For newer doctors, avoid lifestyle inflation

Let me share a story about Dr. Sarah Mitchell.

Dr. Mitchell, like many of us, started her career with a resident’s salary, which was around $40,000 per year. After completing her residency, she received an enticing offer as an oncologist with an annual salary of $350,000.

However, instead of succumbing to lifestyle inflation, Dr. Mitchell made a financially savvy decision.

She committed to living on an annual budget of $60,000 for the first two years after completing her residency, which included her initial resident’s salary of $40,000 and an additional $20,000 raise from her new oncologist position. She saved and invested the remaining $290,000 each year.

After accounting for taxes, this amounted to approximately $188,500 annually.

But there’s more to the story. Dr. Mitchell was fortunate to have an employer who provided her with an annual match of $35,000 in tax-deferred investments. So, factoring in taxes and her employer’s match, she effectively saved and invested $223,500 per year, which equates to roughly $18,625 per month.

So, did this two-year decision pay off?

During the first two years, Dr. Mitchell saved and invested the difference between her new annual living expenses of $60,000 and her oncologist’s income. This added up to a total of $447,000 over the two-year period. While this sum alone is impressive, the real magic happened when she allowed her investments to grow over time through compounding.

Dr. Mitchell invested in a diversified portfolio that yielded an average annual return of 7 percent. With the power of compound interest working in her favor, her initial savings of $447,000 grew substantially. Here’s how her wealth evolved over the next 15 years:

Year 2: $447,000
Year 3: $488,470
Year 4: $534,228
Year 5: $584,670
Year 6: $640,230
Year 7: $701,379
Year 8: $768,627
Year 9: $842,537
Year 10: $923,734
Year 11: $1,012,905
Year 12: $1,110,805
Year 13: $1,218,278
Year 14: $1,336,272
Year 15: $1,465,853

By year 15, Dr. Mitchell’s financial decision had transformed her initial $447,000 savings into an impressive $1,465,853 without any additional savings!

While this may not appear as astronomical, especially considering her high earning potential as an oncologist, it’s essential to remember that this is money she didn’t have to actively work for during those 15 years. Instead, her investments were doing the heavy lifting.

This financial cushion gave Dr. Mitchell tremendous peace of mind and the freedom to make choices aligned with her passions and values. She no longer felt the financial pressure that many doctors experience.

So, what can we learn from Dr. Sarah’s journey?

It’s not about earning the most money possible; it’s about making smart choices with the money you do earn. By living below your means, saving, and investing wisely, you can create a financial foundation that allows you to live life on your terms.

To achieve financial freedom, avoid lifestyle inflation!

Amarish Dave is a board-certified neurologist with over 20 years of experience in both neurology and active stock investing. In addition to his medical career, he holds a background in business from the University of Michigan and has successfully passed the SIE exam administered by FINRA. Dr. Dave is founder,, a website dedicated to educating doctors at all stages of their careers, ranging from residents to retirement, about financial planning.


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