Question: How can physicians avoid falling into the trap of status with regards to buying stuff?
First. First, understand that it isn't a character defect. We’re all are subjected to strong signaling about spending and about our socioeconomic status. Simply having that awareness—an understanding that it isn’t a character defect to feel the urge to buy stuff—is important.
And then the next thing is to start looking around for peers, for people you respect, who have stepped aside from that.
One of our most successful clients represents a good example of this. He’s a specialist physician in his early 60s. He’s highly compensated and has a strong reputation. He drives a 12-year-old Honda Civic to and from the hospital. And he’s closing in on eight figures of net worth.
Being Good to You. The easiest way to avoid getting mired down by socioeconomic hierarchy is to make deliberate decisions about your finances when you start practice.
Right, you may say. Here comes the bit about delayed gratification.
It’s true. You’ve spent a lot of time in school. Long hours with relatively low pay. You deserve some relief. Some retail therapy. How can anyone say to a young physician “You shouldn’t buy the stuff?”
But as you make your big purchases, understand that on a very real level you’re not negotiating with your financial advisor, or a BMW salesman, or a real estate broker. You're negotiating with yourself. You're negotiating with yourself in 20 or 30 years. Be sure to have the same empathy and compassion for your future self that you would have for a patient.
Home, Sweet Home. So, what is the number one measure of status? Usually it’s your home.
At the beginning of the house-buying process, you begin to think through what you want and what you need. You may want to be close to transportation or your kid’s school. You may want to be near restaurants and culture. You might begin to think of lots of other comforts a home can provide. It can be very tempting to just step those things up. And especially in a low interest rate environment, all of a sudden you’ve gone from a $700,000 house to a $1.6 million house, and then you’re kind of locked in because lots of other expenses go along with that.
What if, instead, you said to yourself, “I’m going to buy less house than any of my peers with a similar income?” Imagine how your life might be different. Whatever you decide about purchasing a home, make sure it’s an intentional choice.
Two Sides of the Coin. It’s important for you to be aware that there are loads of people in our society who can get paid really well when physicians respond to status cues. That's the other side of status. Unfortunately, it isn’t that uncommon for mature physicians to end up in a place where they’re not in control of their own choices because they responded to somebody else's signals earlier on.
Obviously, any physician would prefer to say to themselves:
“I’ll have no trouble paying for my children’s college.”
“I don’t have to keep working if I choose not to.”
And here is the very good news: physicians who do the right things from day one accumulate significant wealth. There's a point where we, as financial advisors, can tell those physicians, “Look how much you’ve saved. You have official permission to stop taking call.”
Get Metrics. If you're 30 years old and starting out, make sure you adopt a set of metrics that is responsive to your future financial success, because once you have that set of metrics, you’ll be motivated to excel.
Ask yourself what you’d like your future to look like. Follow that with an understanding that the signal is your rate of savings in relation to your income. Make sure that you know the numbers that you need to get where you want to be, and how those numbers are being tracked. You want objective tracking. You want to have the data. Find an advisor who will give you a robust, believable, and understandable metrics.
In Conclusion. As a physician, you’re a member of one of the very few professions that Americans still believe in and trust. You have that respect no matter where you live, or whether or not you drive a BMW 7 Series or wear a Brioni suit.
Do your best to avoid economic status traps and know that we are thankful for what you do.
Another question: Have you ever made a purchase that you later regretted?