By Dr. Jim Dahle, WCI Founder

Not long ago, I had someone on the Milestones to Millionaire podcast who achieved a significant net worth milestone despite making a ton of financial mistakes. He had purchased unnecessary whole life insurance, spent some time day trading, and made similar mistakes. None of them seemed to slow him down much, however, because of what he had done right. They were simple but critical things. He had earned a lot of money (over seven figures a year at times) and saved something like 50% of it. It actually is pretty common—even the norm—on that podcast to have people who didn’t optimize every little thing in their financial life but got the most important things right.

St. Peter famously said, “Love covereth a multitude of sins.” St. James said, “He that converteth a sinner from the error of his way . . . shall cover a multitude of sins.” Well, in physician personal finance, a high savings rate covers a multitude of sins.

You know, the savings rate. Take what you put away for retirement this year and divide it by your total income. That’s your savings rate. Five percent is bad. Twenty percent is good. Thirty-five percent is career-shortening. Fifty percent is phenomenal.

Making a lot of money often comes with some downsides—difficult education, long years of training, hard work, ridiculous hours, onerous call, management of others, high taxes, liability, business risks. It may be worth it, but few get a really high income without doing most of those things.

Saving a lot of money only comes with one downside. You have to spend less.

Yeah, spending less can be a drag (at least below a certain amount). It can be a pain to shop for deals and carefully consider what you purchase. But look at what you don’t have to do. You no longer have to optimize everything else, and soon enough, you’ll be wealthy enough to not even have to earn and save all that much.

People Who Don’t Save Enough

It’s pretty easy to identify undersavers. They’re worried about all kinds of things. They’re looking for all kinds of financial tricks. Save more money, and all that stuff goes away.

• You no longer worry about which credit card to use to get the most miles, because you can just buy the ticket with cash.
• You no longer worry about what a safe withdrawal rate looks like, because you’re not going to be anywhere near it in retirement.
• You no longer worry about how much leverage to use and how and when to pay off your debts . . . because you don’t have any and don’t need the leverage anyway.
• You no longer worry about your asset allocation. Any asset allocation is good enough.
• You don’t need exotic investments. You can maintain a simple portfolio.

Are you worried about all that stuff? Save 1/3, 1/2, or even more of your income, and you won’t worry about it for long.

More information here:

Saving for Your Future Stranger

How to Start Saving for Retirement

How to Save Money

I find it fascinating that saving money is such a controversial and personal thing. That’s because saving money is just the flip side of spending money, and everybody wants to think they don’t spend money in a bad way. Spending is very wrapped up in our values and who we really are. Plus, it can be addictive.

Yet I run into people who have no trouble whatsoever saving money and others who struggle and struggle to do so. Obviously, the more you make, the easier it is to save a large sum and even a larger percentage of that income. But even among people with similar incomes, some are savers and some are spenders.

Here are some tips to save money. You don’t have to take them all. In fact, I would not expect that. But you need to take enough of them that you become at least enough of a saver to meet your financial goals.

1. Don’t live in a big house in an expensive part of town. While it’s easier (and saves even more money) to never move into it, moving out of it into something smaller works, too.
2. Move to a place with a lower cost of living. That might mean a new state, a more suburban or rural area, or just a new neighborhood. Keeping up with the Joneses is real. Find cheaper Joneses.
3. Move to a state with lower state income taxes. A single doc in California making $400,000 in taxable income pays $34,000 in state tax. If they moved to Utah, they’d pay $19,000. If they moved to Nevada, they’d pay $0. That $34,000 earning 8% per year for 25 years grows to $2.5 million, more than many doctors have when they retire.
4. Shop. Actually take the time to compare your car insurance, your home insurance, your cell phone plan, your prescriptions, and anything else you buy. Sure, it takes a lot of effort, but a penny saved may be two pennies earned depending on your tax rate.
5. Look at your subscriptions: Netflix, Disney+, SiriusXM, Amazon Prime, Dollar Shave Club, Hulu, Paramount+, Spotify, the gym. It all adds up. Can you get rid of half of them? I bet you can.
6. Stop buying stuff.

It’s my favorite Saturday Night Live skit of all time. Because it’s so true. What can you stop buying? Restaurant meals. Take out. Airplane tickets. Concert tickets. Cars. Toys. Clothes. Alcohol. Expensive teams and activities for your kids. Do you have to stop buying it all? Probably not. Do you have to stop buying some of it? Probably.

7. 7. Look at the big rocks. Housing and transportation are big rocks in many households. In physician families, the big rocks may be private school. Or maybe a nanny or other household help. Or health insurance. Is there another way that is almost as good but dramatically cheaper? Probably. You could do public school or get Grandma or a neighbor to watch the kids or use a health sharing ministry or a high deductible health plan.
   8. Learn to be content with inexpensive things and inexpensive activities. Downhill skiing is a lot of fun. But it’s not cheap, especially when it involves the whole family . . . in another state . . . with a helicopter. OK, even without the helicopter, it’s expensive. Going to the library isn’t, though. There is lots of other stuff that is fun but which is not a good financial decision: four-wheeling, boating, snowmobiling, owning a small plane. Just don’t do that stuff if you want to save money.
   9. Earn interest. Don’t pay it. The problem with spending money is that you often spend money you don’t have. And that leads to interest. And interest starts eating up all of your income. The US government paid 8% of its income in interest in 2022. That looks pretty good compared to a lot of households. But some of us pay 0%. My kids know that interest is something you should earn, not pay. Do yours?
   10. Actually calculate your savings rate and share it with an accountability partner. Mathematician Karl Pearson said, “That which is measured improves. That which is measured and reported improves exponentially.” I agree.

Save a bunch of money if for no other reason than it’ll allow you to make a whole bunch of other financial mistakes while still being successful.

What do you think? What’s your savings rate? What mistakes has it bailed you out of? Comment below!