Physician finance isn’t your run-of-the-mill financial strategy. We have certain exceptions and special circumstances to watch out for. And sometimes even the most seasoned pro can make money mistakes. We’re still human, after all.

So let’s normalize the idea that we’ll run into snags and learn new lessons as we work to figure out our personal finance goals.

Here are a few of the money mistakes we made in 2022 to get the ball rolling, as well as the ways we try to mitigate those mistakes. This way you can see some of the thought processes we use in our personal finance strategies even (or especially) when we make human mistakes.

Money mistake: overspending on vacation

One of our biggest mistakes in 2022 was overspending on vacations.

Lisha is pretty diligent when it comes to day-to-day expenses, but when she goes on vacation, she mainly budgets for the big items. The flight, the hotel or the resort are given…but then there’ll be an excursion that her friends convince her to do, or she makes a stop at the spa to get a massage, and before she knows it, she’s spent more than she planned.

I took my family to New York City where we bought Broadway tickets (which by the way, for a family of five is stupid). But also, the weather wasn’t great. I was looking for indoor things to do and found that the Rangers were playing. I love going to pro hockey games. My son Wesley had never been, and so I brought him to the game, which of course was an extra expense.

Madison Square Gardens in New York isn’t cheap, but it was incredible. So yes, we didn’t really budget for it, but I wasn’t going to avoid spending the money out of a scarcity mindset.

Consider a sinking fund or a spending plan

One of the ways to deal with vacation overspending is a sinking fund. By taking X percentage of dollars that come out of either my paycheck or bonuses, I create a separate vacation fund. Then I’ll spend a portion of it on a trip knowing that there’s still some money left in that sinking fund if I decide that I want to spend more.

Another way Lisha and I both try to mitigate our overspending is by having a spending plan.

We don’t assign a job for every dollar, we just pay attention to know ahead of time how much we can spend every month. So even though we don’t keep track of every single purchase, we do keep track of where we are versus our overall spending limit for the month.

Money mistake: incorrectly calculating taxes

I underpaid my taxes in 2021 by $15,000. In April of 2022, I had to write a $15,000 check, which was exquisitely painful, even though I had the emergency fund to cover it.

To avoid that pain again, I decided I would take extra steps to make sure I didn’t underpay my 2022 taxes.

So this year, instead of underpaying $15,000, I overpaid by $27,000. How did that happen? I was expecting some income that I didn’t end up taking home for my business – I reinvested it. And ended up with a massive overpayment.

Lisha had to pay around $3,000 in taxes this year even though she only owed about $500 last year. She forgot to take into account that she now lives in California, where state taxes are higher. Plus, when you make 1099 income, you have to pay self-employment taxes, which cover both sides of the FICA taxes.

Money mistake (sort of): skipping the backdoor Roth IRA for 2022

I had a very large need to have cash on hand in 2022 because of some business dealings that I had going on at The Physician Philosopher. Because of that, I skipped my backdoor Roth IRA for 2022.

There’s a saying in personal finance that cash flow is king, and so having some cash on hand is paramount.

We weighed the pros and cons and decided that having cash on hand was more important than doing our usual backdoor Roth.

I’m mentioning it as a mistake, although I don’t really view it that way. It was a very intentional decision. But from an outward appearance, if someone knew I made $400,000 a year and skipped my Roth IRA, they’d be like, “What? Why? Like, I can’t believe that. That’s ridiculous. You should always do your backdoor Roth.”

And to that, I would say personal finance is personal. Sometimes situations in your life come up that necessitate you making tough decisions and that was a tough decision that we made in 2022.

Lisha mentioned that she also couldn’t invest in her Roth IRA within the 2022 calendar year due to extra expenses. But thankfully for Roth IRAs you have until the tax filing deadline, so maxing out her 2022 Roth IRA was something she did earlier in 2023.

Money mistake: not planning for unforeseen expenses

Not everyone has a hefty emergency fund like I’m fortunate enough to have for unexpected expenses (like say $15,000 worth).

Lisha pointed out that she ran into more expenses than she planned in 2022. Even though she has an emergency fund she is diligent with, it’s not a super large amount, especially as a fellow. When she started her fellowship, she didn’t realize how many expenses she would have to pay for upfront. Like her board exam fees for sports medicine, conference registration fees, hotel fees.

Yes, these things are reimbursed through CME dollars, but oftentimes the reimbursement process is not very efficient. So Lisha was using large portions of cash to pay for these very necessary expenses, which got her in a bind.

She remembered being very stressed about that on top of moving to California, which was not the cheapest thing. She realized, “I like to invest money and I like to be very diligent with my finances, but one of the things that I should probably do is keep a little bit more cash on hand than I did in the past.”

Cash flow is king.

Make physician finance work for you

Any spending plan or money goal should fit your personality and fit your personal goals. It’s important to realize that you can be very intentional with your money and you don’t have to do anything just because someone else is doing it. Make sure it aligns with your values.

We don’t pretend that we always have it right every time. Hopefully you learn from some of the things that we went through and find some value in the intentional thought processes we used in 2022 to sort through some of the situations that came up for us.

Apply it to your own life and make it work for you. As we always say, personal finance is personal.

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