What healthcare professionals have less of is free time but often they desire more income. We have a deep imagination of ways to spend money thanks to a decade-long student lifestyle. Desiring more income is perfectly normal but would having more income make a difference in the lives of healthcare professionals?
Family Doctors Wanting Specialty Income
In large medical groups it’s common to have the primary care doctors be a bit envious of the high income their specialty colleagues make. Not in a bad way, just wondering if they would have been better off pursuing a specialty out of medical school.
When a family medicine doctor starts at a large medical group they typically earn somewhere in the $250k range. A orthopedist earns closer to $450k. A GI doctor could be making $400k. A neurosurgeon could be well past $1 million and $500k for an anesthesiologist.
So a family doctor who is fresh out of residency might think how wonderful it would be to have $400k instead of $250k. Or even better, $600k or maybe even $1 million.
My hypothesis is that the extra income would offer very little value to the medical professional’s financial circumstances. In fact, it would likely be detrimental.
Getting Priced Out Of Certain States
The majority of healthcare professionals are clustered in NY and CA. Because of the massive amount of healthcare spending in these states and the high income, a lot of old money has accumulated.
More wealth often means more spending. There are retired specialists in NY and CA, retired malpractice attorneys, retired CPA’s who handled the healthcare professional’s books, and retired realtors who sold millions of dollars worth of real estate to these groups.
Most healthcare professionals refuse to admit that they are priced out of certain states. They squeeze themselves into nearby cities. They choose townhomes over single family homes. They take on longer commutes just to be close to the wealth.
On the west coast one’s status is measured based on the distance to the beaches. On the east coast it’s how close you are to Manhattan.
More Income or Less Spending?
The more I study personal finance the more I realize how difficult it is for a professional to intentionally regress financially. It feels like defeat. As would be a move from San Diego to further inland. Unless, of course, it’s close to an expensive destination.
Spending less can also feel like defeat because it’s a form of regression. As a healthcare professional it reminds us of our college or residency days – who the hell misses that lifestyle?
Actually, the college lifestyle wasn’t too bad. We were spending less – pure and simple. We needed less money and so we felt free. We also had taken on a lot less responsibility. No kids, no debt, no car payments, no professional degrees to babysit, no in-laws.
Moving Isn’t Easy
All this said, it’s quite difficult for healthcare professionals to move. You wouldn’t think so because of all the moving we’ve done from high school to college, to medical school, then to residencies, and finally on to our attending careers.
However, moving is far more lucrative in terms of generating wealth because it can lower our overhead drastically. The income for healthcare professionals rarely changes based on the city/state we live in. However, property taxes, state income taxes, housing, commuting costs, standard of living and schooling may become far cheaper.
It’s possible to stay in a high-cost area but I often feel that the peer pressure is too high and thus hard to resist. In such areas everything from entertainment to schooling is proportionally more expensive.
$250k versus $750k
A $250k gross income means that we’d have a take-home of around $140k/year. That’s a monthly pocketed amount of $10,000. The rest goes into retirement accounts and taxes.
Earning $750k gross means that we’d have a take-home pay of around $400k/year. That’s a pocketed amount of $30k/month and the rest would go into retirement accounts and taxes.
What could a healthcare professional do with an extra $20k/month?
I can only generalize but I see the lifestyles of the specialists and the lifestyles of generalists and the differences are mainly fancier cars, fancier clothes, fancier homes, and more accessories.
An Extra $20,000 Per Month
An extra $20,000 per month might seem like a lot – it certainly sounds like a lot. But spending an extra $20k is so fucking easy that I think it offers very little value to a healthcare professional.
In fact, as I mentioned above, it’s likely detrimental. There is obviously a reason why financial advisers try to replace your pre-retirement income during your retirement – it’s really hard to willingly spend less.
If you are used to spending that extra $20k then you’re going to desire that same lifestyle in retirement. Suddenly, that extra $20k just took on the appearance of more stuff but not a different lifestyle.
I don’t accept the fact that a person who has a bigger home and a nicer car has a better lifestyle. In fact, they have more to worry about, more to lose, more to maintain and more headaches.
Obviously I’m taking the minimalist stance here. This blog is about less not more which probably is pertinent to only a tiny percentage of high-earning healthcare professionals.
Here is how I would quite easily spend an extra $20k/month:
- $2k extra a month towards debt (mortgage and student loan)
- $7k extra towards mortgage (maybe even a second home)
- $2k extra towards automotive expenses (repairs, maintenance, depreciation)
- $4k extra on entertainment (vacations, dining out, gifts)
- $1k extra on clothing/accessories
- $2k extra maintaining all the shit I own (repairs, replacement)
- $2k extra for professional help (CPA, CFP, insurance products, etc.)
The above is incredibly conservative. When your home doubles in size, your peripheral financial liabilities doesn’t just double, they often go up exponentially.
Utilities in a big home are much higher than a smaller home. A kitchen upgrade that might cost $50k in one home will cost $250k in the more luxurious home. Exterior paint may cost $5k on one home and $45k on another.
Not to mention that once you have an extra $20k to spend a month, your extended family is going to sequester some of that income. You might buy them gifts, pay for them to come along on vacations, help them out financially, or pay for their meals when dining out. You’ll also be the one who will become solely responsible for ailing parents and their care costs.
$250k versus $80k
Let’s reimagine the situation. If you were earning $80k and wanted the same 3x increase in pay that the generalist wishes for, you’d end up with $250k.
$80k gross is a take-home of around $47k/year or $4k/month.
How easy would it be for this $80k household to spend the extra $6k/month? That’s really easy to answer for us healthcare professionals, isn’t it? We know exactly how easy it is for that $6/month to slip through our hands with a few benign purchases.
Why Do You Want The Extra Income?
I totally respect and appreciate the fact that some individuals prefer a more luxurious lifestyle. I don’t have anything against it. But to say a luxurious life is better than a simple life is a stretch. Let’s explore the reasons why desiring more income is so ubiquitous in our culture.
A Simpler Life
If the reason for the extra income is to have a simpler life, that’s definitely not the case. A bigger home, a fancier car, and more expensive vacations do not add simplicity.
I do not imagine the life of a billionaire to be a simple one. In fact, I think it’s a very complicated and involved lifestyle that requires a lot of balls to be juggled in the air at all times. Then again, desiring more income doesn’t make a billionaire.
A Luxurious Lifestyle
If you desire a more luxurious lifestyle then that’s exactly what that extra $20k/month could offer. I just can’t imagine that a healthcare professional would be content with their $4 million home and their $250k car after obtaining the higher income.
Desiring more income for the sake of luxury is an unquenchable thirst.
Right around the corner is the $9.5 million home and their $700k dream-car. A vacation that could have been had for $15k now could become a $45k vacation that is out of this world.
I don’t think it ends there. There are yachts, vacation homes, private air transport, chefs, chauffeurs, bodyguards, security experts, life coaches, and the list goes on.
What if you desire a more financially independent lifestyle? I suppose the extra $20k could come in really handy in order to achieve financial independence sooner.
However, the same “spending” phenomenon is created in the financial independence space. Those with more disposable income simply plan to save more before considering themselves financially independent.
While the person who achieved financial independence with a $250k/year income aimed for $1 million in their retirement account, the person with $750k/year will prefer to have $3 million.
All the while there are those who live comfortable retired lives on $150k in their retirement accounts with social security as a supplement. We don’t hear about these people because the news only highlights the lack of saving in the US which is exaggerated.