You’ve done it – your training is complete and now you’re finally getting a paycheck fit for an attending physician. You think, “I’ve arrived! I’m going to start making so much more money.”

Famous last words. If you’re not prepared, that is. 

Seemingly unassuming, everyday expenses still have the potential to wreck your new paycheck and your budget. I’ve seen it many times over the years: you try to be careful, but you (understandably) want to enjoy your hard-earned money. Costs creep up on you, things snowball. Suddenly, your post-tax paycheck is no different than it was in residency.

You thought you knew how to spend money wisely, but now you wonder, “What was the point of all my hard work to get here?”

Don’t worry. You can still enjoy the money you make while being aware of five main money traps that a high-income earner like you could be susceptible to if you’re not paying attention. 

Enjoyment is part of how to spend money wisely

The first thing that I want you to hear is I absolutely and fundamentally want you to spend some money upfront to make yourself happy. As doctors, we undergo a lot of delayed gratification to get where we are. It shouldn’t have to continue when you’re finally making the money you’ve been working towards for so long. 

That’s why I talk about the 10% rule with residents and fellows. Say your income goes from $4,000 a month post-tax to $14,000. Take 10% of that increase, so $1,000 here, and spend it on something you’ve wanted, just for the joy of it.

Then you spend 90% of that money doing the right financial things without feeling deprived. 

Potential money trap: a new house

Many doctors decide to buy a house as soon as they’ve finished training, but this can end up being a trap in a few ways. An Atlanta-based recruiting firm found that 50% of doctors changed jobs in the first 3-5 years after a new job. Meaning there’s a 50/50 chance that you’ll end up moving not long after you invest in your new home. 

Say you’ve bought a $1M home – it’ll cost 8 to 10% to sell it. So not only are you guaranteed a massive monthly mortgage on a house, but if you needed to sell it, it would take $80,000 to a $100,000 thousand dollars on that $1M to pay a realtor to help you sell it. Then you’re financially trapped, because you can’t afford to sell the house and pay the transaction fees. 

To really spend your money wisely, it would behoove you to rent a place temporarily in the first few years after residency, rather than tie up your paycheck in a house that, chances are, isn’t your forever home. If you do decide a house is really where you want to spend your money, remember that your paycheck has to cover factors beyond just the mortgage: homeowners insurance, HOA fees, lawn care, repairs, and maintenance. 

Potential money trap: a new car

I’m a car guy, and I can admit I’ve made some stupid financial mistakes when it comes to cars. Just in 2022, I bought a Porsche Boxster, which was a great car… but 3 months into it, I realized it was a dumb purchase for me as a dad. I physically could not go pick up my kids in this little two-seater sports car. It became apparent that I wasn’t going to use it, and it was just going to take up space in my garage.

I ended up selling it back and lost about $2500. Remember what Paula Pant says – you can have anything, you just can’t have everything. A big house, a nice car, private schools or Ivy League education for the kids. You have to make choices about how to spend money wisely. 

Potential money trap: lifestyle changes

It’s the Diderot effect, essentially. A sudden accumulation of wealth that makes you think things like, “Someone with a nice house and car like I have should also have a big-screen TV over the fireplace and a perfectly manicured yard.”

We have an idea of the things befitting a physician and what the lifestyle should look like, not just from an external societal perspective but from our own internal expectations.

Potential money trap: private child care and education

If you have three kids that you’ve decided to transfer from public school to private, that single shift on its own is a big expense. Maybe you also decide you want to shift from their regular daycare to having an au pair for more flexibility,and we’re talking about a hugely significant expense increase when you were already paying substantially for school and childcare for three to begin with. You’ll have to sacrifice in other areas to be able to sustain those decisions if you don’t want to fall into a financially trapped situation. 

Potential money trap: experiences

Travel has a ton of appeal for newly minted attending doctors. You’re finally not tied down by training and you have money to spend, so why not? Experiences are one of the more expensive categories, but behavioral finance literature also says it makes people happier. Why? There are 3 reasons. First is the anticipation leading up to the experience, second is enjoying the company of the friends or family you get to see during the experience, and third is that you get to create memories for after the experience is over. 

Creating more joy with your paycheck

According to behavioral finance, experiences also double in the happiness category as a way to create more joy for yourself with your paycheck. Maybe you don’t want to sit in the nosebleeds for a concert or sporting event, so you spring for season tickets or floor seats. 

Another way to create joy could mean spending a little money to make your life easier, like hiring a housekeeper to take care of cleaning or ordering some of your meals already prepared. 

Happiness can also come from spending money on others, whether that’s charitable giving through a foundation or helping someone you know personally to meet a financial goal. 

Ultimately it’s up to you to decide how to make the most of your paycheck, but we hope these insights help you better understand how to spend your money wisely as a physician.

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