Veterinarians: Are your personal finances just 'OK'?
Isaiah Douglass, CFP
Isaiah Douglass owns ID Financial Planning and Wealth Management in Noblesville, Indiana.
Ive been told veterinarians dont care about personal finance or retirement planning. If this is true, doctors, consider this a wake-up call.
You work hard for the money. So why are you beating up on your Benjamins? (Andy Dean/stock.adobe.com)“I have a financial advisor. Things are okay.”
“I'm in the black every month.”
“I don't care about financial stuff.”
If you say things like this, I think you need some help-because whether you face it head-on and try to ignore it, money is affecting your life.
The American Psychological Association found 64 percent of Americans see money as a significant or the most substantial stressor. Roughly one out of three married couples cite money as the top worry they face, and 13 percent of those say they fight about money monthly, according to an American Express survey.
If one of the most significant stressors is finances and it's hurting the veterinary community, why isn't more action happening? How much motivation do we need to get our financial house in order?
Is the problem you don't have a goal?
Maybe it's just hard to get started. Psychology professor Gail Matthews, PhD, researched the art and science of goal-setting and found out you are 42 percent more likely to achieve your goals and dreams just by writing them down regularly.
So, what are your financial goals? Do you have any? Is it a specific dollar amount? “I want $1 million, and then I'll retire”? I've heard that. Frequently, a dollar amount is only given because the person believes it offers them something, and that something is freedom. We all want to have the freedom to live our lives in a manner we see fit and to protect and take care of the ones we love. Money affords us that chance, but money itself does nothing. We also might not need as much as you think.
A report from Princeton shows that among 450,000 people, that $75,000 a year allows for a more profound satisfaction about the quality and direction of one's life. Amounts over and above that do not increase happiness with any reliability.
Saving 5 percent won't allow you to retire and maintain the lifestyle you enjoyed during your working years.
I've been inspired to think about this topic by writing from Elizabeth Dunn, PhD, and Michael Norton, PhD, on the five factors of “happy money,” money spent that adds to your contentment. They recommend you: 1) buy experiences, 2) make spending a treat, 3) buy money to get time, 4) buy to consume later and 5) invest in others. (This Forbes' writer breaks down the lessons of their book.) The challenge is that if we want “happy” money, we must start taking retirement more seriously. But what happens when the paychecks stop?
Will you have enough when you retire?
So, let's run some numbers. Let's assume an average savings rate for retirement of 5 percent of income for the average U.S household-a number from research by JP Morgan). At that savings rate, a person making $75,000 at 30 and retiring at 70 would only be able to have $601,369 for retirement-assuming you save money in a 401(k) with a 3 percent employer match and a 3 percent annual pay raise. Now if we include an estimate for Social Security, you arrive at a sustainable lifestyle of what would amount to $45,000 in today's dollars (remember, inflation eats away at buying power over time). That would offer a retirement in which you have a 27 percent reduction in lifestyle upon retiring (estimate for Social Security income based on earnings and a long-range inflation amount of 2.5 percent). Saving 5 percent won't allow you to retire and maintain the lifestyle you enjoyed during your working years. The bare minimum should be 10 percent, and the target goal should be closer to 20 percent (which can include your student debt repayment, but not your mortgage and car payments).
Part of the beauty of veterinarians is your understanding that money doesn't equate directly to happiness. (Some folks in other professions never get there.) But as you evaluate your life and what you're looking to accomplish, remember that money can be a source of happiness when used appropriately. Look at money as a tool to accomplish your vision.
Isaiah Douglass, MBA, CFP, is the owner of ID Financial Planning & Wealth Management in Carmel, Indiana, a fee-only financial planning firm focused on serving veterinarians across the United States.