The responsibility of my first attending paycheck felt huge. I had never felt so “poor” with my largest paycheck ever coming in the mail. I realized that I had to make smart decisions now that I had more money at my discretion, and this column is about how I made those decisions and the ‘mistakes’ I made.
First, the regrets:
- I should not have waited to be an attending to start prioritizing saving 20% of my income for retirement. In residency and fellowship, I saved some (4%-14%), although I mostly focused on going out, traveling, and enjoying the little free time I had without holding back. That doesn’t mean I went into debt, although I wasn’t as frugal as I am now. I wish I had started saving earlier (compound interest!), although I also enjoyed myself during a rigorous period in my life. It’s water under the bridge.
- I did not convert my pre-tax retirement savings from training into a Roth account when my pay was low during fellowship. Not the end of the world, but a missed opportunity nonetheless to consolidate funds, mainly due to a lack of timely knowledge. Likely, I won’t do this now that my income is higher.
This is a summary of my thought process around the decisions I made with my 1-2 years of attending paychecks, together with my husband, who is non-medical.
#1 Take Stock of Goals, Debts, and Essential Expenses
If you haven’t already, take stock of the situation. When I started my first attending job, I had a child under the age of 1, had just gotten married, and had bought a car on credit because we needed a safe family SUV. Now, I wonder if we really did need a new car after reading this column.
Making a retrospective or, better yet, a prospective budget is the gold standard. We tried You Need a Budget (YNAB) and ultimately went with a low-tech Excel spreadsheet to record our monthly and quarterly Is and Os. Of course, this starts with doing a deep dive into debts like school loans, credit card loans (strategically at 0% and used for the wedding), and a car loan. Repeat for your significant other, if applicable. We also needed to do a very deep dive on expenses—both recreational and essential. Looking back on the previous quarter of credit card statements, Venmo transactions, and debit card transactions was how we built this budget.
More information here:
Doctors Need to Budget, Too (with a Few Examples)
A Tale of 2 Budgets
#2 Review the Waterfall
The next step was the hardest because there were so many buckets for the attending paycheck money to go into. We wanted to buy a house, I wanted to pay off our car and student loans, and the credit card loan needed to be zeroed out immediately (no-brainer). Then, there’s retirement, retirement matches, Backdoor Roths, and bills. Something that I did not realize was that, although my lifestyle did not get upgraded upon becoming an attending, having a child and keeping them in childcare definitely put a dent in the budget.
Looking at WCI blogs, I feel like this reality is not highlighted often, probably since it’s considered an essential expense. But $2,000-$4,000+ a month in childcare is a big deal.
#3 Consider Bringing in a Professional, Doing a Course, or Reading More
Before making the waterfall decisions, we ran the plan by a few financial advisers and CPAs during intro calls, and they agreed with our plan. We strongly considered using a professional to guide us with our finances, even though I was not surprised or particularly impressed by anything that any one person shared with us. Rather than paying a flat fee of $350-$500 a month for someone to babysit our money, we did it ourselves, largely guided by the principles found at WCI.
#4 Make Time-Sensitive Decisions Early
If you are transitioning from training to an attending job, you’ll have some time-sensitive decisions, like converting pre-tax retirement contributions to Roth, if you choose to do that. Don’t miss your window as I did. Also, fund your Backdoor Roth in the first few months of the new tax year, if you can. Squeezing it in during the month of December can result in errors and extra paperwork.
#5 Slowly Start Making Some Decisions
It was scary to start allocating money, especially without a hired guide to enforce the decisions. We followed the waterfall blog to guide our decision-making, and even though my first few paychecks may have accumulated for a few weeks while we built up the courage to make payments, I resisted doing anything stupid, like buying material goods or going on a luxury trip. We almost bought a house, which may have been a stupid decision, but that fell through.
Ultimately, we prioritized 1) paying off credit card debt; 2) making car payments (refinanced at a rate 2% lower and eventually paying it off in one year); 3) retirement saving; 4) saving for a down payment; 5) maintaining the same quality of living as in residency, which meant traveling about every 4-6 weeks while keeping the trips cost-effective; 6) and waiting to buy a house until we have a solid ~20% down payment (this was a difficult-to-accept reality of delaying a home purchase).
More information here:
Being a First-Time Mom and a New Attending Surgeon: It Can Be Done
The Gender Role Reversal: Being the High Earner of My Family as a Woman
How to Get What You Deserve as a High-Earning Woman
#6 Check in Quarterly
Like with most things, routine and maintenance are important. Every quarter, my husband and I have a “financial date.” It involves recording all of our spending and allocations in the very rudimentary spreadsheet that I created and seeing how it compares to the last quarter, in terms of recreational and essential spending. We revisit priorities for funds and assess whether we feel on track with our goals. This date used to include a lot more differences of opinion, but as time has gone on, we are now more aligned.
This may, in part, be due to his surrender.
#7 Evaluate Your Income vs. Cost Savings
If you’re doing all the right things and are still very slowly creeping toward your financial independence, you have two options to speed up the process. This same principle applies to business decisions, too, and it has been a real eye-opener for me.
- Option 1: Cut costs
- Option 2: Increase income/revenue.
If you’re sticking with the “live like a resident” plan, there is only so much you can cut costs. I personally have become a little too cheap—even for my own taste—and it’s a bit of a burden. For example, I obsess over my Buy Nothing group on Facebook, second-hand everything, and try to get the absolute best value on purchases, namely groceries. Many of my friends know me as a Costco spokesperson. And I do LOVE Costco. I don’t see that changing when I am further along in my attendinghood. But it is also really important to reflect on your attending income and make sure it is at least average for your specialty and area. It is mathematically easier to increase income rather than reduce costs when you’re already doing the resident lifestyle approach.
So, arm yourself with data and knowledge and get out there and crush it, one attending paycheck at a time.
Looking to increase your income or renegotiate an existing contract? Hop on over to the WCI physician contract review page, where you can find vetted lawyers and compare your contract to other docs.
What did you do with your first attending paychecks? What expenses were your highest priorities? Did you expand your lifestyle? Or did you live like a resident?
