One House. One Spouse. One Job.

Today’s Saturday Selection comes courtesy of The White Coat Investor. I believe the title may be Dr. Dahle’s version of One Bourbon, One Scotch, One Beer. Picture yourself around a campfire near Lake Powell and sing it with me, “one house… one spouse… and one job. Now ain’t seen my wakeboat since I don’t know when…”

To be honest, I haven’t followed this advice very well. I’ve had several jobs and we once owned five homes at the same time (we’re down to two plus some additional lakefront property). Thankfully, I’ve got one spouse, and I plan to keep her forever.

Even the good doctor who wrote the article has had more than one job ever since he started his website in 2011, but this post does not argue against having a side gig. It’s more the fact that job hopping can be bad for your career and pocketbook. As always, this post originally appeared on The White Coat Investor.

One House. One Spouse. One Job.

 

We spend way too much time discussing minor details of mutual funds, retirement accounts, and insurance policies and probably too little time discussing what really matters in personal finance. That can be summed up in the phrase One House, One Spouse, One Job.

Avoiding the True Pitfalls in Personal Finance

 

Personal finance writers often spend far too much time on the little things in personal finance, and far too little on the things that really matter. Consider how many articles you have read discussing the Latte’ Factor, choosing the correct cash-back credit cards, avoiding restaurant meals, buying used cars, and using coupons. The truth is that for most physicians most of what you need to know to avoid the real pitfalls in personal finance is encapsulated in a single phrase: One House, One Spouse, One Job.

 

One House

 

Physicians fall into the Multiple House Trap in 2 different ways. One is to have serial houses, and the other is to have parallel houses.

 

1) The Serial House Issue

 

This is when you change houses every few years. Buying and selling a home involves some serious transaction costs. A good general rule of thumb is 5% to buy and 10% to sell. Don’t believe it’s that high? Go back and look at your closing statements for your last home, and then look at your credit card statement for the 3 months before and after.

Contract Diagnostics
Sellers tend to pay for upgrades, repairs found on the inspection, closing costs for the buyer, and realtor fees. Purchasers pay for loan costs, upgrades, and maintenance items such as snow blowers, lawn mowers, and power tools.

For a $500,000 house, the 15% round trip cost of purchasing and selling a home is $75,000, or more than many physicians save toward retirement in a single year. Do that a few times and you will find yourself way behind the 8 ball compared to your “one house peers” when it comes to retirement savings.

 

2) Parallel Houses

 

The vacation home. It might be a beach house, a mountain house, a lake house, or simply another house. A second home generally doubles all your housing-related expenses: Mortgage, taxes, maintenance, upgrades, furnishings, utilities, etc., not to mention those same transaction costs and the cost of traveling between your 2 homes.

To make matters worse, many physicians mistakenly think this expensive consumption item is an investment. They envision selling it after it appreciates a great deal to pay for their retirement. Or perhaps they expect to rent it out a few weeks a year.

The truth is an investment property is very different from a vacation home. If you actually run the numbers on your vacation home as an investor would, you will quickly see the return on your investment is likely to be terrible. If you wish to purchase a second home, view it as a pure consumption item. That means you should have retired your student loans, paid off your first home, be saving 20% of your gross income toward retirement, and be able to pay cash for the vacation home.

If you cannot afford to do all that, you probably cannot truly afford to buy the vacation home. A recent thread about vacation homes on Sermo, a physician-only forum, contained advice from many doctors who have owned a vacation home in the past. See if you can see the common theme:

  • 1st Doc: At first it was great when everything was new and later became a real money pit and expense. We started using it less and eventually sold it.
  • 2nd Doc: Every doc I know, who purchased a vacation home, eventually regretted the decision. They became financial drains, and more importantly, became one more chore and obligation that needed tending, and a time suck.
  • 3rd Doc: You can take a lot of vacations all over the world for less money and aggravation than owning your own vacation home will be.

Like most things in medicine and personal finance, it is better to learn from the experiences of others rather than making all the mistakes yourself.

 

PoF Second home

the PoF vacation home

 

[PoF: We still have no regrets after buying a vacation home, but it’s not often you can find a good one for about $15,000]

 

One Spouse

 

Divorce is personally and financially devastating. Whatever expense may be required to maintain your marriage should be considered as pennies compared to the cost of divorce. The truism, “It’s cheaper to keep her” really applies here.

$100 bonus with Code: Partner100

In a bitterly contested divorce, not only do the lawyers for both sides walk away with tens of thousands, but your assets are also split in half. Then you may find yourself paying alimony and even child support. You are basically buying yourself a second house, except you don’t even get to vacation in this second home.

To make matters worse, many physicians find themselves in serial marriages and divorces. Some of the least happy physicians I have ever met are working way too many shifts and taking far too many calls late in their careers as a result of alimony payments and devastated nest eggs.

 

One Job

 

Changing jobs is often financially devastating too. The new job may require a move, which brings in the multiple house issue. More significantly, if you are in private practice, it will take time and money to build your practice back up in the new location. You may also need to purchase malpractice tail insurance or suffer a financial penalty as a result of breaking a contract.

Your new job may exclude you from making 401(k) contributions for a year or two after starting. If you are leaving one partnership for another, you may have to pass through a 1-5 year partnership track before your earnings recover to prior levels. If the jobs are lower-paying employee jobs, there may be no significant cost to changing jobs, but the lower income from not being an owner at either job will take its toll over time nonetheless.

 

[PoF: Note that the good Dr. Dahle is not opposed to a side gig. He’s got one that pays much better than his physician job does these days. You never know; a side gig can become a main gig someday if that’s what you’re looking for.

 

physicians on fire

 

If you’re a physician interested in a side gig, check out the conversations in Dr. Nisha Mehta’s Physician Side Gigs Facebook group. If you’re an MD or DO interested in FIRE, join my Physicians on FIRE group. You’ll be amazed how much you can learn from your peers.]

 


You're still not using Personal Capital? That's how I track the PoF portfolio.

 

One House, One Spouse, One Job. You can mess a lot of things up in your personal financial life and still recover, but you are likely to lose a great deal of money every time you disobey this rule. Serial disobeyers rarely build much wealth.

 

What do you think of the “One house, one spouse” rule? Divorced? How much did it cost you? How many times have you moved and what did that cost? Did you change jobs after a year or two like many physicians? Was it avoidable? Comment below!

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15 comments

  • Slowburner

    The best advice I have heard in a very long time!

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  • This is pretty good. When I started out re-educating myself about personal finance ’bout four years ago, I went in head-first, latte style. I even rode my bike to Menards to return a roll of fiberglass insulation that barely fit in the Burley.

    These days I’ve taken more of a macro view. Go enjoy a latte, and even buy a new pair of jeans once in a while. But avoid the big nonsense described in this post. Very wise.

    • JayCzzz

      Personal finance is behavioral and systematic. Just like with anything we learn to do, one must crawl before walking. Instilling financial discipline may necessitate the Latte purge, coupon clipping, detailed budgeting, initially as you build to be able to handle the macro decisions that really dictate financial success.

  • We’ve moved house once. An expensive move no doubt but in some respect it took us having that first house to figure out what we wanted in a house. Unless we leave the area we won’t be leaving our current home.

    No divorce here, no second house. I can see those problems from others and would only buy a second home if I intend to eventually make it out retirement home 20 years in the future.

    And finally one job. In my field more then one job, hopping Minotaur is a key to a higher income. So that’s role specific imho.

  • Joe

    That’s a good mantra, but “no job” probably doesn’t work for regular people. Jobs aren’t very secure these days. Changing job is also the easiest way to increase your income in the tech world. I stayed at one company in 16 years and it didn’t end well. I should have changed it up more often. That’s the reality these days. Probably different in the medical field for now. Your job security is better than most other jobs.

  • I prefer the travel + airbnb + creditcard / travel hacking to an expensive vacation home as well!

    One job depends on your industry, in IT you will move up the income scale as you change jobs, and most people change every 2-3 years. It can be the same company, but at least a new growth opportunity!

    Totally agree on one spouse ! I see sometimes people rushing to find that one, then spending the money on divorce. It is a sad moment to see and if they are part of your life, you are helping them to get through it. Hurts my heart every time.

    Thanks for sharing!

  • RocDoc

    In 2013 I turned 50, decreased my shifts a bit to have more free time and my husband and I started thinking about buying a vacation home. Around the same time, I started reading Mr Money Mustache and WCI, probably because I finally had more free time. Those websites made me rethink everything! It took awhile, but as more FIRE websites kept appearing and I kept reading them, my husband and I decided that we didn’t really need a vacation home. He could just FIRE and with my flexible lighter shift load we could travel many different places. Now if I could find a good vacation home for $15,000 like POF, I would probably indulge. I thank MMM and WCI and many other FIRE blogs for helping us see another way, which has been fantastic for us.

  • Most physicians greatly underestimate the expense of these items. In my book, The Doctors Guide to Starting Your Practice Right, Which POF reviewed here, I detailed the cost of a friend of mine who moved to a new job. That move cost him $174,800! That’s almost as much as the average doctor has in medical school loans. That doesn’t count the uncounted losses of inability to put money in the new retirement plan for a period, the ramp up of establishing a new patient base and referral base…

    Follow the advice in the book to get the right job the first time, because changing jobs is a big setback financially.

    Dr. Cory S. Fawcett
    Prescription for Financial Success

  • Avocado OB

    Sometimes changing jobs allows one to negotiate a better salary deal or leverage a lower cost of living or both. It was the best move for me financially.

  • Gasem

    Good advice but probably marginally unrealistic on some fronts in this era. One spouse, no divorce is the best advice ever. If anything has gotten me through it’s that. One house is what I’ve done. I once owned three early in my career including 2 beach properties and made money from selling those 2, but the hassle to make it pay was so not worth the return. One job depends. We owned the group and we held the contract for 18 years with occasional physician turnover, till the hospital decided to contract with Team Health across the board for ER, Anesthesia, and Hospitalist services. We were invited to “stay” with ridiculous terms. We just started a surgery center 2 miles down the road and took away 1/3 of their surgical business, the paying 1/3. Team Health my ass. So that worked out and it was one job in a sense, since we were serving the same population, a working with the same surgeons and we were still the same corporate entity. The hospital’s turnover in Anesthesia is ridiculous, so with encroaching corporate medicine one job becomes problematic unless you’re entrepreneurial. Now you’re just a provider. What was it the Architect said: “there are certain levels of survival we are prepared to accept”. The corollary: “and certain levels we are not.”

    I might add an additional “one”, one portfolio and one plan to fund it. Critical.

    Like Mighty Joe Walsh says: “I’m just looking for the clues at the scene of the crime, life’s been good to me so far!”

  • I received this exact same advice from Dr. Casabianca in 2004. Most residents were talking about buying a home in residency then buying another when they graduate and a third when they save up. He heard this and almost yelled at us for even discussing it. He said get one house and stay in it until you die. The job and wife are part of the equation since if either change so does the first. I said it didn’t sound very sexy and he said neither is working until you die. Great advice then and now. Sometimes the job can change without too much financial consequences but it all depends. I agree that taking the time to find the best job is worth the investment which is why I recommend a good mentor or career coach plus a great contract attorney who understands physician contract so you can avoid a job change all together. Great post and I will definitely share! Aloha!

  • Great advice! You definitely need to focus on the “big rocks” before you worry about the pebbles. And these are big rocks! I think the job advice may or may not hold true, depending on the career. But, the spouse advice is huge!

  • GH

    The “one job” argument makes some very good points, but should be taken with a grain of salt. I moved from a W-2 (employee) job to a 1099 without having to move houses and it was a very good move financially, even when factoring in the lost benefits.

    Very good article though.

  • My one and only wife and I have considered a second home down the line, but it would be driveable, sellable and very leaseable. There are many docs in the south who have a beach house and lease it out. Its a 4 hour drive from my new job so if I cut back work and start going at least every 6 weeks we may consider, after running the numbers of course. At the end of the day as the post mentions, it would be a consumable item, not an investement. We have no debt, no mortgage, save a ton and would buy with cash as WCI recommends.

    I cant help changing jobs, on my 3rd in 6 years. But I’ve moved to established practices with better pay so not really a loss every time a doc changes jobs.

    I agree with Gasem above, keep your portfolio simple and of a single strategy – One portfolio to rule them all, and in retirement bind them.

  • JayCzzz

    Very sound advice! POF your $15k steal of a vacation home definitely constitutes as an outlier to the one house convo!

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