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The 10 Percent Rule: Limiting Lifestyle Creep


We have the 1% rule for rental properties, the 4% rule for safe withdrawals in retirement, and now the 10% rule from Dr. James Turner for limiting lifestyle creep.

Lifestyle creep, also known as lifestyle inflation, keeps many high-income professionals from obtaining the wealth they deserve given all the sacrifices and hard work involved in their careers.

What I like about Dr. Turner’s approach is that he doesn’t say you can’t have more, he just tempers the amount of extravagance one can add at any one time. That’s how you become wealthy without looking like a rich person. #StealthWealth

This article originally appeared at WCI Network partner site The Physician Philosopher.


The 10 Percent Rule: Limiting Lifestyle Creep


The time filled with the most financial mistakes for many medical professionals is likely just after training has finished.  The light at the end of the tunnel has arrived.  Your monthly pay-check has now doubled, tripled, or maybe more (my take home residency pay check was 1/5 of my attending take home paycheck).

This all sounds like good news, right? Trust me, it won’t be if you don’t apply The 10% Rule.

The problem is that the light we see at the end of training is that it is often blinding.  “I’ve put my life on hold for the past ten years.  I deserve nice things!”  Or maybe it sounds more like this, “All of the other people I work with have nice homes and nice cars, don’t I deserve the same?

It’s a complicated problem. Is living like a resident after training worth it?

Our human nature is bent towards rewards that have long been due.  The head tells us what those naturally inclined towards impressive amounts of frugality would do:  Use the increased pay-check directly to destroy debt and aggressively investing.  But our heart often pulls us in the opposite direction to satisfy all of that delayed gratification from training.  Buy the big house, nice car, and designer gadgets.

Today, follow along as we discuss the rule that allowed my family to increase our net worth by $254,000 in just one year after training.  It is the same rule that allowed us to pay off $200,000 in student loans in 19 months.



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The 10% Rule Explained


There are going to be multiple times in life where you receive a bump in pay.  This may be due to a large (or small) promotion.  This may be due to a quarterly or annual bonus.  It may be because you achieved an incentive for publications, education, or clinically related outcomes.

The 10% Rule is applied in these situations where you receive an increase in the amount you take home.


The 10% Rule: For every bump in pay, bonus, or unexpected money that you receive: 10% of the money goes towards lifestyle creep and the other 90% goes towards building wealth.


For example, when my family went from making $6,000 per month in my (non-accredited) fellowship in regional anesthesia to making $17,000 as an attending physician I took ~10% of this post-tax raise (or ~$1,000) and I applied this money towards moderately frugal lifestyle creep.

Let’s be honest for a second. Lifestyle creep on most personal finance blogs is considered worse than one of the seven deadly sins. They’ll tell you, “nothing is worse than lifestyle creep!

It usually sounds something like this, “Never ever let your lifestyle creep after training!  Otherwise, it’ll start to crawl, and then run, and then sprint away with all of your earnings!  It’s a monster that, once fed, becomes uncontrollable!

Honestly, this line of reasoning is ridiculous.  I don’t disagree that physicians (and other health care workers) are notoriously bad at spending too much money.  It is why the amount of money that doctors earn doesn’t matter. We traditionally have found a way to spend it all.

However, with a little training, even the financial beast of lifestyle creep can be tamed.

The 10% Rule allows us to given 10% to the heart while we apply the other 90% towards wise financial decisions (destroying our student loan debt, investing in low-cost index fundsstarting a backdoor Rothsaving for your kids 529, etc).



The Purpose of the 10% Rule

As explained previously on The Physician Philosopher, wealth without wellness is no good.  If we ignore the desires of our heart and deny our ability to enjoy anything, this places us in an uncomfortable disposition towards discontent.

Working everyday while we wait to FIRE is not healthy.  Sometimes there are reasons not to retire early.

Likewise, if we ignore the head (and the financial riches that await us if we make simple, automatic, and disciplined financial decisions) we are destined for a long career and a terrible retirement.  We will be just like the other large number of physicians who cannot retire despite earning millions of dollars during their career. That’s not a good place to be, either.

The purpose of the 10% rule is to allow our hearts to remain healthy while we build the financial muscle that produce moderate frugality.  The more you allow yourself an occasional break while remaining financially disciplined, the more wealth and wellness you’ll obtain.  Simultaneously.

This is the purpose of The 10% Rule.

Truth In Advertising: My 10% Rule Applied

Chevy SS
This car stopped getting made in 2017. Should have waited, but the opportunity was ripe. Sat on the idea for four months before ordering. Unassuming sports sedan. Three car seats. 415 HP. Manual Transmission.

I think that one of the most helpful aspects of any advice is transparency.  I anticipate many asking how I decided to apply The 10% Rule after I finished training?

Well, let the truth be told, I did one of the most financially unintelligent things possible.  I financed a car (not just any car, a Chevy SS) and bought a country club membership for golf.  My take-home pay increased by $11,000 and I let my lifestyle creep less than 10% ($1,000 per month in changes).

The car and golf are the only two things we changed about our lifestyle when we finished.

Before I get crucified by the personal finance community for being a heretic, I should also point out what I did with the other 90%.  We paid off our student loans ($200,000 in 19 months), increased our net worth by $300,000 in just 18 months.  We also set ourselves on a path to financial independence in our mid-40s.

My wife and I sat down, went through the Three Kinder Questions to determine our big picture financial goals, and then made decisions.



Calling for my head?


I spend a lot of time discussing how more money will not make us happy, the power of contentment, and how experiences typically provide more joy than “things” like cars.

Am I a hypocrite?

Honestly, I anticipate a bunch of people calling for my head for spending my money in this way.  However, many of those same people love to travel (hopefully, with travel rewards from credit cards) and to spend money on expensive experiences that simply don’t bring me a lot of joy. That is what brings them joy.

What brings me joy is putting my three kids in the back of my car (Daddy, Go FASTER!) and taking them to play golf with me.

Believe it or not, I don’t regret this decision.  No buyer’s remorse will be found here. Seriously. None.  But I am a car guy.

By the numbers, when we finished training we were investing in my family’s future and destroying debt with > 50% of our gross income.


Take Home


I think that a little bit of lifestyle creep after training is warranted, but we have to put some guard rails on what can become a dangerous habit.  And I suggest using 10% of any bonus or increase in pay to do just that.

The 10% Rule has allowed my family to find financial success.  Even after we did what most consider to be one of the biggest financial mistakes that one can make.


I've got my 2 acres of non-leveraged, crop-producing, cashflowing farmland via AcreTrader. Get yours.


Am I crazy for using my 10% rule in this way?  What did you do when you experienced your big increase in pay after training?  How have you limited lifestyle creep?  


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17 thoughts on “The 10 Percent Rule: Limiting Lifestyle Creep”

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  7. When I finished OB/GYN residency in 1984, my income jumped from 25K to 75K per year. During residency, I was carless, biked everywhere, and helped my youngest sister through college. With the income jump I bought a Honda Accord, a microwave, and some stainless steel cookware. And I spent a week at a conference in St Thomas.

  8. I like the 10% lifestyle creep rule. It’s a pretty good rule of thumb. For most people, that 10% won’t make much difference to their lifestyle. I think it’s safe to spend that much. As long as the bulk of it goes toward building wealth, you’re set. Too bad it’s the other way around for most people. 90% goes to lifestyle inflation…

  9. Physician Philosopher,

    What a timely article!

    We just purchased a $58k truck this week, and I have really been beating myself up over it!

    After four months of looking, I found a used Escalade with only 20K miles in pristine condition. One owner, like new.

    It’s a real beauty, white in color with the Platinum package. It looks like a piece of art just parked in my garage and with 420 horses under the hood, I really enjoy driving it as well!

    Here’s a little background.

    My wife and I have been savers since we married 25 years ago. I’m 49, she’s 44.

    I am a police officer and she is a teacher, with excellent benefits and I’ve had paid for medical for my family since day 1. Needless to say, it’s a tremendous benefit.

    We purchased a modest home for $170k and paid it off in ten years. We’ve maxed out every single retirement account since day one, our Roth IRA’s, my 457 and her 403(b). And her 457 which was added later on by the school district, after begging for one.

    We even funded a taxable index fund with the money that was left over.

    We drove older cars that we bought for around three to four thousand dollars, and never had a car payment nor did we ever carry a credit card balance. And no expensive hobbies.

    We raised three kids without having to pay for daycare since we worked opposite shifts when they were young and didn’t take fancy vacations since going on vacation with small kids, isn’t really a vacation.

    We mostly visited family in Florida or went camping.

    We saved on average 50% of our income. And never felt deprived of anything.

    Fast forward to the present, and we continue to save around 50% of what we make and live a great life. With bigger salaries, we continue to save but take much nicer vacations, like going to all inclusive resorts in Mexico and the Caribbean and eat out more frequently if we desire.

    As of the market close last Friday, our Vanguard account was at $1,945,000.00. If the market cooperates and with additional contributions, we should reach 2M by the end of the year. And if we don’t, no biggie.

    I will qualify for a pension next year in the amount of $65,000 per year when I turn 50, with medical costing me 50% of what the municipality pays. Approximately $15,000.00 per year in 2019.

    Or if I wait till 55 to retire, my pension will be $84,500 per year with annual 3% cola’s and paid for medical for my family. My wife will also receive a substantial pension when she retires.

    We could live comfortably with our pensions alone and not even touch our portfolio. Having pensions that will fund our retirement without having to touch our portfolio, gives me the piece of mind knowing that I can keep if fully invested in VTSAX and allow it to grow for my children. It’s a nice luxury/option to have that most people do not have.

    With all that being said, why do I find myself now obsessing over this purchase which we could easily afford. My wife tells me to just enjoy the car, and is totally okay with the purchase. She too loves the car and isn’t bothered at all by it.

    This article really helps in making me feel it was okay to buy something I really wanted especially after nearly three decades of doing a lot of things “right”.

    I took out a loan at 3.49%.

    My gut tells me to keep my money invested. And not to prepay the loan or pay it off.

    After front loading our retirement accounts by June, I’ll have about five to six thousand dollars per month in discretionary income that I could put towards the loan or plow that money into VTSAX.

    I feel that over the long term, ten plus years, the additional money will be better served invested for growth and not tied up in a car.

    Coincidentally, the car payment represents 8.9% of our monthly gross and that doesn’t include any overtime I work. It falls under your 10% rule which makes me feel even better lol.

    I would like to know your opinion and those of others, on what you would do if you were in my position.

    A. Pay off the loan
    B. Make extra 5k to 6k monthly payments or
    C. Make the regular monthly payment and invest the rest


    • So life is about balance for sure. That said, I hate debt. You are clearly doing well enough that there is no reason to keep the debt around. Just pay it off.

      Even at our early stage, we are going to pay down our car loans next instead of investing in a taxable account. Once that debt is gone, we will start pouring money into the taxable account and reap the rewards from that.

      I don’t plan on financing anything ever again after this point, unless I purchase some real estate where someone else is making the payment for me while I leverage a property. Not there yet, though


  10. Thank you, Mr. TPP, for writing this article. It’s refreshing to read an opinion which recognizes that a balance can be struck between increasing one’s lifestyle today while simultaneously pursuing tomorrow’s long-term financial goals. My mother taught me to “Spend Some, Save Some” and I’ve followed her wisdom throughout my life. Doing so has allowed me to enjoy the things that I want now – travel, theatre, books – while also paying off my student loans, paying off my mortgage, saving for early retirement, building a solid investment portfolio. While I’ve implement the lessons I’ve learned from the personal finance/FIRE community, I’ve never been 100% committed to the rigidness of some of its tenets. There is a season for everything, and your article reminds all of us that it’s okay to enjoy some of the fruits of our hard-earned money today instead of waiting to enjoy all of them later.

    • Agreed. It is possible to swing so hard to the frugal side that we don’t enjoy anything today. I think this leads to a lot of disappointment for people who finally “get there” just to find out it wasn’t all it was cracked up to be.

      If you can’t be content now (and find some enjoyment in today) then you probably never will. It is a lesson I constantly remind myself of.


  11. I've got my 2 acres of non-leveraged, crop-producing, cashflowing farmland via AcreTrader. Get yours.
  12. This is an awesome rule… I wish I read this 2 months ago!

    I spend about 15% of a bonus I got (investing the other 85% in index funds) and felt TERRIBLE because I had succumbed to “lifestyle” creep.

    But I also felt I had worked hard and deserved to spend a little bit of the bonus… right?

    I’m glad other people have a more conservative view of lifestyle creep and on are on the same page that spending something is okay. Looking forward to referencing back to the 10% rule in the future…

    • It is all about balance! You have worked hard. Enjoy some of it. And then do what you should with the vast majority of it!


  13. What did your wife get out of the financial creep?

    I didn’t allow any lifestyle creep my first year as an attending, and it worked well for me. It let me reach a net worth of zero within 9 months of starting work and pay off my debt within 3 years (could have been sooner, but I was focused more on investing). After the first year, I slowly loosened the purse strings, and I’ve slowly increased my spending since then. But I’m still saving about 2/3 of what I own, and I’m avoiding major expenses like a fancy car and a big house (no judgment, just things that aren’t a priority for me).

    • The country club that we have has a pool that is free as part of the partnership. She was really excited about that. We take the kids a bunch during the summer. She also knows that the kids love playing golf with me. So, it was more of a family thing there. She certainly doesn’t mind when I take two of the three golfing with me for a couple of hours.

      We also bought her a Toyota Sienna (aka Swagger Wagon) at the end of residency when we had our third kid, because our Sentra couldn’t fit three car seats. I drove the 10 year old paid off sentra for two years until I bought the car mentioned above. Keeping that would have been the wise financial decision, but it is all about balance.



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