Consider these three financial truths:
Truth #1: High incomes do not protect you from financial pain.
We, physicians, have the opportunity to earn millions of dollars over our medical careers doing work that we love. But income isn’t the whole financial story. The ability to build wealth is about the relationship between earning, saving, and investing.
When you manage an ICU patient, for example, you look at the Is and Os. A singular focus on income when building wealth is like a singular focus on input when managing an ICU patient—it’s an incomplete picture.
You might have read about Oseola McCarty. Oseola worked as a washerwoman for seventy-five years, saving every penny she could. Soon after she retired at the age of eighty-six, she discovered to her great surprise that her scanty monthly savings had grown to nearly $300,000. After her death, she left a trust of $150,000 for scholarships. She lived within her meager income and still saved.
On the other hand, you can outspend your income, no matter how much you earn.
Truth #2: Physicians are not immune from outside economic and social forces.
You participate in a global, national, regional, and local economy. The financial health of institutions and people around you contribute to your own financial health in many different ways.
Truth #1: High incomes do not protect you from financial pain.
We, physicians, have the opportunity to earn millions of dollars over our medical careers doing work that we love. But income isn’t the whole financial story. The ability to build wealth is about the relationship between earning, saving, and investing.
When you manage an ICU patient, for example, you look at the Is and Os. A singular focus on income when building wealth is like a singular focus on input when managing an ICU patient—it’s an incomplete picture.
You might have read about Oseola McCarty. Oseola worked as a washerwoman for seventy-five years, saving every penny she could. Soon after she retired at the age of eighty-six, she discovered to her great surprise that her scanty monthly savings had grown to nearly $300,000. After her death, she left a trust of $150,000 for scholarships. She lived within her meager income and still saved.
On the other hand, you can outspend your income, no matter how much you earn.
Truth #2: Physicians are not immune from outside economic and social forces.
You participate in a global, national, regional, and local economy. The financial health of institutions and people around you contribute to your own financial health in many different ways.
- Consider how your own personal net worth is tied to the stock market's performance and real estate prices.
- Consider how your patients’ personal finances impact their choices about when they seek medical care, whether they take medication as prescribed, or how long it takes them to pay their medical bills.
- Consider how the security of your income is tied to the financial health of the organization in which you practice medicine.
- Consider how the financial hardships of aging parents, an alcoholic sibling, or a brother-in-law getting back on his financial feet after his business failed impact you. Chances are you will feel compelled to help, and this offer comes with consequences.
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A decade after the global financial meltdown, we are still in the recovery phase. Every year since 2013, the Federal Reserve Board issues a report on the economic health of US households. In the 2017 survey, four in ten adults said that if faced with an unexpected expense of $400, they would either not be able to cover it or would cover it by selling something or borrowing money. -
This past year, the Feds started collecting data on opioid use in this survey. Could people be turning to opioid use to mask financial pain? -
Further, we live in a culture of consumption. We are bombarded with messages that our self-worth is tied to the things we buy. This drives overspending, the main risk factor for financial insufficiency. -
These forces are even stronger for physicians, as we are subject to the “standard of care conundrum.” As part of the culture of medicine, we are taught to systematically observe physicians' clinical practices in our communities and uphold the standards of care. - While these medical standards guide clinical choices, we also look around and observe the cars in the doctors’ parking garage, the private schools to which colleagues send their kids, and the size of their vacation homes. Keeping up with the Dr. Joneses is, in a sense, woven into the fabric of medicine.
Last, we are becoming increasingly impatient.
Attention spans are shorter than ever. We want what we want, and we want it NOW. Think about how annoyed you are when a web page does not load immediately or your text is not returned in 30 nanoseconds. - Wealth-building involves giving up something today for a better tomorrow.
Truth #3: Biology impacts behavior.- We would like to think we all make considered rational choices that promote our enlightened self- interests.
It appears that the biological forces that have kept our species alive shape our behavior in ways that undermine our best intentions. The part of our brain activated when tempted by a second piece of chocolate cake has a difficult time connecting today’s actions— spending or saving—and tomorrow’s consequences. - Humans have blind spots, but we fail to plan for them.
- Often, we don’t know where our blind spots are, and we don’t have a way of looking for the danger that may be lurking there.
- People who go through rehab are advised to avoid people and places associated with the substances they abused. That’s looking into a blind spot to decrease the
risk of recurrence. - Triggers for spending lurk in your blind spot.
Knowing what they are and how to avoid them can
promote your financial health.
Saving is a habit of wealth. It’s also hard! You can make it much easier when you automate it so that you never see the money that is getting saved. -
Part of building wealth is managing the challenge of connecting our current behaviors and their future consequences. This brain wiring just isn’t there for some people.
We fail to have a healthy respect for the challenge of change.
If you want to transform the state of physical or financial health, you have to make different choices.
Change is not easy; we fight our biology to make changes, even when the current reality makes us miserable. Women will leave abusive partners, for example, six times before they leave for good.
Dr. Vicki Rackner