You can’t save your way to happiness
Most posts on Personal Finance blogs tend to be about how to stop spending (and I know the vast majority of my posts have been so far). Pharmacists definitely need to be saving and paying down debt, especially since the average student loan debt is likely more than $160,000 now. Our incomes allow us to immediately start saving 15-20% for retirement once we graduate or get out of residency, while still paying down our student loans quickly. We can readily become millionaires without much effort beyond saving in our 401k and investing in passively-managed index funds – which is quite the privilege. Pharmacists uniquely positioned for financial health and independence since on average we graduate with six-figure salaries in our 20’s unlike other professions that take more training, might cost more, or start out making far less.
But we can’t just save… because that is boring and we’ll stop…
While no one likes to talk about budgeting (except for me and most other personal finance bloggers I imagine) – I think it is important for many reasons. The most important one for today is that while we definitely need to plan for our various saving needs – we also need to plan for our various spending desires.
It is often overlooked in my post on having a Cash Management Plan (also known by its ugly common name: a budget) – but everyone needs to siphon off some of our income for fun purchases. We just want to intentionally spend rather than instinctively overindulge. I’m a huge NBA Basketball fan and have been since I was kid. I live up in the Pacific Northwest and spent my entire youth dreaming of having Seattle Supersonic season tickets. I finished my residency and started earning a “real” pharmacist paycheck
in 2007 and eagerly looked forward to getting those season tickets I’d been dreaming about since I was a little kid. For those who don’t know, in 2008 the Seattle Sonic’s moved to Oklahoma City and became the Thunder.
After the Sonics were stolen from Seattle – I resolved that I was going to spend some of the money I wanted to spend on Season Tickets and fly to see NBA games in other cities.
Now flying around the country, watching NBA games doesn’t sound very frugal does it?
How can I justify spending money on something as frivolous as watching basketball in person when I could watch every game on television for $200 total per year?? Because it made me happy. And I handled the rest of my budget-business, so I felt free to “waste” a little.
I decided I was going to save $4000/year (equaling ~$350/month saved) in order to travel around and watch basketball games. I setup a bank account dedicated solely for this and setup an automatic transfer to that account each month.
This worked really well for several years and culminated with me increasing my allocations to the point of buying season tickets for the Portland Trailblazers in 2013 and flying down for games (my plan was to sell off the tickets I didn’t want to use).
So, as you see – your life doesn’t have to be all about not spending on latte’s and eating ramen noodles forever.
This however turned out to be the breaking point for my NBA traveling and spending period, since I ended up taking a bit of a bath on re-selling tickets and I spent more than my budget – which was the final nail-in-the-coffin.
Pharmacists don’t need to focus 100% on saving!
We have worked hard in school and in life, so we deserve to increase our lifestyle spending some to account for this effort. The real trick is not raising it too much while getting in the habit of saving for your future life needs (retirement, paying down debt, etc).
Maybe your “frivolous” spending is on designer clothes, new electronics, charitable donations, eating out at restaurants. It doesn’t matter what you spend, as long as it brings you happiness and you aren’t stealing from your other savings goals.
Life is about making choices and our financial budget is no different. Why was it easy for me save $350/month for flying around to watch basketball games? I choose to save and pay for a reasonable vehicle in cash (I’ll never have a car payment again). Not having a car payment of $300-700/month allowed me the discretionary money to devote to travel; while still meeting all my retirement, insurance, and debt pay-down objectives.
Or you could work to spend less on your rent or mortgage expenses. That might mean having a roommate, renting longer before buying a home, or purchasing a smaller house. Millennials are spending more on their housing than previous generations despite a larger income (adjusted for inflation). This graphic and more information can be found here.
Take home point time
Pharmacists definitely need to get their financial house in-order immediately once their graduate and start making their “real” salary (and even earlier, if possible). But we can’t solely focus on our saving at the expense of any “fun” spending. In the same way that you won’t stick to a diet that doesn’t allow you your favorite foods – you won’t stick to a spending budget that doesn’t allow you to buy the things that you truly want.
We just need to be careful that we don’t escalate our lifestyle expenses so much (and/or so fast) that we become trapped in our jobs and loose our optionality. Hopefully, you’ll be so good at saving and intentionally spending to make yourself happy that you’ll be looking for ways to spend more and create more happiness for others. Life and finance are about trade-offs and consequences (both good and bad).
What do you trade-off in order to have some “fun” money to spend? Did you like seeing an article about spending rather than only reading about saving? Have other thoughts you want to share? Put them below!