When I was growing up, my parents split, and I faced the financial realities of divorce. For me, it meant a new school, new classmates, and living under a new roof with new rules. The change upended our lives for a few years. That’s probably why money has always meant security to me. It’s one of the reasons I was driven to pursue medicine, a stable profession with steady income. Deep down, I wanted to be able to take care of myself- and never have to rely on anyone else to do so. But later, I learned that even those with high incomes can struggle to pay the bills. No matter your income, it takes certain habits and a certain mindset to live on less than you make. You might even look at living beneath your means as a superpower. 

Money is freedom

It wasn’t so long ago I lived on disbursements of student loans, with the knowledge that every dollar I spent drove me further into debt. It was a harrowing time psychologically. I tried to focus on my studies, while I saw my loans grow to six figures. Sometimes, I’d lay in bed worrying about it. But as a student, you need to focus. And the only way to do that is to learn to live with the loans- to develop a tolerance for debt. Unfortunately, developing debt tolerance isn’t always helpful later on!

In residency, once I started making money, I started to think about how to22 tackle my debt. With time and patience, years later, I accumulated a cushion of funds. Once I could reliably pad our household account to around $10,000, we could stop wondering whether there would be enough in there to cover the next bill. I used to time my payments carefully to avoid an overdraft, but now, we could use auto-pay, freeing up precious mental bandwidth. This decreased financial clutter is just one of many reasons to live beneath your means. 

Tumultuous times in medicine

It’s disheartening to see, but with increasing corporatization of medicine, physicians are feeling more like commodities, as they get tossed about by administrators in large organizations. Medicine is still a great profession, but physicians aren’t being universally respected as they used to be. I see it at my own institution, and in the media.

In this pandemic in particular, it’s never been more important to live below your means. Some hospital systems, while cutting back on elective care, are cutting physician salaries at the same time. Worse, some systems are asking for docs to volunteer without pay, despite the risk to themselves and their families. Some facilities lack adequate personal protective equipment, and when one physician spoke out, he was fired. In times like these, there’s never been a better time to have a stash of “F- you money,” a favorite term of J.L. Collins, the author of The Simple Path to Wealth. 

My career was upended at the same time

Just as the pandemic was mounting state-side, my radiology group dissolved. As an independent contractor, I was left wondering when I’d get paid for the work I’d done, and whether I’d be working the next week! I knew I was needed at my hospital, but would some new radiology practice or corporation come in and try to undercut my pay? Would the hospital support us radiologists who’ve provided service all these years?  

In this vulnerable situation, I’m so glad we’ve lived beneath our means. If I was offered a low-ball salary, I could’ve walked away. If we were living paycheck to paycheck, I’d be under duress to accept whatever the new vendor offered. They didn’t know my financials, but could’ve speculated about how rooted we were in the community, and whether we could afford to walk away. If we didn’t have savings, I’d have less leverage to negotiate. Without a stash of “F- you money,” I’d have less ability to advocate for my family. At worst, a new company could’ve taken advantage of that.

If they’d low-balled me, my family would’ve been OK. I could’ve declined, and taken some time off. I’d have looked into other job opportunities or locums assignments. In the meantime, I’d be a stay-at-home-mom who blogs on the side. This blog nets a few dollars per day, and wouldn’t support the family. The reason we’d survive is because we live beneath our means. 

Who’s covering my tail?

As my company dissolved, so did my malpractice coverage and hospital privileges. It was surreal.

Tail coverage is the malpractice coverage for “prior acts:” work I’ve done over the past 6 years. My last company had this covered, until they dissolved and stopped paying the premium. Now, I’ll pay for it out of pocket. Tail coverage will cost me five figures, and it’s just one example of the costs physicians shoulder to practice medicine. That’s why I’m appalled that while other healthcare workers are receiving hazard pay to fight Covid-19, doctors are being asked to work for free. I don’t get it. Who could afford to?

These blunders highlight the importance of living beneath your means. Even during good times (like a couple months ago), we must plan for surprises. When you live on less than you make, you can absorb the financial challenges that come your way. If you’re ever fired, abused, or suddenly under-employed, you’ll need enough savings to absorb the blow, and pivot to your next move. Beyond an emergency fund, consider having a disaster fund. It might save you when you really need it someday.

What got you here won’t necessarily get you there

Since accomplishing my first big financial goal, my peak net worth, we’ve all encountered a new reality of a global pandemic and the associated economic downturn. I have been so laser focused on that net worth goal, but now, I must shift my focus. The most important objectives now are protecting our health and conserving resources. And mentally preparing for that net worth to fall.

I’m also making moves to increase our financial margin of error. I’m refinancing our rental property, so that it becomes more cash-flow positive. This will decrease my monthly expenses as a landlady, in case one of my tenants can’t pay their rent.

Living within your means

If you’re a student, class is out. This might mean enjoying some time outdoors, independent study, and reconnecting with family. If you’re a resident, it might mean repurposing yourself as a phlebotomist or front-line physician. With social distancing and closing of non-essential business, some opportunities to spend have disappeared for the moment. It’s an instructive moment in living within our means, in a way.

At work, I plan to show up as long as I’m well. I’m sharing preparedness resources with administration, I’m doing what I can to keep my team safe. When I return home, whether I’m helping building a lego tower or cleaning up spills, it’s all part of mothering in a pandemic. These simple acts have a new significance, and I’m grateful we are still well enough to do them.

These days, the pretense of society falls away. I load my leather work bag with medicine and supplies. I take my toddler for a walk in any t-shirt I’m wearing around the house. There aren’t many people around to judge. With nothing to do but stay home between shifts, it’s easier than usual to live within our means. We’re focusing on the simple pleasures in the meantime: cooking at home, potty training, and Netflix.

How to live beneath your means

It’s times like these I’m glad we are used to living beneath our means. If you haven’t done so up to this point, or aren’t sure what that could look like for you, here are some ways you might consider trying.

• Rent your living space until you have a large amount of savings. Owning a home is almost always more expensive.
• Choose the cheaper version. For example, I don’t mind cheap coffee or ugly produce: they keep me in the habit of saving. One day I realized I could save money by switching to bar soap. There are always more ways to go cheap, even while living the good life.
• Avoid waste. I save any bit of food I can. When my husband candied walnuts the other day (yeah, I was impressed), and I couldn’t finish the last few, I saved them. They’re in a tiny container, and will make an awesome snack later. I saw no reason to chuck them. Basically, avoid waste if you want a rich life.
• Rethink your clothing. Do you really need so much of it? I like the idea of a capsule wardrobe, and have a small rotating wardrobe myself. It includes relics from years, even decades ago. I am currently writing in shorts from college (which are old enough to vote). And I’ve stopped shopping for sport.
• Look at bad habits: I was in denial about how much money we spent on wine! I’d have a couple of glasses each night, and between me and my husband, we could blow 10-15 bucks per night. Then I thought about the yearly cost of this habit- $3000 a year! For financial & health reasons, I’m glad we cut back. Are there bad habits that are costing you money?
• Hide the funds. I described this approach in 5 Steps to Reverse Your Budget. In short, you can intentionally constrain your budget to help you save more. This approach leaves you free to spend what’s left without stress.

Can you really afford it?

When you’re considering an expenditure, ignore your monthly income. If you’re a physician or high-income professional, your income could bias you towards thinking you can afford it, even if you can’t. I think some students and residents think a big attending salary will absolve them of all their financial sins, but it’s not necessarily true.

The reality is, once you’re a six-figure earner, you’re paying a load of taxes: think a fifth to a third of your gross or more. So basing spending decisions on your gross salary is a mistake. Doing so ignores the fact that that money isn’t all yours. A huge chunk of your gross belongs to the public in the form of income (and other) taxes you’ll pay. So be real with yourself.

You want a new car, and think you can afford it based on gross income? The question you should ask is whether can you afford it on your net income. Also known as your “take home pay,” it’s the money that’s actually yours to spend (and save) after the tax bite. To be honest, when I’m making a purchase, I ignore those numbers too. Because the less you spend, the more room you’ll have in the budget.

Another money trap

As a big earner, you don’t just pay all the taxes- you may still grapple with student loans. For many docs, student loan payments can cost $10,000- $17,000 per year or more. The larger figure is for someone paying back $500k in principal and interest over 30 years. Take a look at your loan amortization schedule to see how much you’ll actually pay for your original student loan balance. It might surprise you how much interest you could save by refinancing and/ or pre-paying like I did (note: now is NOT the time to refi if you’re paying toward PSLF).

One of the reasons I wanted to eliminate my loans was to live below my means more quickly. The loans were a large fixed expense, and I didn’t want them hanging over my head. At our income bracket, there was no benefit to keeping them, since we couldn’t deduct any student loan interest. With that monthly payment, there was less margin between my salary and total fixed expenses. I wanted it gone.

In the short term, with the lump sums I made toward my student loan principal, we had less disposable income. I stretched myself to overpay them. But in the long term, I was claiming my authority over my debt, and belittling it every month. Now that my student debt is paid, our monthly expenses are lower, and it’s easier to live beneath our means.

You are who you hang out with

Another way to live beneath your means is to be around like-minded people who live beneath theirs. Personally, marrying a practical person who doesn’t get starry-eyed about lifestyle purchases is super helpful. Sure, shrimp and lamb are among his favorite foods, but so is frozen pizza. He drives a Subaru, and probably will for life. It would be harder to reach any financial goals if my spouse was a spender.

The way you socialize can determine whether or not your budget is balanced. I once befriended a group of doctors and professionals who liked to go out to expensive restaurants and order everything on the menu. No matter what you ordered or consumed, everyone split the bill evenly. Doing this on a regular basis would be a handicap to wealth accumulation, and it made me feel helpless. I just couldn’t hang with them regularly. Their values didn’t align with mine. 

Great minds think alike

Now I gravitate toward those who have a similar lifestyle to mine. A new friend, a pediatrician, is also the breadwinner of her family. As the one driving the finances, she has a similar mindset to mine. Another friend is a real estate investor, who focuses on investing over spending. Compared to other high-income earners we know, she is frugal. She knows that any money she saves could turn into a rental property. That’s why, even as a doctor’s wife, you won’t find her sporting status symbols. Hanging with these ladies is more fun because we are on the same page.

There’s a physician in my area who died in debt with no estate plan. He left behind a complex family structure, and a mess for his family to sort through. To settle his debts, his mansion sold at a bargain basement price. His widow gets by in a condo, while her fragmented family struggles with legal fees and child support. It’s heartbreaking stuff. We can all do better by our families than this- and the first step is living on less than you make. 

Everybody needs a backup plan

When it comes to inevitable disaster, like a market crash, a pandemic, or both, living beneath your means will keep you sailing through when others struggle. It could even put you in a position to help others.

I’m so used to living on less, that the thought of living above our means feels vulnerable. Planning for financial contingencies makes for a far more comfortable life. In fact, building in financial leeway is a cornerstone of my work-life balance. And in stressful times like Covid-19, we could all use a bit of balance.

What steps could you take to live below your means? Would you like to make more money? Cut expenses? Maybe both? Or maybe this all sounds too restrictive for you.

If I’m a patient tomorrow, gasping for air, will I regret living beneath my means? I don’t think so. One day, after my last breath, my family and my community will thank me for doing just that.