How to break bad money habits, according to the experts

By Naveed Saleh, MD, MS
Published May 24, 2021

Key Takeaways

Physicians work extra hard for their money—and it takes years of study and training to reach full financial potential. That’s why finance experts recommend that doctors maximize saving and investing to ensure optimal financial health for themselves and their loved ones.

Reaching one’s full financial potential, however, is a goal that eludes many Americans regardless of their profession, according to a recent Intuit survey. The company found that 65% of Americans are unsure of how much money they spent last month. To boot, nearly one-third of Americans wished they had spent less money during the past month. 

Fortunately, there are treatments for poor financial habits, according to the certified financial planners we spoke with. Let’s look at their tips.

The slippery slope of luxury spending

Vacation homes, European sports cars, jewelry, and swanky international trips can undo even the best of financial intentions, said Anthony Watson, CFA, CFP, of Thrive Retirement Specialists.

“Physicians work very hard for many years and then suddenly experience significant increases in compensation. It is only natural for a physician to want to reward themself. The problem, unfortunately, is that physicians are not immune to ‘lifestyle creep,’” he said. 

“Lifestyle creep occurs when an individual’s standard of living improves as their discretionary income rises and former luxuries become new necessities. So, trading in that Honda for a BMW, and later that BMW for a Porsche … it would be very hard to go from the Porsche back to Honda. These former luxuries, and new necessities are hard to give up and can become problematic when it comes to wanting to retire,” he added.

Read more about other common financial mistakes at MDLinx.  

Go for the 15-year option

When buying a home, it may be tempting to choose a 30-year mortgage. But beware!

Watson outlined three reasons why the 15-year option is best for physicians.

“First, as a physician, chances are they are already later in life by the time they purchase the home. There’s a good chance using a 30-year mortgage that the physician will end up having to retire with a mortgage payment.

“Second, a 30-year mortgage presents a lower payment than a 15-year mortgage giving the false appearance of greater ‘affordability.’ A 30-year mortgage can lead a physician to buy a bigger and more expensive house than they otherwise would using a 15-year mortgage. A bigger, more expensive house brings with it higher taxes, higher maintenance costs, and higher furnishing costs that can't be shed without moving and follow long after the mortgage is paid and into retirement.

“Third, using a 30-year mortgage, you will pay approximately three times the amount of interest over the mortgage life than you would using a 15-year mortgage.”

Don’t let the salary get to your head

Watson cautions that physicians should avoid confusing high income with high net worth.

“There is a material difference between having a high income and a high net worth,” he said. “Net worth is what you keep from your income. By this definition, a person making $40,000 a year and saving $10,000 a year is better off than a physician making $400,000 a year and saving $5,000. Money problems are relative. Having a high income alone does not protect you from falling into the same money problems that lower-income individuals can face.”

Ditch the credit card

High-limit credit cards and monthly minimum payments are a recipe for disaster for those with impulsive spending habits.

According to Lewis J. Altfest, PhD, CFP, CFA, CPA, PFS, at Altfest Personal Wealth Management, “If you are an impulsive spender, consider leaving your credit card at home. One doctor client I was with fell for an expensive leather coat deliberately put near the cash register, and was saved only by it not being his size. The funny thing was, as soon as he left the store, the coat left his mind.”

The power of visualization

Although money isn’t everything, it is tragic for a physician to fall on hard times during retirement. Here is where visualization comes in, per Altfest.

“If you are a serious dissaver, visualize what that means for your retirement’s standard of living,” he said. “I told one doctor that he would be able to retire on his meager savings if he continues with his spendthrift habits, but a large part will come from social security, and a Saturday night treat will be selecting from a full menu at McDonald’s. It had the requisite effect.”

Want to catch up on your retirement savings? Read more at MDLinx. 

Finding a new hobby

Altfest brings up an interesting point: Spending money is like a hobby, but not the hobby you want. There are plenty of hobbies that require little or no money. These guilt-free hobbies can follow you throughout life, including art, music, and sports. Check out these hobbies that make you a better physician.  

Final thoughts

If you are earning a good salary but having trouble saving despite your greatest efforts, maybe it’s time to enlist the help of a certified financial planner or money manager. Remember that it’s not how much you make today that ensures your future financial well-being, but rather, how much you save for tomorrow. 

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