How Should I Spend My Money? Our Key to Success

By Jimmy Turner, MD
The Physician Philosopher

For those that have been following along on our journey, you know that part of the purpose of this website is to chronicle our progress towards financial independence.  I recently wrote a post on how we are doing compared to our original goals as stated in the first Physician Philosopher Manifesto.  Today’s post will answer the question, “How Should I Spend My Money?”

Some people have said that raw numbers are not as helpful to them as percentages.  Today we will discuss both as we walk through how my family decides to use the money we receive.

Follow along as we discuss how we allocated the money we have received over the last 18 months, and the rule that guides it all.

The Key to Success

I am a big proponent of balance.

When answering the question, “How Should I Spend My Money?” – the concept is simple. We need to spend a little money now to allow for some real time enjoyment.  We also need to save a lot to get to our financial goals, particularly if we want to get to them quickly.

While there are many ways to “pay our future self first, and our current self last” the tool that has helped our family balance this tough task the most has been The 10% Rule.

For those who are being newly introduced to this rule, the idea here is to take 10% of any increase in take home (post-tax) pay you receive and spend it on whatever your heart desires.  Then, use the other 90% of the money for building wealth.

For example, when my take home pay went up by more than $10,000 after finishing training, I used $1,000 to spend on things we enjoy.  The other $9,000 + went towards building wealth.  The rest of our life stayed exactly the same, including the house we lived in, where our kids went to school, and the other car we drove.

That $1,000 went towards a car payment (yep, someone who writes about personal finance is financing a car!) and a country club membership.  The other $9,000 went into either a retirement account or paying down our refinance student loans.

You can apply the 10% rule to any time where you receive money.  This includes quarterly/annual bonuses, windfall money, or a promotion.

What Did We Accomplish?

Using this rule we have been able to accomplish a lot in the last year and a half while we have felt completely satisfied with our lifestyle.

Here is a list of some of our accomplishments, which I share in order to encourage you as an example of all of this being possible:

  • We will have paid off $200,000 in student loans in 19 months (last payment to come at the end of January).
  • Our investment accounts have more than $150,000 in them.
  • We have continued to tithe 10% of our take home pay throughout all of this.
  • A three month emergency fund was built up ($30,000).

For those that like percentages, here is how it shakes out.  From our gross pay each month, this is how things are proportioned:

  • 30-35% to federal & state taxes (~30% after we meet the social security wage base maximum)
  • 7% Tithe to our church (10% of our take home pay… we should probably tithe pre-tax.  More to come on this in a later post).
  • 20% to our planned monthly student loan payment (this does not include the 90% of our bonus pay we put towards this, too)
  • 4% goes towards a 529 for each kid
  • 15% goes towards retirement vehicles (does not include employer contribution/matching, which takes this number up to 20% of our gross pay, if included as salary.)

What Did We Get to Enjoy?

If you add up all of the percentages listed above, we put 75-80% of our gross pay to investment accounts, paying down student loan debt, and giving money to others.

This means that we live on 25-30% of our gross pay each month.  You might say, “Well, yeah, but you get bonus pay, too!”  You’re right.  We do.  And that number has not been inconsequential over the last year.

This explains how we paid off $200,000 in 19 months with a planned monthly payment of $5,500.  The missing $4,500 from our monthly average of $10,000 towards student loans came from my bonuses.

However, I can tell you that we followed the 10% rule with that money to a “T.”  Of that bonus pay, 90% of the take home pay from those bonuses were put towards our student loans and we simply enjoyed the other 10%.

What did we use the other 10% on to enjoy during the year?  Here is a list, though I am sure to be forgetting some things:

  • Our annual beach trip with my wife’s family.
  • A new gas-fired grill.
  • New tires for our swagger wagon.
  • We bought a new mattress for our master bedroom.
  • We installed new carpet in our home that we were selling.
  • My wife enjoyed some shopping sprees.
  • I bought a new golf driver.
  • The previously mentioned financed car and monthly golf membership.

While I am surely forgetting some of the things we purchased via The 10% Rule, the above items show that we were able to continually upgrade our lifestyle while we accomplished some pretty awesome financial goals as well.

We will also be going on another trip in January to the mountains the day this post is published and to the Dominican Republic with our best friends (and NO kids!) in June.

How Should I Spend My Money?

This rule has led to some really big success for us over the last year.

Using The 10% Rule, we have paid down our student loans at a clip of $10,000 per month. After that payment is gone, we will be cash flowing an additional $5,500 per month.

You may have guessed it by now, but $500 (10%) will be used for enjoyment or small lifestyle creep (like hiring a cleaning service my full-time working wife has wanted for the past year).

The other $5,000 will go towards building wealth.  And the trend will continue with each new pay raise or additional money that we receive.

Take Home

Following this rule has provided financial discipline to our lives that we had previously lacked during training.

The importance of this cannot be overstated as your savings rate while you are young is infinitely more important than what you invest in or what the market is doing.

While you may adapt this to be a 5% rule or a 15% rule depending on your current situation, I encourage you – as always – to be intentional with the money you receive.

Do the right thing with the vast majority, and enjoy the rest.  Doing so will set you up for a life of contentment while you continually crush your financial goals along the way.

Are you a fan of this rule? Do you following something similar?  What is your way of determining what to do with bonus pay, promotions, or unexpected money?  Leave a comment below.



  1. Dave @ Accidental FIRE

    I never had a budget or followed any rules, I just always spent way way less than I brought in. There was a constant mantra of “save” in my head, and that way of doing things served me very well.

    • ThePhysicianPhilosopher

      Whatever gets the job done! We needed rules to provide some structure. When it comes to daily spending, though, we do something similar (the “save” mantra)

  2. Xrayvsn

    I do think the 10% rule you have created is a wonderful guide for everyone. Too often we think of “bonus money” as just that, a bonus and spend it completely (if not more).

    That leads to the dreaded “lifestyle creep.” If 90% of the bonus is put towards saving/paying down debt, you do yourself a huge favor for future self all the while still giving something to current self.

    I wish I knew about this rule early on. I probably am more extreme than the 10% rule now (almost everything goes into investing), but the time benefit of doing it from the beginning is lost so I have to make up for it that way.

    • ThePhysicianPhilosopher

      I’ve heard a lot of people say that (they wish they had heard of something like The 10% Rule earlier). This is why I discuss it so much. It really has been so helpful in making us happy now while we also continually obtain our financial goals for tomorrow.


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