I love the TV show "The Office." In one episode, Michael, the lovable but hapless boss, talks to Oscar, the pragmatic accountant, about his money troubles. Oscar helps break down Michael's spending, ultimately concluding that the majority of Michael's money is spent on things that "" to buy. Like professional bass fishing equipment.
I re-watched this episode recently and as I was cracking up at this scene, a truth hit me. There was a time before my where I was in a similar predicament. My wife, Selenid, and I spent our full income each month with a 0% savings rate. We even spent beyond our income, leading us to build up credit card debt.
Things changed as we began our financial education, created a budget and written financial plan, and grew our net worth exponentially.
However, many doctors, despite high income, still are working because they have to, not because they want to. Because they need the paycheck to cover expenses.
If this is you, one solution is to increase your income through improved or side gigs, but the most direct and easiest way to fix this problem is to decrease your expenses.
Because -- truth bomb -- if you cannot save and invest at least 20% of your gross income on a doctor's salary (any doctor's salary), the issue is likely a spending problem.
That means you are spending money on things that no doctor ever, ever needs to buy. Like these eight things...
1. Whole Life Insurance
Every doctor who has family that depends on their income to cover expenses needs life insurance. But you pretty much never need whole life insurance.
You want to buy term life insurance. This is insurance that covers you for a set period of time -- usually 30 years. And if you pass away during that time, the covered amount gets paid to your dependents. Once the term is over, the insurance is gone. However, by that time, you and your loved ones should be financially free if you are following my to get there.
2. An Abundance of Medical Association Memberships
There will always be some associations in your specialty that are worth joining. Whether for continued education, interaction with colleagues, or philanthropic support.
But what drives me nuts are the associations that really no doctor needs to buy. For example, someone recently asked me why I wasn't a member of the American College of Surgeons.
My response: Why are you a member? And it was tough for them to spell out any reasons other than having the letters FACS after their name in email signatures.
In my opinion, you don't need those extraneous letters. Your patients don't even know what it means and your colleagues don't really care. And you definitely don't need to pay hefty annual dues to get and keep them.
3. Actively Managed Mutual Funds
Passively managed index funds outperform actively managed stock and bond funds 80% of the time for less fees and taxes. That means that actively managed funds are one of the things that no one ever, ever needs to buy, even someone with a decent income to invest.
4. An Expensive Website
Private practice physicians will need to put more time and effort into their website, of course. But it shouldn't be that expensive.
My blog site, which is more active than most practice sites, costs about $14/month to run.
Yours shouldn't cost more.
5. A Vacation Home
To be honest, I thought for a minute of just listing "a home" here rather than a vacation home. Because in many ways, especially for your first home, renting makes more sense than buying. But there is nuance to that.
What no doctor ever actually needs to buy is a vacation home. Yet, many doctors do. And I know, I know, you're going to use it as a short-term rental -- but are you really? I've heard that before...
If you want to go on vacation, rent a place. Or stay at a hotel. You don't need to buy a place year-round to stay at occasionally, especially with a busy schedule that prevents you from taking frequent vacations.
6. Superfluous Insurance
You don't need insurance on your cell phone. If it breaks, just buy a new one. Any doctor's income can support that. Same with your vacuum cleaner. Or garage door. Or your kid's new toy.
Doctors actually need term life insurance, own-occupation liability insurance, home and car insurance, malpractice insurance, and maybe umbrella insurance.
That's it. Nothing more.
7. A Car Service
There was a very famous New York City plastic surgeon who used a car with a driver to go everywhere. Even just a few blocks to different hospitals. Sadly, he went broke shortly after retiring at a very old age -- older than I can imagine he actually wanted to work.
That example hopefully speaks for itself...
Buy a reasonable car. Drive it yourself. Or use Uber.
8. A Financial Advisor (With an Escalating Fee)
If you want to pay a financial advisor fee, go ahead. If it is the only way that you will invest your money, then it's worth it as long as you are getting good advice.
But you don't need to. The path to financial freedom via investing is one any doctor can do herself or himself.
OK, so, where do we go from here?
The main point I'm trying to make is not that you can't or shouldn't buy anything that makes you happy or makes your life easier. The point is that, even as a doctor and high-income earner, you can't buy everything. The goal is to employ intentional spending so the things you buy actually bring you joy and fit in your plan to reach financial freedom.
And just like Michael Scott in The Office, you need to determine what are needs, wants, and things that no one ever, ever needs to buy.
Then make some changes! Create your savings rate. Invest your money. Begin the journey to financial freedom.
Jordan Frey, MD, is a plastic surgeon at Erie County Medical Center in Buffalo, New York, and founder of .
Looking to improve your financial well-being? Check out Frey's online course, , a comprehensive and interactive 12-module course that helps doctors achieve personal, professional, and financial success during and after their transition from trainee to attending. Or read his best-selling book, .