Learning About Money Skills Without Realizing It
Looking back on my life, some of my fondest childhood memories involved clipping coupons with my mother on Saturday mornings.
While Shaggy and Scooby investigated a spooky mansion, I’d sleuth through coupon adverts in search of products I recognized from around our house. Often, I’d pick out items I’d like to add to our shopping list and would submit them to my mother for approval.
We avoided items not included on the list and always attempted to eat prior to shopping to avoid impulse buys. Therefore, I needed to be resolute in convincing my mother the item was worthy of “the list” because its contents were sacrosanct and unalterable.
As a young child making household product and food suggestions to his mother, you can imagine my conversion rate wasn’t high. Some common responses from my mother:
- “No, Riley, we don’t need a 12 pack of Star Crunches nor Zebra Cakes.”
- “You already drink enough milk, why does it need to be chocolate milk to drink more?”
- “Better luck next time, dude.”
Be that as it may, you miss 100% of the shots you don’t take. I didn’t let a denial stop me in my tracks.
When we finished cutting, we’d sort them into her accordion-like coupon binder, go shopping, and tally up our savings afterward. I loved seeing how to save money and whether we could beat the previous week’s take.
As it turns out, my wife had a similar routine with her mother looking at weekly sales promotions coming in the newspaper. At the time, we had no idea these activities would shape our way of thinking.
For me, I did it for the enjoyment of matching products to pictures, filing coupons into a binder, and maximizing savings numbers on receipts.
For my wife, she made it a quest not to pay full-price.
We didn’t do this with the intent to learn, but as it turns out, these activities instilled some strong practical money management skills in us at an early age.
Learning About Personal Finance
I’m happy to report some 25 years later, we’re young professionals and we still look forward to sorting through the coupons and sales promotions in the mail. After all, if we want to reach financial independence, we need to learn to cut out unnecessary costs.
What excites me more about my wife’s instructions not to throw out those adverts is when she tells me not to recycle them until she has had a chance to look for any deals.
Talk about teamwork making the dream work!
Both of us inadvertently learned about practical money management skills by watching our parents and playing games alongside them.
We have continued to learn more personal finance lessons over the years and feel it would be nice to share some of them with you.
Specifically, this post lists three money management skills my wife learned during medical school and residency (the remaining components of the trilogy will list three financial skills I learned while in college and graduate school, and finally three we have learned together since getting married).
Medical School Taxes Even the Best of Us
As my wife’s final year of her dermatology residency draws to a close, she’s eager to begin practicing.
Like so many doctors, she’s worked hard and walked (re: scraped?) a long road to get through medical school and residency.
Make no mistake about it: she finds her line of work rewarding, enjoys connecting with patients and having the opportunity to practice her dermatology skills in a clinic in northern California. She’s a Pleasanton Dermatologist.
But her education hasn’t always been this rosy.
In fact, my wife describes medical school as a trying time in her life. She speaks of prolonged periods of poor sleep, tight schedules and challenging course material. In sum, she felt like too little butter being spread across a piece of toast.
Stated simply, there just weren’t enough hours in the day for her to accomplish all she needed to do. I am sure many physicians can relate during their medical school stints.
When she looks back on her medical school experience, she feels happy knowing those times have passed and better days lay ahead.
While in school, she had to show smart decision-making with her finances and live within her means. She did this because she wanted to avoid unnecessary expenses and taking out more loans than she needed.
Part of this involved finding ways to cut expenses and manage a personal budget.
Here are some lessons she learned.
Many medical students choose to live alone because it provides them greater freedom, privacy, and solitude, all of which are particularly important when it comes time to study.
Doing so, however, comes at a higher price point than housing with roommates. My wife chose to live with four other girls while in medical school.
She did this because doing so saved her money, made her lifelong friends, and afforded her a nicer house than she could by herself.
Living with roommates allows you to pool expenses, namely utilities and rent, and have a lower cost per roommate.
When looking for housing recently in the Bay Area, I remember seeing the high starting price points for condos vs. apartments for rent. 1 bedroom apartments fetched above $2,000 in most places worth considering while the jump to a 2-bedroom only amounted to $400-$600.
Looking further, I saw the cost differential between a 2-bedroom and 3-bedroom apartment only added another $300-$400. Knowing I’m interested in saving money on living expenses on our house hunting checklist, I naturally suggested to my wife we should consider getting a roommate.
I tell you this knowing full well I wasn’t serious, given the new addition we’re expecting later this year. Finding a roommate willing to live with a married couple and a newborn would be a tough pitch to make.
Returning to my wife’s medical school experience, I decided to price out some apartments in the area she lived during school. Because she attended UCLA and wanted to live close to school, most area apartments in the Brentwood part of Los Angeles tended to be luxury-class.
I priced one complex for the various apartment layouts and found the following results: a luxury 1-bedroom apartment in her neighborhood currently costs $3,000 per month, whereas a 2-bedroom unit in the same complex costs $4,300.
By opting for the 2-bedroom, you receive the same location and quality of housing but pay $950 less in rent per month or $2,150 per month in total.
Additionally, you split utility expenses.
|Apartment Options||# of Bathrooms||Monthly Rent||Size|
|1 bedroom||1 bathroom||$3,000||626 sq feet|
|2 bedroom||2 bathroom||$4,300||987 sq feet|
|3 bedroom||2 bathroom||$5,500-$6,000||1,627 sq feet|
These costs per person scale favorably as well.
A 3-bedroom apartment costs $5,500 and comes to $1,833 per person, saving $1,167 per person as compared to living alone. It’s easy to see how you can easily save $5,000 in a year by sharing living costs.
My wife took full advantage of these economies of scale and came out of school not only better off financially, but with some amazing friends. We’ll be attending the wedding of one on Labor Day weekend.
Win-win from a financial and social sense.
She learned the importance of getting a little help from her friends and how economies of scale lead to lower costs.
Credit Cards – Managing Them to Her Advantage
Managing finances can be tough on a shoestring budget. You constantly face decisions about how best to spend what little you have.
These decisions compound in difficulty when you see others in your situation shunning prudence and instead living lifestyles like they’re already minted doctors with a paycheck to match. Lifestyle inflation is one thing, but living on borrowed money when you don’t have the income to support it isn’t our style.
In the medical field, where most graduates stand to make a decent living, some folks justify borrowing more money now in order to finance the means they see down the road.
You may find yourself asking why you should wait when an eager lender will finance your fabulous life now at the low cost of 7.99% interest per year? Worry about how to pay off student loans later.
Or sometimes, medical students come from families with doctors and can live on a more comfortable budget. Neither of my wife’s parents worked in the medical field and she chose the prudent path of avoiding excess debt.
We’re thankful for that choice because her first student loan payment comes due this summer and fits well into our expected budget. Her decision to live within her means and not rely on costly credit options will allow us the opportunity to buy a home sooner.
It may even position us to pay off the mortgage faster and live a debt free lifestyle. Time will tell, though we’re determined!
Instead, she decided to live within her means in medical school and not borrow heavily against her future. She did this by not only minimizing her student loan debt, she also made it a point to use credit cards responsibly.
She applied for her first credit card through her bank and used it to build her credit.
She knew one day she would like to buy a house and would need a good credit score to receive the best loan terms.
Despite having the credit card, she opted to make most of her purchases on a debit card and would rarely use her bank’s credit card.
She didn’t want to become dependent on easy (and expensive) credit. She managed never to carry a credit card balance nor pay interest on her purchases.
My wife learned the importance of not comparing yourself to others and living beyond your means.
Credit cards come direct to you in the mail and can easily lure someone into making purchases they don’t need.
She applied for a credit card for emergencies and used it to diversify her credit history. Later, once she and I had learned how to manage credit responsibly, we looked into credit card sign up offers on Reddit churning (r/churning) for travel hacking ideas.
We haven’t canceled any of the cards we’ve found through the forum because we don’t see a need to churn through credit cards. Instead, we look for cards with attractive sign-up offers and loyalty programs which make sense for our needs for years to come.
She Would Have Contributed to her Roth IRA Sooner
This cataloging wouldn’t be complete without listing a lesson my wife wished she’d learned sooner: my wife regrets not investing in an individual retirement account (IRA) sooner.
My wife would describe herself as goal-oriented and enjoys planning for the future.
We both do.
IRAs help make those plans reality by setting aside money in tax-advantaged investments to compound over many years. This compounding is the surest path for seeing how to build wealth.
As she’s come to see others in her field build their practices, she’s also come to appreciate buying assets that make money even when you don’t work. By owning a part of a practice with multiple doctors, she can share in the mutual work of others.
Regarding the IRA contributions, she realistically only missed out on a handful of years’ worth of eligibility. However, she still regrets not taking advantage of her chance sooner.
I’m happy to report since we’ve been together, she’s chosen the balanced approach of both investing in her tax-advantaged accounts and paying off her student loan balance.
She has come to understand the tax deductions given to retirement accounts by the federal government and wants to contribute the retirement plan limit each year going forward.
She didn’t have access to a 401k plan while in medical school or now in residency but plans to exhaust every tax-advantaged account available to her going forward.
She learned this lesson a little too late in her opinion, but still ahead of most.
I’ve made up for her lack of early contributions by maxing out my IRA accounts each year for the past 7 years and my 401k for the first time recently.
Next year, we plan to max out all of our tax-advantaged investment accounts, including our Health Savings Account (HSA).
Lessons Compound with Time
My wife managed to avoid learning some practical money management skills others have to experience the hard way.
Some don’t learn important lessons on smart money management, living within their means, or how to manage debt until they’ve made a costly mistake.
They’re often left attempting to minimize the damage instead of maximizing their opportunities.
Fortunately for my wife, she developed good financial habits by being born to great parents, having exposure to their keystone habits and always looking to improve her position in life. We both share in this good fortune.
Most importantly, these strong drivers have led her to get to where she is in her residency and she sees the next step as finally reaching some semblance of a reward. We appreciate our success and hope to pay it forward.
In addition to her hard work, she’s managed to avoid unnecessary expenses, use credit responsibly, and learn how to start investing money for our family’s shared future.
She’s set herself up for a great life we can’t wait to start in San Francisco. All of this work and these traits have compounded with time and only look to continue.