When we see ourselves every day it’s easy to miss the subtle changes that happen over years. Then in a moment of reckoning—stepping on the scale or putting on an old pair of jeans—we are left thinking, how did I get here? The same thing can happen to our finances.
As a dentist you have paid the price of endless hours sitting in a classroom, taking on loads of debt, and years of delayed gratification. You deserve to cash in at some point. But like sugar adding inches to our waistlines, lifestyle creep is a common offender when it comes to our finances. With lifestyle creep, more focus should be on the creep than the lifestyle. Designing your lifestyle with the long term in mind is critical to finding financial fulfillment. Those who are able to align their values with their wallet usually have two things in common: They 1) prioritize and 2) have a system.
Prioritize
Unless you are Warren Buffett or Jeff Bezos—when it comes to money—you generally can’t have it all. Seems logical. Most people get that. But often our actions tell a different story when the rubber meets the spending road. When a 35-year-old ortho tells me he wants to be financially independent in 10 years and then goes out and buys a $2 million house and a brand new $100,000 car, there is a misalignment somewhere. Maximizing fulfillment around spending requires arranging values from most important to least and then deploying our money towards those priorities. Don’t tell me what you value. Show me how you spend and I’ll tell you what you value. If a big house and new cars are top of the list, that is perfectly fine. Just understand those purchases very likely push financial independence farther down the list. If the goal is financial independence as soon as possible, that means you will probably be required to cut somewhere. Financial planning is simply navigating trade-offs—understanding everything has a cost. You just have to figure out what cost you’re willing to pay.
Have a System
“People do not rise to the level of their goals, they fall to the level of their systems”
James Clear
Motivation alone is too fickle and fleeting to rely on over the long term. Instead, have a system for success. Step one, get organized. If you want to lose weight you have to know your starting weight. Same with your money. If you want to build wealth, first you have to know where you stand financially. That starts with knowing your net worth. Simply put, net worth is all of your assets minus all of your debts. It is critical to track your net worth 2-4 times per year in order to monitor progress. Next, have a system to monitor your cash flow. Tracking leads to awareness—the starting line of progress. A 10-15 minute monthly checkup is usually all that’s needed to start down a path of more thoughtful spending. Finally, when it comes to savings, instead of having a whatever-is-leftover mentality, make it automatic. Think of savings just like your mortgage—a bill that must be paid every month. Pay your savings bill of 15-20% of your gross income first. Then spend whatever is leftover.
Conclusion
Just like mindlessly snacking—not noticing the pants getting tighter—it is easy to slip into the unconscious trap of spending in the moment with no thought of the long term. There is a difference between designing the lifestyle you want with intention and letting a lifestyle you never wanted in the first place creep up on you over time. The latter is generally what leads people to say things like, “Money can’t buy happiness”. I say it can. If spent on a foundation of intention and reflection money can add richness and meaning to your life.