Physician Spending Habits: Why High Earners Often Underestimate Their Lifestyle Costs

Every time I create a one-time financial plan for a client, I ask a simple question:

"How much are you spending?"

Most people don't know.

We usually know what clients spend on housing, taxes, and debt payments. But everything else is a bit of a black box.

In my experience, only about 1 out of every 4 or 5 clients actually knows that number.

One reason? People rarely think of large "one-off" purchases as spending.

A $10,000 home improvement project.

A $20,000 vacation.

An extra $10,000 family trip.

A new hot tub.

A finished basement.

Landscaping.

The funny thing is... these "one-off" expenses happen every year.

So instead of asking prospective clients what they're spending, I ask a different question:

"How much are you saving?"

In many cases, outside of their 401(k), the answer is nothing.

That's when I pull out my equation:

Spending = Pre-tax Income − Taxes − Savings

For example:

Pre-tax income: $400,000

Taxes (~30%): $120,000

401(k) savings: $24,500

That leaves approximately $255,500 of annual spending.

This shocks people.

The first response:

"There's no way I'm spending that much."

But the math doesn't leave room for debate.

The second response is even better:

"Well... where the heck is all that money going?"

For clients who want to answer that question, many have found the Monarch Money app helpful. (No affiliation.)

One observation...

In my experience, the most effective way to reduce spending isn't budgeting—it's automating your savings.

Most people save the $24,500 in their 401(k) because it never hits their checking account.

The same principle works outside of retirement plans.

Automatically transfer money from checking to a taxable brokerage account every payday.

People tend to spend what's available.

If you want to save more, make sure less money is available to spend.

Schedule a complimentary Exploratory Meeting below.

https://calendly.com/caligiurifinancial/consultatio

Investment advice offered through Stratos Wealth Partners, Ltd., a registered investment advisor. Stratos Wealth Partners, Ltd. and Caligiuri Financial are separate entities. Caligiuri Financial operates as a DBA branch of Stratos Wealth Partners, Ltd. The information contained in this commentary reflects the opinions of Caligiuri Financial. These opinions do not reflect the views of others and are subject to change without notice. Content in this material is intended for general information purposes only and should not be construed as specific investment advice or recommendations for any individual. Please contact your advisor with any questions or for specific recommendations regarding your own circumstances. Investing involves risks including possible loss of principal.

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