Previously we discussed the Pros/Cons of a Two Physician Household and the Complexities of a Two Physician Household. Today we will discuss tips on maximizing your finances in a two physician household.
Recently I have been seeing more families where both spouses are doctors. I don’t recall seeing any rising statistic of this phenomenon, but I suppose that many of these couples meet during their training. Medical professionals are busy—many spend their waking hours in the hospital or doing medical-related activities. They tend to meet at the workplace and hit it off. Spouses in the medical professional also understand the stresses and long hours in medicine. In theory, similar lifestyles should be more compatible. We’ve already discussed the pros/cons of this arrangement.
In this article, we will discuss tips on maximizing the one advantage of a two physician family: high earning potential.
Two Working Physicians Can Generate ALMOST Twice the Income
Two working physicians do not equate to double the income. Federal and state taxes will eat into this couple’s earnings. The income of one doctor will likely bring up the family’s federal marginal tax rate to nearly the highest bracket. This effectively puts the bulk of the second doctor’s income in the highest marginal tax bracket, which is upwards of 39%. Throw in state taxes and half of the second income is taken by Uncle Sam. If you live in tax heavy states like California, Hawaii, New York, or Connecticut, you might lose more than 50% of your income to taxes.
If both spouses are employed, then both will also be responsible for payroll taxes (FICA). That is another chunk up to the first $118,500 earned in 2015. If only one spouse were able to generate the income of both, then they will only have to pay for it through the working spouse. Double ouch.
Two Working Physicians Have HIGHER Expenses
With two working physician spouses, you double nearly all of the work expenses. This includes disability, umbrella, and malpractice insurances (serious money). You double the commuting costs, wear on your vehicle, and wear on the individual. Both individuals also need to maintain work clothing. The costs add up.
Maximize Net Worth Growth By Controlling Expenses
I do know a surgeon and internal medicine sub specialist family who brings in upwards of $1.3 million annually net. Both of them spend most of their waking hours (weekdays and weekends) involved with work related activities. They are machines. Every aspect of daily life that they do is outsourced. The AMG dealership goes to his office to switch out his car for maintenance and leaves a loaner. They have a personal chef deliver healthy dinners twice a week at a cost of around $120 a meal. You won’t see either of them cleaning the lime off of their toilets. Vacations are extravagant and extreme. The surgeon once worked up until 9pm one evening, and went straight to the airport for an international flight for vacation.
This is fine if you can generate serious coin like this couple, but most doctors cannot afford this type of lifestyle. The way a two doctor family gets ahead financially is the same as with anyone else: controlling costs.
A two physician family where each spouse makes $150,000 a year ($300,000 combined) has plenty of options to grow their net worth:
- A significant portion of this family’s income should be directed towards debt and investments. If this family has consumer debt, this has to be eliminated immediately, followed by educational/student loan debt. Half of one’s spouse’s paycheck can be used for living expenses while everything else can be directed towards building net worth.
- Control transportation costs. A two doctor family will have double the commute. Make sure that you aren’t throwing potential savings away leasing a Mexican-made German luxury gas guzzler every 3 years. If you work in the same hospital or location, consider car-sharing if both work schedules are amenable to it.
- Don’t buy more house than you need.
- Think twice before you send your toddler to private school. While the merits of sending your toddler or 5-year old to private school can be debated in another article, it will eat into your net worth. Is it worth it? You decide.
- Be careful about dubious investment opportunities. It seems like many doctors I’ve spoken to are tempted by the prospects of easy money. I’ve been tempted too. Want to buy gold? How about this plot of land that your patient says has natural gas underneath that could be fracked? How about buying some real estate shared on an investment property your co-worker “has the in on”? The truth is that there is no easy money. Your earning potential as a doctor took a decade of blood and sweat to establish. Unless you can predict the future, don’t bet on a get-rich-quick scheme anyone tells you.
- Likewise, be wary of certain investment products pitched to you by your insurance agent. There are plenty of investment strategies like Banking on Yourself and combination insurance-investment vehicles that are clever. Many of these sound better than they really are. Make sure that you are informed about the benefits and conditions that each vehicle entails before you sign up. You can lose a lot of money if you don’t understand what you’re getting into.
- One spouse can consider negotiating a 4-day work week with his employer if it can make your life easier. Having a free day to run errands, pick up the kids from school, or just veg out. If you can grow your net worth by saving on daycare or minor chores, you are even get to save post-tax dollars.
The list serves as a mere guideline to follow. As you build up your net worth and F-You Money towards Financial Independence, each step will matter less.
What money saving measures have you or your spouse implemented? Do you have any tips for two-physician households? Comment below!