Does stuff Own You?

By Dave Denniston CFA

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Have you ever wondered…
Am I spending too much? Will I ever be able to retire?
As a matter of fact, I think we can sum it up in a few short words in the form of a question…
Does ‘stuff’ own you?
You may own ‘stuff’ legally. However, emotionally I see many physicians owned by their ‘stuff’ rather than the other way around.
What do I mean by that?
Let’s explore 3 signs that you may be owned by your ‘stuff’.

Sign# 1: You have high amount of monthly obligations
As I look at different physicians that I’ve worked with over the years, they fall into two different camps: there are savers and there are spenders (and of course many of us lie in-between). Check out the best 12 pieces of advice that I could possibly give to either of these groups.
The spender physicians are some of the kindest, most wonderful people. They are giving and they are dreamers. They take amazing trips and vacations. They work super hard and play hard.
They are also often burdened with a whole bunch of monthly payments. Here are some common examples:

• Car leases (usually on luxury vehicles- like Mercedes, Tesla, BMW, etc)
• Car loans
• Sending kids to private school
• Timeshare loans
• Have mortgages over $500,000 and payments that are over $3,000/month
• Taking home equity lines of credit to pay for home renovations (or separate loans for a pool)
• Tremendous amounts of student debt that are barely budging (avoiding to refinance)
• Own a second home that also has a mortgage

If this resonates with you, here are some immediate actions that you can take to improve your situation:

• Commit on a go-forward basis to buy big ticket items like cars in cash. This can be super hard, but you can do it!
• Find an amazing public school for your kids rather than an expensive private school
• Dump your timeshare by selling it to a reseller (for pennies on the dollar) or simply stop paying the maintenance dues
• Downsize your home (this could be easier said than done depending on the size of your family!)
• Consider finding a job in a place that pays a much more substantial salary and/or has a lower cost of living. For example, in Alaska, I’ve seen many primary care physicians make $300k+ a year- which is often $100k to $150k more than they’d make on the West Coast or East Coast (plus home prices are wayyyy lower there too)
• Refinance your student debts to get them paid off as soon as possible at a lower interest rate
• Sell your second home

Sign# 2: You are working a tremendous amount of hours to support your lifestyle
Due to all of these obligations, there’s this crushing pressure to perform financially.
I’ve seen many of these wonderful people taking on locums opportunities in order to stay ahead. Many of them are working a full-time gig plus locums on the side.
They are working more than 80 hours per week and they wonder if they can keep up the pace.
As a matter of fact, they are on the fast track to burnout.
How can they possibly get off the hamster wheel where they are racing, racing, and racing and never able to get off?

Here are some guidelines that may be helpful:

• If you are in a tough situation and need to do locums, commit to doing it for a short time period (less than 1 year)
• While you are in that period, block out time in your calendar every week to review over your finances. Keep a running total for the month of how much you’ve made, how much you’ve spent, and how much you kept. This doesn’t need to be super detailed. Actually, the simpler the better. Below is an example of a spreadsheet that my family & I use. Mint and other similar programs are great, but I think there’s power gained in manually typing in numbers. It forces you to review it carefully. You’ll see that we’re tracking a few goals and really keeping an eye on one category of our budget. We love traveling and we’re socking away money to fund those goals as well as buying a new car in cash.

Sign# 3: An early retirement is out of the question
Another way to track “does your stuff own you” is by examining if an early retirement may be out of the question.
You may be wondering- how do I know if that’s even a possibility?
If we go back to our earlier exercise of tracking personal expenses, a simple run of thumb to find out if you can retire today is to…

1. Find out your total amount of assets and your total liabilities. Write down those numbers.
2. Subtract your total assets and your liabilities- this is your net worth.
3. Multiply your net worth times 4%. Write down that number.
4. Multiply your monthly expenses time 12.  Write down that number.
5. If your 4% net worth is lower than the monthly expenses x 12, I’d suggest that you aren’t there yet (Heck, I’m not- but I’m also not looking to retire today).
   

Here’s another slightly more complex set of rules of thumb to track your progress if you have a significant amount of time away from ‘your number’.

1. Take those monthly expenses and find the average. (Hint: Use ALL the monthly expenses, don’t discount vacations or new cars, more than likely you’ll do those in retirement as well)
2. Then, multiply them times 240. Write down this number. This is your target number.
3. Take your monthly savings and find the average
4. Multiply that number times the number of months remaining for the target retirement date. Write down that number.
5. Find out your total amount of assets and your total liabilities. Write down that number.
6. Add together step#4 and step# 5. Compare that to step# 2.

If your assets minus your liabilities + savings (the total from step 6) are less than your target number (the total in step 2- in my case about $2,000,000), then I’d suggest that you still have some work to do to be financially free.

If we look at my situation, we’re averaging $4k/month savings. I’ve got about 14 years (168 months) until target retirement. That’s a total savings of about $672k (with no growth). Our total assets minus liabilities are around $1 million. So, we’re currently quite shy of that goal!
55 might be more realistic for us based on our current savings habits based on these rules of thumb.
Keep in mind these are just a couple of simple exercises. Financial planning is significantly more complicated when you take into consideration inflation, growth rates, salaries, taxes, etc.
As you do a little bit of math and if retiring by 45 or 50 or 55 is completely out of the question- I suggest that it’s time for us to take a long look in the mirror and re-examining our habits.
Did you realize the impact that some small tweaks could have financially?
It’s all about putting yourself in the position to succeed.

Final Thoughts
Let me leave you with two questions…

• Does your stuff own you?
• Or do you own your stuff?

I challenge you to go through these exercises and examine your heart, examine your numbers, and examine where you are headed.
In addition, if you are in a clinical position today, consider how taking many of the steps we discussed could lead you to pursue opportunities in non-clinical jobs where there may be less pressure and less burnout.
Make sure to take the necessary time to look over your money and understand the impact that your decisions are making on you today and in the future.
I believe that you are amazing and have such a bright future ahead of you. Great things are ahead!
What do you think? Are you owned by your stuff or is your stuff owned by you?

More Advice by Dave Denniston- The New Retirement and Finances of Business vs. Hobby

About the Author
Dave Denniston, Chartered Financial Analyst (CFA), is an author and authority for physicians providing a voice and an advocate for all of the financial issues that doctors deal with. He also has 1 wife, 2 kids, and a bunny named Black Snow (which is a lot better of a name than Yellow Snow).
If you’ve enjoyed this guest post, you can learn more about his adventures in financial planning, liquid investments, illiquid investments, & much more nonsense by finding his latest blog post and videos
The opinions expressed are those of Dave Denniston and The Capital Advisory Group and are subject to change based on market, tax, and other conditions. The information provided is general in nature. Consult your investment professional regarding your unique situation. Securities offered through United Planners Financial Services 800-966-8737, Member FINRA, SIPC. Advisory Services offered through Capital Advisory Group Advisory Services, LLC. 5270 W. 84th Street, Suite 310, Bloomington, MN 55437, 952-831-8243, United Planners and Capital Advisory Group Advisory Services LLC are not affiliated.