Of all of the questions I’m asked on a regular basis, “How much should I be earning?” seems to be the most popular among new physicians.
Many of them live in fear that they’ll accept an offer that’s far too low, or they’ll find out that their peers are actually earning much more. The horror!
Of course, the first thing I tell residents and new physicians is to research the market. Find out how much physicians earn depending on location, and find out the averages for your specialty. Then, determine how “in demand” you’ll be given an area and its population. That will give you a good ballpark figure.
However, the thing that I see new physicians overlooking — and it’s something they shouldn’t be overlooking — is how much money they need. Personally. Not in comparison to their colleagues, and not in comparison to their neighbors, but how much money they would personally feel comfortable with supporting themselves and their families.
Yes, it’s good to know you’re earning in the norm or above average compared with other folks. But when it really comes down to it, shouldn’t you be earning for yourself and your family, not other people?
I’ve devised a simple formula that any physician can use to determine whether a salary is adequate, above average or beyond healthy. Best of all? You don’t have to consider your specialty or your experience. You only have to consider your needs.
Use the first worksheet in Stage 4 of the online resource library to follow along and record your notes.
Step 1: Determine Your Financial “Needs”
Your financial needs are the items that are absolutely necessary — they’re payments you have to make regardless of your level of income. This includes basic housing, utilities, clothing, food, transportation, and payment of student loans. You would continue to spend on these items even if you were running out of money.
Step 2: Determine Your Financial “Wants”
Wants include things that aren’t absolutely necessary, but they’re things that would make life rather boring if you didn’t have them. These include tings like modest vacations, eating out on occasion, a new car every few years, and a home in a nice neighborhood. Keep in mind that “wants” will very for every individual.
Step 3: Determine Your Financial “Dreams”
Items in the “dreams” category are certainly not necessary to live a happy and fulfilling life. These can include items like a sports car, a second home, a yacht or expensive jewelry. Again, these will vary for every person.
Step 5: Add Up Your Costs
Determine how much it would cost to live with just your needs. Then, how much it would cost with your needs and your wants. Finally, come up with a rough figure for how much you think it would cost to live a lifestyle that included all of your needs, wants and dreams. Think about how much the items will really cost, and be realistic and honest when calculating your figures. As a simple rule of thumb, be sure you calculate 10% of your income for retirement if you’d like to retire at a traditional age.
Step 6: Find the Perfect Income
You will be most happy if you’re making enough money to meet your needs and wants, and possibly even a few of your dreams. However, keep in mind that there is always a price to pay. If you’re earning big, you might be slaving away at work, with no time to enjoy the things you worked so hard for.
I’ve known a lot of physicians over the years, and the ones that are most happy find positions that are in line with their values, interests and lifestyle expectations.
The secret? It doesn’t really matter whether you’re making $125,000 or $500,000. It matters that you’re able to balance your work and life priorities so that you’re able to enjoy the fruits of your labor.
How important is a high salary to you? Is it more important than work-life balance? Do you actively take into account how much your peers are making?
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Though the views expressed above are solely the writer’s, Alexian Brothers supports “The Dose with Dr. Goodhook” and is partnering with Adventures in Medicine to create an open, inspiring and insightful community for residents and physicians. Click here to learn more about ways that Alexian Brothers is making practice purposeful.
