If There’s One Essential Money Habit, This Is It

Money habits — good and bad — are sticky. Once you’ve developed them, they’re hard to shake. So make this one stick, and do it quickly: Save your money.

Your chances of accumulating vast wealth increase dramatically when you make a habit of saving and investing regularly. No matter where you are in your wealth-building journey, it’s critical to incorporate saving into your routine, even if it’s $10 a month.

Saving as soon as you’re able is essential for physicians, many of whom start their wealth-building journeys on their back foot. Most physicians can’t afford to save meaningful amounts until their early-to-mid 30s, which is late compared to those in other high-earning professions. Put bluntly, it’ll hurt you more than others to make common money mistakes or wait until 10 years after graduation to start earnestly saving for your future — owning a home, building a family, retiring, and whatever else you want to save for.

Physicians’ above-average salaries make it easier to play catch-up, but losing 10 years of compounding interest in the market is a tough blow.

According to a survey by Voya, the average American starts saving for retirement at 23 years old — that’s a likely 10-year head start on physicians. (Although, there’s no comparable physician-specific survey, so why not share your starting age in the comments?) Physicians’ above-average salaries make it easier to play catch-up, but losing 10 years of compounding interest in the market is a tough blow.

The math and data behind saving early

The time value of money, a finance concept, proves the importance of starting to invest while you’re young. Let’s say you invest $100 a month in a Roth IRA, earn an annual 8% return, and then withdraw the money at age 65. Compare the results:

If you start investing at age …

• 30, you’ll have contributed $42,000 and have a Roth IRA balance of $230,000.
• 40, you’ll have contributed $30,000 and have a Roth IRA balance of $95,000.
• 50, you’ll have contributed $18,000 and have a Roth IRA balance of $35,000.

The real world backs up the theory, too. Let’s say your $100-per-month Roth IRA contribution was invested in the S&P 500. Here’s what would’ve happened, according to data from officialdata.org (note that these returns are not adjusted for inflation):

• If you invested from 1989 to 2024 (average annual returns of 11.11%), your account would be worth $435,190.
• If you invested from 1999 to 2024 (average annual returns of 8.22%) your account would be worth $156,865.
• If you invested from 2009 to 2024 (average annual returns of 15.2%), your account would be worth $67,278.

Despite experiencing nearly double the annual return rate during the period, someone who invested from 2009 to 2004 didn’t make nearly as much as someone who invested from 1999 to 2024 and suffered through a prolonged sluggish market.

Tips for developing a saver’s mindset as a physician

Automate your saving and investing: The easiest way to save and invest consistently is by setting up weekly or monthly automatic transfers from your checking account. You’re less likely to default on your savings goals if you aren’t responsible for moving your money around manually.

Take control of student debt repayment: Nearly three-quarters of physicians use debt to fund their education, and the average student’s medical school debt is more than $230,000, according to the Education Data Initiative. That’s not counting undergraduate student loan debt, which averages about $30,000 for public university students. All that debt will take a bite out of any budget, no matter the income level.

Debt is the reason that even with six-figure incomes, physicians can find themselves without much to save after paying essential expenses. Still, even when money is tight, having a saver’s mindset will make it easier to fast-track your wealth accumulation when you’re unfettered by debt.

When building your budget as someone with debt, you’ll have to decide if you want to take a debt-first, investment-first, or blended approach. The choice comes down to several factors, including debt load, debt interest rates, expected investment returns, and personal preference. We get into the debt vs. investing decision in another article (and don’t miss the three rules at the end).

Nice things are nice, but it’s important to upgrade your lifestyle only after you’ve thoroughly considered the financial implications.

Follow the “match your splurge” rule: Understandably, locking money away into a savings or investment account is the last thing you want to do with your paycheck as a hard-working physician. You probably want to treat yourself to a celebratory experience or big purchase — a symbol that you’ve made it as a professional. That’s completely fair. It’s important to relish in all that you’ve accomplished.

So, go to that Michelin-starred restaurant or buy those designer shoes. But here’s the catch: Every time you splurge, aim to put an equal amount into a savings or investment account.

Let’s say you’ve been eyeing a vintage Rolex for $5,000. Keep saving until you can put a matching $5,000 into your investment account.

Limit lifestyle creep: Like splurging, it’s natural to want to upgrade your lifestyle after you finish medical school and residency. Once you’re a full-blown physician, people have expectations about the type of car you drive, where you live, and which school your children attend. Do. not. give. In.

Lifestyle creep is the unconscious rise of your base living expenses. It happens when you buy or rent a home that’s bigger or more luxurious than you really need, or you drive a car thinking that it’ll impress the neighbors. Months and years later, you might realize that your cost of living has risen dramatically without your active consent. (Inflation is a separate issue.)

Nice things are nice, but it’s important to upgrade your lifestyle only after you’ve thoroughly considered the financial implications. As your income rises, be careful not to allow your essential living expenses — food, clothing, and shelter — to rise at the same rate.

… That is, unless you’ve consciously decided that it’s what’s best for you. There might come a time when you’re comfortable with how much you’re saving and can afford to make changes that will improve your life.

Join the discussion

Of the five Ws — who, what, when, where, and why — the most relevant to saving and investing is “when.” Prioritizing your savings goals as early as you can gives you the best chance of building wealth.

How have you developed a saver’s mindset while tackling student loans and other big-ticket expenses?