Thinking about getting a new 78” 4K Curved TV? Our favorite online retailer has it “on sale” for $5997.99 with free shipping! As a high income doctor, you can afford it right? You probably could, but you’re really paying much more than you realize.
Imagine that you are a neurosurgeon in California who works 80 hours a week making $700,000 a year. Surely you can afford this fancy entertainment gadget, right? Suppose you are a real baller and pay $6000 for the TV, $500 for a wall mount, and another $500 for the handyman to install and mount the TV to your living room wall. After all, you’re a brain surgeon.
So for $7000 out the door, you have a nice shiny new TV that you hardly have time to use. (For simplicity, we won’t include the recurring costs for satellite or cable of at least $100 a month.)
As a high-income married earner, you immediately put yourself in the 39.7% federal marginal tax bracket (for 2014). You are also in the 11.3% marginal state income bracket in California (on top of the $54,054 fixed tax: see: https://www.ftb.ca.gov/forms/2014_California_Tax_Rates_and_Exemptions.shtml).
You will have to earn roughly $14,285.71 using marginal tax dollars in California to pay for that $7000 TV! If you run your own practice with a 50% overhead, you’d have to earn twice that!
While we can look into the cost in more detail and account for the exact numbers, the conclusion is that we need to be aware of the real cost of the ancillary amenities we buy—it is much higher than the price tag we see and possibly eats into our savings more than we realize.