because I had finally reached every financial goal that I had set out to achieve. I stopped budgeting and still spent well under $5k/month.

I decided to pick it back up because in a way I missed it. Or maybe I felt that I hadn’t extracted everything I could. Within a few month after picking it back up, sometime in 2016, I took my monthly expenses down to less than $2,000/month and eventually down to a touch under $1,500/month.

Certainly, a doctor living in Portland Oregon cannot get their expenses any lower than $1,500/month – exactly what I have been thinking for a long time. Until just recently when I started reflecting on this topic.

In fact, my expenses will go lower as long as I keep budgeting and keep mastering budgeting. Not only can my monthly expenses go below $1,000/month but they can go down to $500/month and even zero.

As stupid as this sounds (even to me), it’s quite possible that my expenses will actually become a positive net flow. I am still trying to figure out how that would look but I just know that it’s not only possible but likely.

 

Increasing Income

The very first real paycheck I earned was my residency income, around $38,000/year, gross. June of my 2nd year in residency we got a big raise and the salary went to $40,000/year. October of that same year I got my medical license and took my first moonlighting gig. 8 hours overnight in the ED at $65/hour – $520 for one night of work!

I had learned how to take my hourly wage from $10/hour to $65/hour. This was a huge jump and almost none of my fellow residents capitalized on this opportunity.

I realized that moonlighting shifts in Southern California were really hard to come by. There were very few residents who were doing the work, but the ones who were working were beasts! It was funny, I would see the same money hungry crew no matter where I picked up shifts.

Eventually, I realized that if I was willing to be available even more than those guys that I would get first dibs. I learned that it was the schedulers who were the most important individuals to befriend and not the medical directors. While my friends were kissing up to the physicians running whatever clinic they wanted to work at, I befriended the schedulers and the occasional charge nurses.

I was now getting prime choice on shifts. And though I wasn’t earning more per hour, the work I was doing was easier since I wasn’t getting stuck with the shitty shifts. I was also able to get the better shifts, the ones which I could do without having to skip residency rotations.

Eventually, I got first dibs on holiday shifts and the very popular overnight shifts which paid the most. Because I would almost never say no to a shift the schedulers would email me as soon as they got a bolus of shifts made available to them. I picked up almost all of them, ensuring that the following month I would get dibs once again.

It was time to look for better paying shifts. The $100/hour gigs were guarded by residents with their life. Some of the ER’s and workman comp groups were paying that rate but they wanted ED docs or Occ Med residents. The solution was to hit up those residents and figure out what it was they needed to know that I potentially didn’t know. So, I learned the pertinent skills and now I was the getting nearly all the workman comp shifts.

The natural progression was that I had become so valuable that I could now demand higher hourly wages for each shift while other moonlighters were getting the same rate. The clinic directors wanted me because I worked hard, the schedulers wanted me to get the shifts because they knew I was diligent and the locum groups were happy that I could get higher hourly rates since it meant they were getting a higher cut.

I was always available to pick up other providers’ sick calls. I never once called out sick of a shift and I would always be willing to go in if an urgent care or ED needed a provider last-minute.

I went from $10/hour in residency to $65/hour, up to $85/hour, and eventually to $100/hour once I signed with my first medical group. With the overtime I was working, this went up to nearly $145/hour.

Don’t be quick to dismiss overtime. Few medical groups have the budget to offer their clinicians overtime. Most of the docs actually believe that their medical group doesn’t offer any overtime at all. Behind the scene it’s a whole different thing. Those hustlers, like myself, are not only able to get overtime pay and extra shifts but they are also getting the easiest shifts offered to them first.

Finally, just over a year ago, I thought that I had maximized my hourly wage and couldn’t possibly earn more an hour. In fact, after deciding to retire I was able to secure the highest hourly wage I have ever enjoyed – $230/hour. Can I earn more? Absolutely.

The natural progression will be that my hourly income will keep going up. I don’t expect it to go up incrementally but exponentially. It will likely go to $400, $600 and finally several thousand dollars an hour. Each bump in hourly rates will come faster than the one before.

 

Which One Wins?

I am convinced that budgeting wins in this scenario. I base this on 2 assumptions, first, that anyone living in the US can enjoy the most incredible, enjoyable lifestyle without spending much money and second, the future value of income and money is uncertain.

I would recommend to any physician to focus mostly on their budgets and improve their skills when it comes to lowering their dependence on income. That’s how I view budgeting – achieving our desired lifestyle without needing to spend a lot for it.

If the goal is to have the most amount of dollars in our savings/retirement/investment accounts then the income strategy would certainly win. Be prepared to sacrifice a lot more of your time and energy in return for those dollars. Admittedly, there is a sweet spot of net worth which if achieved will make it nearly impossible for any amount of spending to fail.

Comfortable Lifestyle For Cheap

I can live in very safe places in the US, enjoy clean drinking water, safe streets, clean air and have access to free libraries which have state of the art computers, internet access and educational material.

We can learn and enjoy an endless supply of video streams on YouTube for the cost of having to sit through some advertisement and we can walk into any emergency room and get healthcare without having to pay for it. For those who can demonstrate a low or lack of income, you can even get free or low-cost healthcare at free clinics all over the US.

Sure, you may not be able to pay for all the fancy HBO and ShowTime channels but you can rent free movies from the library.

Buying a $10k mountain bike might be out of the question but thanks to Craigslist you can get a $100 bike and still have a blast on free bike paths.

Future Value Of Money

It’s certain that the value of money will fluctuate as it always has. Even though our income might go up, it doesn’t mean that its buying power will increase. Furthermore, taxes and other regulation could erode any purchasing power that you might have left.

In order to have an income you must trade your energy and time for it. Who knows how our jobs will evolve in the future. We might get lower remuneration or possibly even higher though that would come with having to put in a lot more effort.

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