Building wealth part 1: my humble beginnings

After working for a while as an attending and making an OK salary, I started realizing that I'm not getting any richer as the days/months/years went by. We were still renting a small 2-bedroom apartment. Yes, we finally got rid of that clunker and bought 2 new mid-priced cars(one American made, and another Japanese). No, we haven't gone on those expensive vacations. And yes, we were maxing out our 401k's. But we had no savings or investments outside of our 401k to speak of.
So the only thing I was noticing was that I was getting older. And I didn't like that. Well, there's nothing you can do about flow of time. But I thought I should be getting richer while getting older and I wasn't. So, where did all that money go? We started monitoring our spending. Turned out, we didn't spend them on anything big. That was it, NOTHING BIG, but everything small. Expensive gifts for our friends' and relatives' birthdays. Nice dining out. Starbucks 3 to 4 times a week. And so on and so forth. So we started thinking every time we were about to swipe them credit cards: do we really need this? and if yes, how log do we envision using it? Would it really improve our quality of life?
Since we started doing that, I stared noticing more money left in our checking account at the end of each month. Still far from the riches, but it was a start.

You might be a prime target!

There's this nice article from Bankrate.com about our "class system" about the financial industry targeting so-called" mass-affluent" with investable assets from $200k to $1mil.( and ,obviously, above). Sure, the more you give them to invest "on your behalf", the more money they'll be able to make off of you in fees!!

http://www.bankrate.com/brm/news/retirement/20071101_American_wealth_a1.asp

Who is looking after our money

In general, in a relationship between a professional and a client (such as in doctor-patient, or lawyer-client), it is a known that the clients interests are supposed to be put first.
In an interview with Bill Moyers, John Bogle, the founder of Vanguard Funds, gives his view of a current state of financial industry.(the interview was given before the fall of Bear Stearns, by the way). Especially interesting to me was the last partof his interview, when he states that nowdays, the corporations are run in the way to maximize the profits for its managers and NOT
for its stockholders. He calls it "manager's capitalism" It's not about creating value anymore, it's about the most efficient way of extracting the value for its managers.
In addition, he talks about that gargantuan debt we racked up in the past decade.

http://www.pbs.org/moyers/journal/09282007/profile.html

Financial independence

For me, the true definition of wealth is financial independence.What does this mean? Well, if I can stop working for money (and may as well continue working just because I love medicine-taking care of patients-academic pursuits etc.), then I'll be truly financially independent.
Which means that whatever collateral income I have (retirement funds, savings, real estate etc.) should bring me exactly what I spend each month. How achievable this goal is depends on my financial needs and expenditures.
Therefore, I don't look at high income as a mesure of wealth. You can be poor even with the high income if you have no savings/investments and assets to your name. Stuff you might be acquiring with your high income (and that incudes nice cars and big houses, in addition to flat screen TV's and titanium golf clubs) does not bring you any closer to true wealth.

Food and doctors

One of the major money wastes that I encounter in everyday life is related to food: I don't see too many hospital workers, including doctors, bothering themselves by bringing luch to work. Even as simple as having breakfast at home is too big of a deal, it seems.
Most of my coworkers drink coffee bought from the hospital cafeteria, which is a branch of a nation-wide of above-the-average(in terms of prices) fast food chain. Also most of them order breakfasts and lunches from the take-out places.
The daily expenditures for this can easily amount to $10-15 a day ( $3 for breakfast, and at least $7 for lunch, and a cup or two of coffee in between).
NPR today had a nice program about teaching doctors to cook healthy meals in less than 20minutes, titled" Doctors Get a Crash Course in Healthful Cooking"
http://www.npr.org/templates/story/story.php?storyId=89883788

Conspicuous consumption

Conspicuous consumption pervades our society. You can see poor people wearing brand name clothing, listening to iPods and playing hand-held video games. You can see middle class people driving expensive cars, living in big houses in swanky suburbs.

Neither group can really afford those luxury items.Nevertheless, the message from the society at large is to maintain your status, to show(mostly to others, but to themselves too) that you've made it. This notion is what makes people to spend, spend at all costs. Take on those ARMs, consumer credits, HELOCs etc. Max out those credit cards. We live only once, you know.
70% of our GDP comes from consumer consumption. That is, our economy is totally dependent on it.

It's a small wonder that a notion of building of true wealth is more of a counterculture.
In a way, the beautifully wrapped box becomes in and of itself a goal instead of its contents.

Who is rich?

Who can be called "rich"("affluent", "wealthy")?

Most people would define this category by income ( and I don't). With the median annual US household income of around $47,000, are those making more should be considered wealthy?

Would making $100,000 a year make a person wealthy? Maybe $200,000? The prevailing societal notion of wealth = high income. Even more so, as I stated in my previous post, certain professions by default are considered to be wealthy. And with wealth, conspicuous consumption should follow( I hope to add on conspicuous consuption among professionals later).

Not all agree with such definition, however.

Big income- and still no money?

One of the reasons I wanted to start writing this blog was the fact that most of the doctors I know(and some other professionals, such as lawyers and engineers) are struggling financially.



Readers who are not doctors themselves or don't have a family member who is a doctor can be very cynical about such statement. "Yea, right!.." "Poor doctors!" " With a six-figure income, they are struggling"

The notion of a wealthy doctor is ingrained in our society .If you ask 100 random people who the wealthy people are, most would name doctors and lawyers.(in big cities, responces will include investment bankers and stock brokers). Mothers still dream of their child becoming a doctor or at least marrying one.



Doctors themselves, especially the younger ones, would probably disagree.
And not necessarily because they know what their outstanding student loan balance is ( for college and med.school). And not necessarily because of all those years of delayed gratification ( 3 to 8 years after med. school in residencies and fellowships).
It's probably because when they are finally done with all their training and become attending physicians with a better salary they do not feel any richer that when they were residents or fellows. And most of them ARE not any richer.

In my posts that are (hopefully!) to follow, I'll try to explore this seeming paradox.

Blog created

Welcome to my newly created blog.

I'd like to dedicate it to hard-working doctors of all specialties .However, those personal financial matters I'd like to share with my readers apply to everyone-doctors or not.