I graduated from residency over 10 years ago, and I still remember it as one of the most exhilarating times of my life.
More than anything, I was ready to start practicing and making a difference in my patients’ lives. But in addition to my excitement about work, I was thrilled about the new life ahead of me.
Finally, I’d be able to afford all the things I had to sacrifice through residency. I could get a nice car, take my family on vacations and send my kids to excellent schools.
No longer was I a sleep-deprived, chained-to-the-rounds resident. I was an employed physician, and I intended to celebrate.
At the same time, I knew I needed to be responsible. My physician compensation was enviable — I was making enough to be considered among the nation’s top 2% of earners. One of the first things I did before I started my new job was create a financial and investment wish list.
At that point in time, I had a very clear picture of what I wanted my future to look like. I saw myself happy, financially well off, supporting my family and saving for a comfortable retirement.
But then, a funny thing happened. I kept putting off my savings plan. I said to myself, “Right after orientation, I’ll buckle down and figure out savings.”
I didn’t.
Then I said, “Once I’ve completed a few months of practice, I’ll get it all figured out.”
I didn’t.
Finally, I said, “After my first kid is born, that’s when I’ll start saving and investing. I can’t afford not to.”
Ten years later, I still hadn’t contributed to savings or investments. Though I owned nice material things and lived a very comfortable lifestyle, I wasn’t putting any money aside for the future. When I finally sat down to do the math, I realized something eye-opening:
If I didn’t change my lifestyle, I would have to wait until much later in life to retire. Even with my impressive salary, it would take a lot of time to make up for the ten years’ worth of savings I could have been putting aside.
How did this happen? I wondered.
I’d simply stretched my earnings too far. It’s so easy to just spend what you’ve got — that’s true if you’re making $100,000, $200,000 or millions.
You don’t have to live a meager, boring lifestyle to save. Every little bit helps. The key is being disciplined and consistent with your savings and investments.
According to Jean Wolfe, Principal and Senior Wealth Advisor for LarsonAllen Financial, LLC, if I had invested a monthly $2,000 of my salary into a mix of stocks and bonds right after residency, the average return of my account thirty years later would be $2,683,505. However, by waiting 10 years after residency to start investing, the return would only be $1,131,137.
Granted, these figures are based on the past history of the stock market, which does not guarantee future events. But as you can see, it makes a big difference to get started early on.
I encourage all young physicians to spend some time learning about savings and investments immediately after residency. Over the last four years, I’ve worked hard to make up for the 10 post-residency years that I didn’t save or invest. I’m happy to say that I’m on strong financial ground now, but I could have made things easier on myself if I had developed a long-term financial plan right after residency.
I have two main tips for new physicians: First of all, don’t put off financial planning. There is no better time to start than now, and you’ll be thankful you did later on.
Second, watch all of the “extras,” as I mentioned earlier. No matter how much you make, it can be tempting to spend it all. A good savings and investment plan doesn’t require you to live like a peasant. The best way to stay on track is to pay yourself first every month. With every paycheck, you should always pay into your savings or investments before spending money on other things. If it helps, just think of your savings as a bill that you have to pay.
Check out the Finance Basics Stage in the Adventures in Medicine Resource Library for some more eye-opening stats and great tips.
Best wishes to all of you. Please pass this post along to others who might benefit from it.
-Dr. Akbar
What steps are you taking to create a comfortable financial future?
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