I often reflect on how different my life would be if I had not begun building simple habits for financial well-being. Recently, while considering this alternate path, I started researching some financial facts and demographics.
As you can imagine, they were all very interesting -- but also somewhat scary and a pretty good sign that we, as a country and world overall, need to do better when it comes to preparing ourselves and improving our financial literacy.
Now, mind you, these financial facts are for our overall U.S. population, not just physicians. That data is harder to come across and appears to exist only in low-response-rate surveys on social media. But I think you'll agree with me that the facts below seem very applicable to many students and professionals in our field.
1. 58.1% of millennials have less than $10,000 in savings
Now, some of these facts talk about millennials. Your initial response may be, "Well, I'm not a millennial" or "Millennials are so young. Of course, they don't have savings."
But then I did some Googling and it turns out that I am a millennial by definition. This includes anyone 1981 and 1996 -- meaning a lot of early and mid-career doctors fall into this category!
Furthermore, I was part of this 58.1%, until recently. As little as 2 years ago.
But let's make this even more doctor specific. If we increase the cut off to less than $100,000 in savings, I bet this number would be pretty similar...
The fixes to this problem include:
- Intentional spending
- Paying yourself first
- of your gross income
2. Only 30% of U.S. households have a long-term financial plan
Those of you reading this are self-selected and a greater percentage of you may have a plan. But overall, I'd wager the percentage of U.S. physicians overall without a written financial plan is similar.
In my mind, the reasons for this are multifold:
- Doctors don't think we need a financial plan because we make good money
- The process seems intimidating
- We think we can hire people to reliably do it for us. This is because we are used to acting, by oath, in others' best interests...something that not all financial advisors are required to do...
If you do fall into this group, you can review my written and even use it as template to create your own.
3. Americans spend 10.5% of their income on food, on average
This number was probably about right for me when I was a resident. However, now food comprises about 6.6% of my and . This is probably still a bit high, especially considered how big of an issue food waste is -- even in our house where we really try to limit it.
The bigger concept to grasp here is that we need to understand where our money is flowing to. Without full knowledge of our expenses, it's hard to manage or control our finances.
Remember, the formula to build wealth is simple at its core: You build wealth by increasing and investing your margin.
And what is your margin?
Your margin = (What you make) – (What you spend)
And what you spend is always 100% in your control.
So, look at your expenses and see what may need some adjustment. That is how you create savings you can invest to build wealth.
4. 39% of Americans would have a hard time covering an unexpected cash expense of $400
The cost limit here would probably need to be higher for physicians. But a shocking number of physicians still do not have an emergency fund, and would have to liquidate investments or delay addressing an emergency event.
There is simply no reason for that as a high-income earner.
My advice: Keep 3-6 months of expenses as an emergency fund and don't get cute with it...keep it in a
5. Only 24% of millennials show signs of basic financial literacy
Seems accurate for physicians as well. And again, this is not surprising.
Why?
- Lack of education
- Perceived taboo of money in medicine
- Bad or misleading advice
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To take it one step further, shouldn't personal finance be taught in high school and college? Critics will always site a time crunch, claiming there already aren't enough hours to teach the necessary curriculum. But this doesn't jive in my mind.
We learn way too much functionally useless stuff to not be able to find some time to teach the basics of financial literacy. It's a fundamental and critically important life skill.
Thing like: and the.
The Bottom Line
We, as physicians and as people in general, do not have a good grip on personal finance. And unfortunately, financial well-being is a huge component of overall well-being.
Ignoring it can very much lead to burnout, just like I experienced. Also, unfortunately, financial well-being is probably the most overlooked aspect of overall well-being.
As these interesting and scary financial facts indicate, we need to do better. The good news is that we can!
Too often I hear people tell me, "I wish I knew this when I was younger." I do too! But there is never a "too late."
Start your , start increasing your savings rate by , and start investing in . Crawling leads to walking which leads to running. In that order only. We all can do it!
Disclaimer: The author is not an attorney, accountant, or financial advisor. His expertise is in the field of medicine. Any information in this op-ed and its links should not be considered personalized financial advice.
Jordan Frey, MD, is a plastic surgeon at Erie County Medical Center in Buffalo, New York, and founder of .