Luxury Items

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After a decade or more of being broke, a new attending may feel overwhelmed with the sudden surge of cash.  When those big paychecks start rolling in you might be tempted to start splurging on luxury items.

No one would blame you for being tempted.  Self deprivation has its limits and most physicians spend their twenties watching their non-medical friends earn and spend way more than they do.  Now it’s your turn to drive that Mercedes, buy that vacation home and fly first class, right?

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I’d suggest that there is a better type of luxury item.  Like other luxuries, these are out of reach for the average American. They may not be flashy status symbols, but they certainly add to your pleasure and comfort.  Here are some luxuries that your physician income can afford you.

Knock Out Student Loans

The average medical student graduates with ~$200,000 in student loans.  You could refinance and slowly pay them off over the next decade.  You could hope to qualify for Public Service Loan Forgiveness.  Or you could do what I did which was work hard, live below my means and pay off $225,000 in loans in 2 years.

person with chain link ball on foot
Set yourself free.

I have never once regretted getting that albatross off from around my neck ASAP.  While I paid off my last student loan at age 30, many of my colleagues in their 40s are still dutifully making their minimum payments each month.  Eliminating that debt was one of the best gifts I ever gave myself.  Why not treat yourself to the gift that keeps on giving?

Pre-funding Roth IRA

The majority of Americans don’t take advantage of an IRA.  In fact, one TIAA survey found that only 33% of Americans have an IRA and only 18% of Americans actively contribute.  82% of your fellow Americans aren’t going to contribute a penny to an IRA in 2019!

One of the luxuries your physician income can afford you is to fully fund your backdoor Roth IRA at the beginning of the year.  Every January 2nd my wife and I max out our Roths.  Sending thousands of tax-free dollars to my future self sure sounds luxurious to me!

Using HSA as an Extra Retirement Account

A health savings account may be the best retirement account of them all.  There is no income limit, the contributions are tax-deductible, the money grows tax-free and when you withdrawal the money you don’t have to pay taxes (if you use it for health expenses).

Most people will have to tap into their HSA for big healthcare expenses, but your physician income affords you the option of leaving that money undisturbed to grow for decades.

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Feed the piggy and watch him grow!

Prepaying Mortgage

The personal finance community will debate the merits of prepaying your mortgage until the end of time.  Historical data would suggest that you are better off taking those extra principal payments and investing them in the stock market.  Although that might be true, one of the luxuries of your high income is that you can afford to pay off your mortgage early (even if the math can’t justify it).

home real estate
Home sweet home is sweeter when you own it.

How many shifts a month go to paying for your house?  How would your attitude towards work change if your biggest bill was eliminated?  How much less money stress would you experience with that sudden bump in extra cash every month?  How luxurious!

Megaloading 529

Most parents worry about how they are going to afford college for their children.  Most students will have to rely on student loans, while some parents will be able to afford to cash flow the tuition payments.

accomplishment ceremony education graduation
Those caps represent more than a million dollars.

You know what’s even better than busting your hump in your 50s to afford college tuition?  Having already saved enough for college by megaloading a 529 account.  In 2019 the limits for a 529 are either $15,000/child/year.  You also have the option of a $75,000  lump sum that covers 5 years of contributions.

My youngest child will start college when I’m 53.  My goal is to have enough saved in everyone’s 529 that I could afford to retire the day I move him into his freshman dorm.  Paying for college will be my last financial hurdle to achieving financial independence.

Working Less

This may sound like sacrilege to my fellow workaholics, but some physicians actually use their high income to cut back their work hours.  After pre-paying your mortgage and pre-saving for your kids’ educations you will suddenly find yourself with more cash than you know what to do with.  Why not use this as an opportunity to start cutting back?

I’m probably not the best person to get advice on work/life balance from (I’ll leave that to Physician on FIRE and Crispy Doc), but eventually I will use this income to get out of working nights, weekends and holidays.  Once I achieve morbidly obese FIRE I will even cut out my easy side hustles.  Can you think of a better luxury than that?

Cancelling insurance policies

The main purpose of disability and life insurance is to replace lost income that you or your dependents is counting on.  After years of working and saving, you will eventually become financially independent.  Once you no longer need to work for financial reasons the final luxury is cancelling these insurance policies.  I’m not there yet, but eventually I will be able to save thousands a year on insurance premiums.

Lap of Luxury

Most luxury items provide fleeting pleasure.  Your big dumb house will end up owning you.  Your sports car will lose its luster.  The country club membership will become a money pit.

There are some luxury items that keep getting better with age.  You will never regret being debt free or being able to cut back your work hours because you achieved financial independence.  I’m not saying you have to live like a monk.  There is plenty of room in a physician’s budget to have fun.  Just remember that there are some luxuries that are truly priceless.

What do you think?  Which of these luxury items is your favorite?  Looking back, is there any splurges you regret spending money on as a new attending?  Share your thoughts and comments below.

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14 thoughts on “Luxury Items

  1. I have definitely adopted this path of luxury and found it has given me far more happiness than what the average person views as a luxury item.

    I made the mistake of letting my student loans drag on far too long (17 yrs after graduation) and that was one of my big financial mistakes, but once that weight was off my shoulder it set a chain of events that made me want to reproduce that feeling by paying off any remaining debt I had. Paying off the mortgage and being completely debt free was the best financial achievement for me.

    I have been debating front loading my daughter’s 529 and probably will do so this year to coincide with receiving a huge profit from the sale of my office building I am part owner of. I do treat my HSA as a stealth IRA and cash flow any medical expenses. Not to the point where I have decided to cut out the insurance policies (I have a return of premium rider on my life one that sort of puts me in the sunk cost fallacy and I carry it for that reason too). But all in all I am glad to see I have hit the majority of your luxury items.

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  2. I’ve been blessed to do all on your list. Plus I’m at a point where I can afford non-fake watches: what’s the story of that Rolex knock off?

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    1. 99% agreed on the nonsense of wasting money on luxury items, big houses, cars etc.

      Bujt I would make an excemption for the Rolex watch, which is an outlier of the peergroup. To be fair, very few watches hold or gain in value, but some brands have stand the test of time (Rolex Sub/GMT/Daytona, Omega Moonwatch or a classic Patek) and can even be a way to diversify a portfolio with low correlation to the stock market.

      Would consider it as another alternative to physical gold, but with a different yield perspective..The market liquidity is usually not that bad for the best known models. .Of course, as with every investment, we should know what we are doing before buying..

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      1. That last sentence sums it up for me. I don’t know a thing about watches. I’m sure there are people who have seen solid returns on their investments, but I’ll stick to things I understand. Plus, my watch gets blood, puss, puke and occasionally guts on it at work. I wouldn’t want to marinate my investment in ER stew.

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  3. I have done most of the things you talk about also. I have an expensive watch that I love. My new Apple watch. The Rolex thing was big in the 80-90s. I had several friends making payments on a Rolex. Never understood that one. BTW I am probably going to buy a big dumb house today with cash. The beauty of financial independence.

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  4. Your talking my kind of luxuries, SHS. A close friend bought a Patek Philipe because he’s into the finer things, and he truly enjoys it. I have no problem with that.

    I rock a plastic-encased digital Casio I bought used for under $20 at an REI garage sale. As you allude to, being an ER doc’s watch is a hard knock life. If I had to give it a sporty name, it would be the Effluvia 100, so named for the various body fluids it has been exposed to in the ED over its long lifespan.

    We just funded the dual backdoor Roths, the HSA this month, and that makes me feel like the king of the world. I don’t mind that my crown is the same beat up Red Sox hat I’ve worn for a decade and a half. Different strokes make different folks feel they are living richly.

    Thanks for making me feel like that much less of an outlier.

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    1. I have a similar 15 year old worn out Phillies hat I wear while steadily investing in these luxuries. There’s no possession that feels as good as financial independence. I thought that as I got closer to FI I would loosen the purse strings, but the longer I have this high income the less I feel the need for material things.

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