Comparing your expenses against your income can be a shock for anyone. However, this is particularly true for many doctors — as their salary continues to rise, so do their living costs.
Lifestyle inflation can creep up on doctors as much if not more than anyone. Before you realise it, you’re living paycheck to paycheck. Even if you’re earning a great wage.
Not only does this fuel unnecessary stress, but it opens up the door to debt and blocks retirement and investment opportunities.
Here are some simple ways for doctors to avoid the trap of lifestyle inflation.
Take an honest look at your expenses
A career in the medical sector is demanding. After working a gruelling shift, it’s almost impossible to ignore the internal, convincing voice saying you deserve a reward; after all, you work hard and earn a good salary, you should enjoy it. But then comes the retail therapy, or spending more on that new car. These impulsive buys can greedily eat away at your salary.
To avoid overspending, first look at your lifestyle and identify the big costs contributing to your expenses.
Next, set up a budget to cultivate conscious spending habits. Through a robust budget, you’ll be able to set aside income for important expenses rather than reflexively firing the trigger on costly purchases.
Don’t forget to leave some money to spend on something you enjoy; denying yourself any gratification will only backfire. The key is to manage it.
Advice from a medical wealth expert can help independently assess your financial habits.
Drill down on your financial goals
Just like a goal is always more achievable if it’s measurable, planning for medium and long-term financial goals is easier once actual figures are penned to the page.
If you have a spouse or partner, take the time to discuss your ideal future.
Where do you want to be in five and ten years?
How much do you want to earn in ten years?
What would your ideal retirement look like?
When do you want to retire?
What are your lifestyle goals?
Sitting down with a professional who understands the unique financial needs of doctors can help you set realistic wealth goals and advise you on investment options that suit your income and future plans.
With goals in place, you’ll be much more accountable and smarter with your money.
Don’t forget the debt
Many medical professionals study for longer than most people. By the time they enter the job market, they’re often behind and carrying debt.
Before going after any big goals like investing, you need to prioritise paying off all debt. This could be credit cards, a car loan or student debt.
The key to successfully coming out of debt is to focus on the high interest items and stick with your plan before increasing your spending. You should get professional advice about your approach.
Shift your understanding of success
One of the simplest ways to avoid lifestyle inflation is to think of success differently. Constant comparison between yourself and colleagues or friends will only drive that insatiable desire to have more.
Validating your success through big-item purchases, like a new car or a big house you can’t afford, doesn’t prove your significance to others.
Instead, re-evaluate what you own. Continually check your spending decisions against the principle of how the purchase adds value now and into the future.
Get focused and prioritise
You’re incredibly busy. And because of this, it is hard to stay on top of your financials and set yourself up for success. With a little professional help, doctors thrive. As medical wealth experts with specialising in accounting, financial planning and wealth strategy, we’ll make sure lifestyle inflation no longer impacts you. Because no medical professional should have to worry about money.
Contact us for a free initial discussion about your needs.
The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.