Smart Money MD

Back when I was a resident, I lived in a high cost of living area. About one and a half of my paychecks went towards my monthly rent.  I know this sounds crazy as a resident earning about $50,000 a year, but that was my situation.  I probably paid more than what most of my readers pay for their mortgages on an entire house! This wasn’t a nice pad either with a Sub-Zero fridge or Toto toilet either—I lived in a roach-infested studio where the amount of heat I got in the winter was controlled by the building’s superintendent.  But, the trade-off for such an expensive unit was that I felt safe living there…most of the time.

With a skewed budget like that, I did pay close attention to my budget even though I wasn’t attuned to the finer aspects of finance. Cheap cellphone providers weren’t in style yet, so I shopped around frequently if my phone company decided to jack up their rates.  Likewise, I spent a few hours every year on the phone with my Internet provider, threatening to leave their company if they wouldn’t keep my bill the same.

I sweat the small stuff.

Most doctors have some sort of compulsive behavior in their blood.  All financial bloggers DEFINITELY have compulsivity in their fabric too (Yes, if you like spending your weekends plotting out your dividends from your stock market funds, you have compulsive behavior!).  As a busy resident, the time I spent sweating the small stuff could have been probably better allocated to sleeping, studying, or even socializing.  But, I was very aware that my budget had a narrow range before I needed to break out the awesome balance transfer checks that tempted me.

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So lowering my Internet bill from $80 a month to $29.99 a month was worth negotiating for an hour or two each year with the frustrating service representatives.  So was fighting through extra crowds of customers at the cheaper ethnic supermarket.

Total savings of getting your feet stepped on at the supermarket: probably $15 a week.

The savings do add up. And for most families, the $50,000 a year resident stipend could easily feed a family of four.  Saving a few thousand dollars of post-tax dollars a year could help fuel your Roth IRA, 529, or emergency fund. That is a practical use of time and money for that budget.

Once your life gets busier and you begin to command a higher price for your services, the small stuff might actually become too small for your time.  You might not want to drive an extra two miles and wait in line for gas at Costco to save ten cents a gallon.  Do you risk your child’s well-being by using the babysitter who is $1 an hour cheaper? What about $5 cheaper? Or $10?

The decisions become more complicated as more variables come into play.  If you are justifying a minuscule cost savings in exchange for time already in your limited schedule, then it’s probably not worth it.  For instance, if you have to round for 4 hours on Saturday and Sunday morning, then you probably would not want to raise your blood pressure on the phone with a Comcast agent trying to lower your Internet/TV bill.

On the other hand, if you typically spend your weekends building furniture or at the local park with your kids, you could probably spare an hour a year to save $1000 on your Internet bill.  It wouldn’t really matter if you otherwise had a salary of $50,000 or $500,000. I would venture a guess that even some people I know with a $5,000,000 net worth would still be willing to argue with a phone rep to save a grand.

Some people will sweat the small stuff no matter what situation they are in.

Another consideration on savings depends on how much your job allows you to earn more for working more.  If you are an ER doctor, you could probably fill in a few extra shifts and earn a few extra thousand bucks.  You might end up deciding that it’s easier for you to just go to work to earn more rather than going out of your way to save on gas or groceries.  If you really like money and are willing to sacrifice time your time, you could do BOTH.

Whatever your threshold for pinching pennies, make sure you actually have a threshold.  At some point, you have to decide what makes you happy.  Sure, that high sugar, high calorie Starbucks latte might cost $6, but you could swing it a few times a year if it can help you get you through your clinic.

You might also like: Money Does Buy Happiness

What is your threshold for saving a buck?

(Photo courtesy of Flickr)

Most of my readers do not live in high cost of living (HCOL) cities. The financially savvy crowd typically has already done their homework and know all about geographical arbitrage. A doctor in the Bay Area might not even be able to swing a two-bedroom apartment for less than $3000 a month (more like $4500). Guess where all of your salary is going towards if you life there? For $3000 a month, you can get a McMansion in Indianapolis, with a one-acre lot to boot.

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Unfortunately, not all of us have that much freedom. Many doctors are going to be “stuck” living in a HCOL city due to family ties, specialization, or hubris. Hey, Northern California is nice.  You won’t find strawberries better anywhere else in the world.  Who cares if there are droughts, mudslides, and earthquakes? ?

Likewise, there are many doctors in the New York area.  This place is crazy expensive.  I remember hearing some statistic that almost a quarter of all doctors in the United States have journeyed through New York City or are living in one of the boroughs. I suppose that it is a reasonable number due to the dense population and high number of hospitals in the region. For this reason, many of you readers might end up living in the NYC area at some point during your career. Here are some tips to keep more of your paycheck in your bank account while living in the Big Apple:

Rent  

By far, the biggest expense for most people in NYC is the cost of rent or owning. There is almost no real way to cut costs since the real estate market is insane. If you choose to live in the city, getting a roommate may be the most economical choice. You can probably save about 30% on rent with splitting a two-bedroom unit instead of living in a studio or one-bedroom apartment. The cost of rent correlates with vicinity to subway lines and neighborhoods. You have to weigh in safety to cost, as there is obviously crime in the city. One consideration is to live near a college campus where you might be able to get a cheaper rent targeted for students. Rent stabilized units are also an option, although many of these may be in less desirable neighborhoods.  Get on your hospital bulletin boards to look for roommate options and rental opportunities. Sometimes there are professionals who own their apartments but wish to rent them out while they are living in another city training or on a sabbatical.

I assume that most of my readers aren’t in the market to purchase a house/condo/co-op in New York City. If you are flush with money, go on ahead and buy. ? Expect to pay premium HOAs for doormen and building amenities.

Food

There is no Aldi grocery store in NYC, but there are plenty of ethnic neighborhoods with more budgetary grocery items. I wouldn’t necessarily consider these ethnic markets to have a healthier selection of food, but vegetables, fruits, and meats tend to be cheaper in Hispanic markets and markets in Chinatown. The grungier the neighborhood, the cheaper the products.  There are Chinatowns in Manhattan, Flushing, and Brooklyn. Take your pick.  Budgetary Indian groceries can be had in Jackson Heights in Queens.

If street markets or ethnic groceries aren’t your type, you can still find some deals at expensive grocery stores like Fairway and Whole Foods.  These are the markets where you pay $12 for a dragonfruit, or $24.99/lb for salmon that you can get free from rivers in Alaska (Looking at you, LiveFreeMD!).  Produce at these groceries establishes aren’t allowed to have blemishes. And unfortunately when fruits are stacked together in piles, some of them will be bruised. Every day Fairway will have blemished fruit prepackaged in clear bags for about $1.50 or $2 apiece. Sure, you might only get two apples, a pear, and two oranges, but this haul would have otherwise cost $10!

Restaurants are a dime a dozen in the Big Apple. If you live there, you will find your favorite cheap eats.  Ask Yelp, or your friend who has written thousands of Yelp reviews. We live in a foodie world.  The only tip that I have that I rarely see mentioned is dim sum. Yep. Dim sum is tapas in Chinese form. It is typically eaten as a brunch. Each dish is typically >$4 a piece. If you have dim sum with friends, you will likely rack up a hefty bill. If you are in the market for decent dim sum at the minimal price in NYC, go to Ken’s Asian Taste.  Go there, and report back here on your findings.  You will not be disappointed.

Furniture and consumables

For furniture, Craigslist is your friend. It is not easy moving stuff onto or off of Manhattan island.  New York is also a city with many transient residents.  Use that to your advantage. You can even hire movers on Craigslist.

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If used items aren’t your cup of tea, then you can seek your wares elsewhere.  There is an IKEA in Brooklyn, and one in New Jersey.  That’s right, right across the river is more normal civilization.  You can find Targets, Walmarts, and grocery stores with normal prices.   Even if you rent a car for the day (or Zipcar/Uber), you can save quite a bit if you are buying bulk.

Hospital

No matter how much you hate going to the hospital for work, it can be your friend.  Take advantage of your hospital perks, like discounted or free meals.  Procell batteries (first person to comment on this, wins a prize!), alcohol swabs, and the break room are your friends.  Use that hospital gym membership, cellphone discounts, and price breaks that your labor affords.

New Yorkers, what other money saving suggestions do you have?

“Your cholesterol might improve if you’re able to lose 40 lbs!”

“Let’s strengthen those quadriceps before we do that knee replacement”

“Let’s cut back on sugar and carbohydrate consumption and see how your blood sugar  responds.”

Modern day medicine is big on lifestyle modification.  What can we do to improve our health without simply throwing chemicals and medication at the problem?  We promote these strategies in our hospitals and clinics with the intention that it could save healthcare dollars long term.  Even bariatric surgeons who offer the ‘fix’ of weight loss focus on improving metabolism, activity, and the psyche to keep that weight off while maintaining good health.  These recommendations extend beyond the exam room–every daytime talk show has had at least one segment on health. Some shows only focus on health, with @Dr. Oz’s talk show being the sine qua non of lifestyle tweaks to improve your health. Does this work for healthcare? You betcha! There’s no silver bullet for every malady, but these changes spark the conversation.

Is wallet lifestyle modification even applicable to doctors? 

Ten years ago, I would have dismissed the notion of curbing spend as a pertinent strategy of building wealth for doctors.  Look at those commercial real estate developers. Lori Greiner didn’t build a real estate empire by saving money on street parking rather than springing $20 to park in a garage. The Golden State Warriors wins games with their high-powered offense (although the defense helped too).   As a doctor, shouldn’t I be able to go gangbusters, bring in $2 million a year, and not worry about that $5 latte every morning?

Okay, most doctors don’t bring in a 7-figure income annually, but a solid 6-figure income should still be attainable. Isn’t that enough? With a good offense, I wouldn’t have to worry about changing the air filter on my 10-year-old car. I still agree on this principle, and pinching pennies matters less when we become more financially stable.

Related: 41% of doctors have less than $500,000 net worth.

However, most people don’t become financially fit overnight, nor can we reap in a cool 7-figure salary each year straight out of residency (I actually have a friend who actually was able to bring in $1.1 million net his first year, but that is a highly unusual situation). While we are building our net worth, there are strategies to expedite the process without drastically changing your lifestyle.

Five quick lifestyle tips to curb your spending.

1. Sell your excess clothing.  We all have clothing that we shove into the back of our closets. I definitely have shirts that I haven’t worn in years. Once we fill up our closets, we buy homes with bigger closets.  Now, this problem may be more gender specific—most male doctors who read financial websites in their free time probably cycle through a fair share of free t-shirts—but we are all guilty of owning clothes that we don’t actually wear.  Get rid of your clothing and make some money! Sell on eBay or Etsy!  It’s not that hard. The goal is not to make a flip on your old clothing (although there are people out there who make a living on eBay), but to purge unwanted items and get some return on the initial purchase. You will feel better with an emptier closet and perhaps a fuller wallet.
2. Get audiobooks from the library. Look, you’re paying a marginal federal tax of 39% and state, county, and city taxes to boot. You’re paying to get those roads paved and for the public libraries to stay open. You probably also commute a solid 4 hours of your life every week to work. If you listen to audiobooks, save your $10 a week and check out some books through the library. You don’t even have to walk into the library to check out an audiobook! My local library has both Android and iOS audiobook streaming apps (Overdrive) that allows you to check out books. This isn’t going to make you rich, but do it for the principle!
3. Cut down on housekeeping. Look, our time is valuable. About half of my colleagues, especially those with kids, have opted to have housekeeping. It’s a wonderful process. You pay someone and your home magically gets cleaned. The problem is that housekeeping is expensive. If your net worth is still negative or are within a few years after residency, you don’t need to have regular housekeeping. For hardwood or tile floors, use a microfiber mop. Get the most expensive microfiber cloth in existence. You’ll still save money over a weekly housekeeper.  Get a Roomba (or your favorite robot vacuum cleaner). I run my Roomba twice a week. It doesn’t wipe the counters, but it cleans up some of the dust bunnies on the floors. It’s very helpful if you have pets.
4. Don’t be a sucker for expensive furniture, appliances, or fixtures. Your first home (or even your second home) won’t be your last. If you have young kids or misbehaving pets, your couch will take a beating. A $2000 sectional is possibly more comfortable than a $1000 sectional, but you have no need for that $10,000 handmade couch from Bali (yes, this does happen!). Likewise, I have seen numerous doctors and one business administrator who spent tens of thousands of dollars renovating and customizing a formal dining room that gets used 2-3 times a year! A friend of mine also has copper faucets and sinks in his bathrooms. Copper may look nice, but guess what? Your sinks will look like the Statue of Liberty in no time with no maintenance!
5. Be wary of growing into overpriced niche foods. What do you mean overpriced? Take honey, for example. You can buy your standard clover honey at the grocery store, or you can buy Manuka honey from New Zealand. You’ll probably get a 1000% markup from the standard honey. Does this special honey confer health advantages that other honeys do not? The jury is still out, but you’ll surely pay a lot more if you stick it out. Going 100% organic on foods is another sure-fire way to empty out your wallet. There are many ethical and health benefits to consume certain foods ‘organically’, but if financial stability is any priority, temper the high-end grocery purchases.

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Related: How Mustachian can a doctor be?

The lifestyle modifications for your wallet will evolve throughout your career.

Don’t fret! You don’t have to suffer your entire life! I was guilty of lifestyle inflation during residency, fellowship, and during my first job. I was guilty of eating Manuka honey while having a negative net worth. I learned to align my actions with my immediate and long-term goals. Once I reached a certain financial milestone, I readjusted my trajectory.

You can too.  Lay off the Manuka honey when you’re making $50,000 a year as a resident. Once you get the firepower to generate $2 million a year from your job, you can buy all of the Manuka honey you want.

What wallet modifications have you implemented?

(Photo courtesy of Flickr)