Quite possibly, this should have been my first post. A significant portion of this website is going to be focused on building wealth and my journey to get there. Being a philosophy major in undergrad, this begs the question: What is the purpose of obtaining wealth?
Some reasons (other people give) to obtain wealth:
- To become financially independent (i.e. you don’t owe a dime to anyone)
- Speaking of not owing dimes to anyone, since you own a lot of dimes yourself, you can choose to give them to whoever you want.
- Charitable giving is a good thing! Wealth allows you to help those that need it.
- Retiring early (some even call their investments an “F off Fund” to stick it to “the man” when they tell them how to do their job).
- To have the ability to partake in the hobbies you enjoy (If it were me this would involve buying a nice car, brewing beer, and playing golf. See picture to right).
- Time to spend with family. Remember all those holidays you couldn’t go and see family because of your work schedule. This is now a non-issue. Family first, right?
- Speaking of family, wealth allows you to protect your family by leaving an inheritance to help them live a life of wealth and wellness, too.
- If you are in the practice of medicine, the best way to reduce the chance of litigation is to stop practicing it or to practice it less.
- Because you can, why not?
- With burnout being a hot topic and an increasing issue, wealth allows you to leave behind any career that doesn’t work out as planned.
- It allows you to practice medicine as you should, because you aren’t worried about the administration’s perspective on your practice (see “F off Fund” above).
Okay, but what is the point?
So, I’ve given you several reasons why wealth may be beneficial. This doesn’t really answer the question of the purpose behind obtaining wealth, though. [Remember, philosophy major here].
Financial independence, charitable giving, retiring early, spending time with family, money to invest in hobbies, practicing medicine the way you see fit. All of these things amount to the following concepts: Wellness and joy.
The purpose of obtaining wealth is to establish wellness and to be able to spend it joyfully.
So, while I understand the math behind living “like a resident” after residency (and during residency), I take a less hard-lined approach to this than many others. This is the point where most would tell you that if you save an additional $250 per month by not buying the golf membership for unlimited golf, this would amount to $3000 per year. If you, instead, invested this $3000 each year you would have ~$367,000 in 30 years (assuming 8% in earned interest).
This line of reasoning in famous financial blogs and books came about for good reason. We, as medical professionals, are terrible about not spending money to “keep up with the Joneses.” So, the pendulum has swung very far in one direction to encourage you to save as much money as you possibly can.
However, the problem with this is that as humans we know that the head and the heart don’t always agree. Yes, we should usually/probably follow our heads. However, we don’t always do that, and for good reason. Some things don’t make sense, but bring us an immense amount of joy.
Why did you have a second child (or even a first) if you know that the average cost of a raising a child is more than a quarter of a million dollars. (Physician on Fire writes a great post on this subject). Likely, the reason you had the second kid is because of one of a few reasons 1) The first kid brought you joy, 2) You presumed the 2nd kid would bring you joy, 3) The second kid would bring your family (spouse, grandparents, siblings, etc) joy.
I have three kids, and based on POF’s assessments, I can expect this to cost my wife and me about $500,000 over their lifetime. Fortunately for my finances, we are done having kids. But I’ve gotta say, I don’t regret having any of my children. And no, not because that would be a terrible thing to say publicly, but because I cannot measure in money the amount of joy that my children have brought me. It is truly an honor to be their dad.
As much as you love hearing about how much joy my kids bring me, let’s be honest…you didn’t come here for that. If you’ve hung with me this far, here is the point. Wealth is about being able to enjoy life fully, to be able to spend and give joyfully, and to produce wellness.
Is it worth it to reach financial independence and early retirement, if you are burned out, depressed, or loathsome along the entire way? Likely not.
So, yes, I understand the Latte Factor. However, I also understand that if you are saving 20-30% of your gross income, destroying your debt, and preparing for your future… you can enjoy some of your current finances on some of the above that bring you joy: giving to charity, hobbies, and even (I am gonna say it!) buying a car. Now, don’t go buy a Mercedes AMG S65. Buy a reasonable car. Don’t go overboard.
What, then, does moderately frugal look like, you ask? The moderately frugal person who is destined to meet early retirement and wealth while also enjoying wellness is doing the following:
- Investing 20-30% of their gross income. Pay yourself first. Straight off the top.
- Destroying debt. Ideally set up to be accomplished in five years or less after finishing residency. [Some have paid their debt off during residency]
- Enjoying the rest of the money, while mostly living like a resident after residency until your debt is paid off, on things that bring them wellness and joy.
- Remembering that this is a “moderate” philosophy. Don’t go buy the house, car, country club membership, etc. right when you finish. It is sage advice to live mostly like a resident after you finish training for a few years!
What do you think? Are you moderately frugal? Or are you all in frugal? Not frugal at all?