I’ve been asked to write about saving strategies. It seems that some have a hard time saving their money. Paying down debt or being on time with mortgage payments isn’t an issue for this group of physicians. It’s that they just can’t get themselves to save.
So this post will be a little about saving strategies from my own experience. I think the key points of a successful saving strategy is motivation, a goal, a purpose, and an endpoint.
The reason for saving has to be a valid on. If you are a greedy little fucker then use the greed. Count those dollar bills every couple of days to keep you motivated. Watch your net worth grow week by week.
A better life
Maybe your motivation is to travel or have an ideal lifestyle which the practice of full-time medicine won’t allow you. Then it’s good to set a savings goal which will motivate you towards that goal. The motivation is escaping suffering.
Good for Others
Maybe you want your kids to never have to go through the same bullshit as us. You want them to turn 18 and be financially independent. Your motivation is to do something special for someone else.
The point is for you to find the right motivation and for the motivation to be the driver for saving. The savings goal will fall behind from time to time and you revisit your mental motivation poster and you’ll be right back on track.
Savings fatigue is common among medical professionals because they often oversave for retirement and work far beyond the years they need to.
It comes from not having a savings goal. Or perhaps having set a savings goal out of fear and lack of knowledge.
If you need $8M to retire then you have to work and save $8M worth. Unless you own a business where you’re using other people’s labor to earn money, you’ll have to put in those labor hours yourself. Create a realistic savings goal which isn’t going to tax your soul.
Setting a Goal
I analyzed my income back in the day when I was working full-time at Kaiser Permanente and realized that I had an easy $10k that I was wasting on shit. Shit that brought me momentary joy but soon had to be replaced with more shit to maintain the emotional erection.
So I decided that I wanted to be financially independent, worked my way backwards doing the math, and set a savings goal of $10,000 per month.
If I couldn’t meet that number then I worked more hours or cut more expenses. I was motivated to stick to this savings goal because I no longer saw practicing medicine as a sustainable career.
Revising the Goal
A saving strategy is only as sound as the motivation and the goal behind it. I had to constantly revisit the goal and journal about what it was going to afford me.
Besides journaling I also decided to roll in circles where people were a little less obsessed with display of wealth. These aren’t bad people but money has a different meaning to them. I wasn’t growing as a person around this group but was thriving around the frugal nerds.
Why are you saving? A common answer might be to be financially stable in the future. Perhaps to be able to retire some day. Money for house, money for a big vacation.
Purpose ↔ Motivation
The purpose has to be meaningful enough that it feeds into the motivation and vice versa. If it doesn’t then it might be an external purpose you adopted but don’t really believe in.
If you’re the happy, productive type then why the fuck would you ever want to stop working? So retirement might mean shit to you. But perhaps financial independence might be something you’d feel more comfortable with.
Start imagining all the options you will have in the future if you save for it now. A healthy saving strategy needs someone fueling the fire constantly. The purpose of an action isn’t always lucid. Spend some time and tease it out for yourself.
You may want to one day work in a different medical setting. Or, like me, you may want to work from anywhere, whenever, however much you want.
Imagine what your savings will provide you. Approach it from many different angles. Write it down, create a visual graph of it, put a picture board together, or discuss it with your close friends/family.
How much money does a physician need to retire? How much do they need to live a comfortable life working part-time? $1M, $2M, $5M, or maybe $10M, just to be safe.
I ask the question because most of us save in order to have money for our future – maybe retirement – or to become financially independent in order to have more options. But if you don’t know how much you need then there isn’t an end-point and you’ll burn out of your saving strategy.
$5M isn’t better than $2M if all you needed was $2M. Regardless of what anyone else tells you, you’re not adding layers of safety or a healthy redundancy to your portfolio by accumulating excess wealth.
Money is an inanimate object; a concept really. Those with a ton suffer and those with very little suffer. It isn’t evil or harmful. But it requires work and takes responsibility to manage. The more money you have, the more issues you’ll have to deal with.
Make it Personal
My little net worth is more than enough for me. I’ve been told otherwise by pretty much anyone I’ve come across, except for my financial advisor.
I promise if they end up being right and I end up being wrong I’ll write about here. So far, I’m doing exactly what I want to be doing with my financial independence.
Knowing when to say enough is hard because the financial media feeds us a lot of flavors of fear and has reprieve for sale, ready on standby. It’s good to tune all that out.
Ignore even your colleagues or online physicians who have millions saved. Focus on your own lifestyle and save enough for that goal alone. The math isn’t all too complicated.
Knowing you can stop putting money away will keep you from burning out. It might help to keep a spreadsheet or calendar to signal you when you can stop saving.
I was born to parents who were rich by inheritance. Over the years they lost all their wealth, had their home foreclosed on, and are now living on less than $1k/month each.
Learning to budget is critical even if your parents never taught you. Unless you’re waiting for a massive trust fund or inheritance, budgeting will be necessary to meet savings goals.
Even if you make $5M a year and you don’t budget, you’ll end up having to save $100M in order to afford your expensive, unbudgeted lifestyle in the future.
Budgeting helps you prioritize what matters to you. For example, with YNAB when you overspend in one category then you’ll have to decide which category you’ll have to raid from to cover the overage. It’s an amazing cranial exercise.
I’m an introvert, I don’t have a lot of external influencers and don’t care much how others are doing things. This makes it much easier to set a goal for myself and stick to it.
There are a few things however that I might share in common with extroverts. For example, I care about the environment and don’t want people suffering or dying in other countries. In fact, I care even more about animal suffering because they are more vulnerable and can’t compete with our harsh intelligence.
Maybe this kind of wastefulness can be your motivation. It could help you set a goal and guide your saving strategy.
It’s sort of like the minimalism that seems to have inspired Dr. McFrugal.
I also don’t want to be dependent on having to be wasteful to be quasi-happy. If I have to visit a shopping mall in order to experience joy or have to constantly drive a new car then what would happen when I can no longer have those things?
I’m torn when I hear about focusing on the journey rather than the destination when it comes to achieving financial independence or other financial goals.
Making a Choice
I was having panic attacks in the exam room and dealing with a PA who was filing harassment charges against me because I was in the process of firing her in my role as a medical director.
It was a sacrifice setting a financial goal to plan my escape from medicine. It was a sacrifice every month putting that money into a bank account and then investing it in some index fund which I knew (and still know) very little about.
Giving up Luxuries
Don’t get me wrong, I wasn’t suffering because I was saving, I was suffering because I wasn’t financially independent. And based on all the income I was earning, I should have been.
No part of me is naturally frugal. But my crazy, wild spending was no longer sustainable and no longer good for the world around me. Giving up luxuries was a necessity and I am now thankful I did.
I am writing all this to make the point that sometimes sacrifices have to be made in order to have the kind of freedom you want.
Some of you may have to get divorced over this if it’s important enough to you. Some of you have to stop getting plastic surgery. You may have to give up your fancy wine, your aged whiskey. Some will have to forgo vacationing.