I'm Struggling to Live on $160,000 a Year: MD Lament

Dennis G. Murray, MA


June 03, 2011

In This Article

Oh, Those Greedy Doctors!

Despite what the general public might think, many physicians who struggle to pay their bills are far from being spendthrifts. They don't drive a Mercedes, they don't belong to a country club, and their spouses don't shop at Neiman Marcus. Sure, they might donate a little too much to the arts or splurge on an expensive vacation or a flat-screen TV, but nothing too out of the ordinary.

A number of factors could contribute to making it legitimately difficult to feel flush on $160,000 a year, say financial experts. Even though a majority of American families live on less, it's still not outlandish for money to be tight.

Some of the factors include:

  • Size of the student debt that you are repaying;

  • Number of children, and definitely the number of children attending college;

  • Size of your mortgage and/or the size of your mortgage in relation to your current income. For example, if you took on your mortgage when your income was higher -- perhaps before reimbursement cuts -- then too large a proportion of your income is now going to your mortgage. (And woe to those of you who took out a variable rate mortgage only to see the interest rate reset much higher);

  • Other circumstances, such as supporting elderly or ill parents; and

  • Losing much of your savings in a bad market or bad investments, with the result that you've got to save much more each week to stockpile for future income.

Still, in many cases, feeling strapped on $160,000 a year comes from overspending: whether it's spending too much on certain items, such as a luxury car or a second home, or merely going out too often to very expensive restaurants. Then there are the less obvious yet sometimes questionable expenses. For instance, some primary care physicians send their young kids to private school or to a pricey summer camp because that’s what doctors are supposed to do. As a result, money that should be saved for the parents' retirement gets siphoned off to pay for current expenses.

Some Questionable Expenses

"Education is important, but ask yourself how much your kids are really going to benefit by going to private schools, especially private elementary schools," says Robert M. Doran, president of Infinity Wealth Management, in Wantage, New Jersey. "For some students, if discipline is a problem, a smaller school might hold them to a higher level of accountability. But for most kids, public schools are fine."

The decision to send even one child to a public high school instead of a private high school can save as much as $10,000 a year, money that can be used to pay down debt or save for retirement. Parents can apply the same logic when it comes to community or state colleges vs private universities, at an even greater annual savings. One couple featured recently on CNNMoney.com saved $50,000 on their son's undergraduate degree in architecture by sending him to a community college for 3 semesters before he transferred to a more prestigious school.

Put the same energies into all of your spending decisions, especially if you’re fresh out of residency: Do you need the 3000-square-foot house when something more modest will do? The BMW instead of the Honda? Will a week in the Adirondacks recharge your batteries as fully as a week in Rome?

"A lot of doctors struggle to maintain a high-spending lifestyle that began when they finished medical school and decided to reward themselves for all the years they worked hard and sacrificed," says Matthew J. Kelley, president and CEO of Gold Medal Waters, a wealth management firm based in Colorado. "In my experience, they may overspend on the home and it often continues from there."