Money Looks Better In Your Bank Than Your Garage

While the statement is a bash on impractical fancy cars that make your garage look pretty, you can substitute in any money-draining hobby, object, or recurring expense. I am not opposed to enjoying our hard earned dollars–we’ve worked long and hard enough–but it is always a good idea to reassess our desires with reality and practicality.

I once had a medical school classmate who asked me why I would ever need to buy a skillet. It was evident that she never cooked anything her entire life. Fast forward 6 months and I noticed that her closet had at least 100 different pairs of designer shoes! Despite the seemingly outrageous expenditures she had, it was clear to me that she was financially set for life. Not from savvy financial sense, but from inheritance money. Thomas Stanley calls this “economic outpatient care”, which is fine as long as the income channel never runs out. Hey, 10 years later, it really hasn’t stopped and she became an anesthesiologist (although I’m not sure if she still works).

The people who actually run into financial trouble are those whose expenditures ramp up as their earning potential increases. This applies to the majority of my doctor readership. We start out dirt poor, generate hundreds of thousands of dollars of negative net worth, and get slapped by insurance companies trying to restrict every single penny doctors deserve while bringing in a low 6-figure salary. Actually, M.B.A. grads follow a similar track, albeit at a more extreme level. I’ve met recent M.B.A. grads who managed to see 22 countries and build up elite airline status with multiple carriers all in a 2-year span during business school! Afterward, they join private equity firms and command salaries in the $300,000 starting range and up to $500,000 within a few years!  The advantage and dangers of such earning potential is that you can build up wealth quickly but can also lose it even more quickly.

If you don’t have a trust fund to fall back on, you have to play an active role in squashing out your debt and building your assets…no matter how big your paycheck is.

You Must Reassess Your Lifestyle Regularly.

Hold onto your receipts or review your credit card bills. Remind yourself what you are spending your hard earned dollars on.  Find out where your earnings are going towards and get angry at unnecessary expenses.  $2,000 a month restaurant bill? $800 heating bill in the winter? Routine last-minute cross-country airfares to visit friends? It doesn’t matter if you bring in $10,000 or $30,000 a month of income. If the expenses aren’t justified or sustainable, cut them out. I am relatively cost conscious but still find myself susceptible to lifestyle creep.

Since I rarely use cash for purchases, I track my expenses using Personal Capital. You can link up your bank and credit accounts to one system and categorize your I/O’s of your finance. Each week I can pull up a chart showing where my income and expenses were directed. They also provide a robo-investment/advisory service at relatively low costs (that is how they make money), but I currently only use the online financial information services. My investments are also categorized and I can quickly assess how much tilt or where my funds need to be rebalanced.

Direct Your Earnings Towards Your Bank

Every time you receive a raise or paycheck, be sure to pay yourself first. This means allocating a fixed amount or percentage of your income towards retirement and investments. Set realistic savings goals that are achievable. I currently allocate 50% of my post-tax income towards savings. Is that sufficient? Yes, but as high income earners who are able to control our expenses, it is conceivable to save up to 70-90% of our income!

Your savings goals will depend on your short and long term plans. Do you wish to reach FIRE? At what age? Do you have kids that you have to put through an Ivy League education? Do you want to be a millionaire or a $5 millionaire? Do you plan to quit your medical practice after five years and start living out of an RV? It makes good financial sense to draft out 5 and 10 year plans (I admit that I have yet to put much in writing either because I haven’t decided if I will settle in my current city or move on). As long as you do have an approximate plan and savings mechanism, you are much better off than the majority of our peers.


It is okay to spend your hard earned cash, but it is also important to reassess your financial goals regularly.

What strategies have you implemented to build your nest egg?

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