The Cost of Daily Habits
The table below from the BMA website is the true salary of “trainee” doctors for the first 9 years of our careers. I’ve highlighted salaries (based on a 40-hour-week): red for FY1; orange for FY2; yellow for CT1/ST1 and CT2/ST2; and green for ST3 – ST7.
So like most truths, it isn’t very glamorous.
Don’t get me wrong, we’re not starving nor is this a plea to establish a new charity called ‘Medics in Poverty’ but I want to erode the traditional thought that doctors are really well off.
Now that we’ve established that we earn a very modest salary compared to other professionals, the importance of a financial education shouldn’t be underestimated.
One of the most important concepts that will help you improve your financial health is the latte factor. It’s not just advice about not buying Costa every day because most people (myself included) don’t feel that £2 here or there really matters.
If you’re out with your friends enjoying lunch then there’s absolutely no problem with spending £20. A problem tends to arise when this becomes a daily habit or even a status symbol such as the classical ‘keeping up with the Joneses’ syndrome.
If £2 every day doesn’t really matter, what’s the problem?
Jane is our newly appointed 25-year-old FY2 doctor who earns a respectable but not particularly enviable £28,357. After deducting income tax, national insurance and a pension contribution of 7.1% this is whittled down to £20,839. We haven’t even considered student loan repayments.
For simplicity’s sake, let’s say a latte costs £2.
If she purchases one latte just three times a week, then it costs her £312 of her after-tax salary every year. In itself, that’s a considerable sum of money. However, Jane isn’t concerned because it only represents 1.1% of her before-tax salary.
Most people only think of money in absolute terms. After all, £312 is £312 right? When Jane is working, £312 doesn’t feel like that much, especially spread over 52 weeks in a year. However, how long can she continue working for? 30 years…40 years…50?
We should go one step further by considering how much capital is required to generate an income of £312 because our life expectancy and working lives are both finite.
With current cash ISAs hovering around the dismal 1% annual interest mark, we can be certain that it’ll take £31,200 of capital to generate enough income to sustain just three lattes per week!
Now onto annuities.
An annuity is essentially a lifelong guarantee of a certain level of income you receive when you exchange a portion of or all of your pension fund.
Sounds great right? The only catch is that like cash ISAs, current annuity rates are also shocking, and are likely to remain that way for the foreseeable future. For example, £100,000 only translates into a maximum annual income of £4,886 according to Hargreaves Lansdown. Not to mention, there are a lot of strings attached.
What this tells us is that we need a pension fund of £500,000 just to generate an annual pension of £24,430!
Based on these annuity rates, Jane needs an after-tax retirement fund of £6,385 just to maintain her seemingly innocent coffee habit when she is 65:
Instead of calculating how much a habit is costing you, consider how much income is required to sustain the habit.
As we increase our savings rate and reduce expenses, not only are we moving towards our goalpost faster, we realise that the goalpost is actually moving closer to us as a smaller capital pot is ultimately required.
P.S. I learned everything I know about finance from this book, this book and that one, amongst many others. For a more extensive list, don’t hesitate to drop me a line at rory@ukdoctoronfire.com. If you prefer learning through listening use this link to earn a free audiobook of your choice by signing up to their 30-day free trial. Simply cancel with the click of a button if you decide later on that the service isn’t for you, no questions asked.
Pingback: Compound Interest | UKdoctoronFIRE
Pingback: Book Review: The Millionaire Fastlane by MJ Demarco – UKdoctoronFIRE
Hello ukdoctoronfire.com owner, Your posts are always well written and informative.
Hi ukdoctoronfire.com administrator, Thanks for the valuable information!
Hi ukdoctoronfire.com webmaster, You always provide in-depth analysis and understanding.
Hi ukdoctoronfire.com webmaster, Your posts are always on point.
Hi ukdoctoronfire.com owner, You always provide in-depth analysis and understanding.
Hello ukdoctoronfire.com owner, Your posts are always interesting.
Hello ukdoctoronfire.com admin, Your posts are always well-written and easy to understand.
Dear ukdoctoronfire.com administrator, Your posts are always informative and well-explained.
To the ukdoctoronfire.com admin, Thanks for the well-researched and well-written post!
Hello ukdoctoronfire.com administrator, You always provide great examples and real-world applications.
Hi ukdoctoronfire.com admin, Your posts are always informative and up-to-date.
To the ukdoctoronfire.com webmaster, Thanks for the comprehensive post!
Hi ukdoctoronfire.com administrator, Your posts are always informative and up-to-date.
Hi ukdoctoronfire.com admin, Your posts are always well-formatted and easy to read.
Hi ukdoctoronfire.com webmaster, Your posts are always interesting.
Dear ukdoctoronfire.com owner, Thanks for the well-organized and comprehensive post!
To the ukdoctoronfire.com webmaster, Your posts are always well thought out.
Dear ukdoctoronfire.com admin, Your posts are always well thought out.
Hello ukdoctoronfire.com admin, Keep it up!
Hi ukdoctoronfire.com owner, You always provide valuable information.
To the ukdoctoronfire.com administrator, You always provide valuable feedback and suggestions.
Hello ukdoctoronfire.com owner, Your posts are always well received by the community.
Dear ukdoctoronfire.com owner, Thanks for the well-presented post!
To the ukdoctoronfire.com administrator, You always provide great examples and real-world applications.
Hi ukdoctoronfire.com webmaster, Good job!
Hi ukdoctoronfire.com administrator, Good job!
To the ukdoctoronfire.com admin, Your posts are always informative.
Hello ukdoctoronfire.com webmaster, Your posts are always well-written and engaging.
To the ukdoctoronfire.com administrator, Thanks for the well-researched and well-written post!
Dear ukdoctoronfire.com owner, You always provide useful tips and best practices.
To the ukdoctoronfire.com admin, You always provide clear explanations and step-by-step instructions.
Hi ukdoctoronfire.com administrator, You always provide helpful information.
Hello ukdoctoronfire.com admin, Good to see your posts!
Youre so cool! I dont suppose Ive learn anything like this before. So good to find any individual with some original ideas on this subject. realy thank you for starting this up. this web site is something that is wanted on the net, somebody with slightly originality. useful job for bringing one thing new to the internet!
There is evidently a bunch to know about this. I think you made certain good points in features also.
Thanks for your tips on this blog. 1 thing I want to say is the fact purchasing electronic products items over the Internet is nothing new. Actually, in the past decade alone, the marketplace for online electronics has grown drastically. Today, you can find practically virtually any electronic tool and other gadgets on the Internet, which include cameras in addition to camcorders to computer parts and video games consoles.
It is best to take part in a contest for the most effective blogs on the web. I’ll recommend this site!
Throughout this grand design of things you actually secure a B- just for effort. Exactly where you lost us was first on the details. As people say, the devil is in the details… And it could not be much more accurate in this article. Having said that, permit me inform you just what did give good results. Your text is extremely engaging and this is possibly why I am making the effort to opine. I do not really make it a regular habit of doing that. 2nd, despite the fact that I can easily see the leaps in reason you come up with, I am definitely not sure of just how you seem to connect your points which produce your conclusion. For the moment I will, no doubt subscribe to your issue however wish in the future you connect the dots much better.
You need to participate in a contest for top-of-the-line blogs on the web. I’ll suggest this website!
I enjoy you because of your entire work on this web page. Debby take interest in working on research and it’s easy to understand why. Almost all notice all of the dynamic way you make vital guidance via the blog and as well encourage response from some others about this issue then our favorite child is without a doubt becoming educated a whole lot. Have fun with the rest of the new year. You are always performing a superb job.
I am only writing to let you be aware of of the helpful experience my child found browsing yuor web blog. She picked up a wide variety of issues, most notably what it is like to possess an awesome coaching mindset to let other individuals without hassle know just exactly several impossible things. You truly exceeded people’s desires. Thanks for offering these precious, healthy, educational as well as easy tips about this topic to Ethel.
I think this is among the most significant information for me. And i’m glad reading your article. But should remark on few general things, The website style is perfect, the articles is really great : D. Good job, cheers
Thank you for every other informative site. The place else may I get that kind of information written in such a perfect way? I’ve a mission that I am simply now working on, and I’ve been at the glance out for such info.
I have noticed that over the course of developing a relationship with real estate managers, you’ll be able to come to understand that, in each and every real estate purchase, a commission rate is paid. All things considered, FSBO sellers do not “save” the commission rate. Rather, they try to earn the commission by way of doing an agent’s work. In accomplishing this, they devote their money plus time to conduct, as best they could, the assignments of an adviser. Those duties include disclosing the home by means of marketing, introducing the home to all buyers, constructing a sense of buyer urgency in order to induce an offer, arranging home inspections, controlling qualification check ups with the loan provider, supervising fixes, and aiding the closing.
very nice publish, i certainly love this website, keep on it
Attractive section of content. I just stumbled upon your weblog and in accession capital to assert that I acquire actually enjoyed account your blog posts. Any way I抣l be subscribing to your augment and even I achievement you access consistently rapidly.
certainly like your web-site but you have to test the spelling on several of your posts. Several of them are rife with spelling issues and I find it very troublesome to tell the reality however I抣l certainly come back again.
This is really interesting, You’re an overly professional blogger. I’ve joined your rss feed and look forward to searching for more of your excellent post. Also, I have shared your website in my social networks!
Thanks for your blog post. A few things i would like to contribute is that laptop or computer memory needs to be purchased if your computer can no longer cope with anything you do along with it. One can set up two good old ram boards containing 1GB each, as an example, but not one of 1GB and one having 2GB. One should check the car maker’s documentation for own PC to make sure what type of storage is necessary.
Hello ukdoctoronfire.com webmaster, Your posts are always well-formatted and easy to read.
Great post! The information provided is so valuable. Thanks for sharing!
To the ukdoctoronfire.com owner, You always provide great examples and real-world applications.
Please provide me with more details on the topic
Thanks for posting. I really enjoyed reading it, especially because it addressed my problem. It helped me a lot and I hope it will help others too.
To the ukdoctoronfire.com administrator, Keep up the good work!
Dear ukdoctoronfire.com administrator, Keep up the good work, admin!
To the ukdoctoronfire.com administrator, Thanks for the detailed post!
Thank you for writing this post. I like the subject too.
Dear ukdoctoronfire.com owner, Your posts are always well presented.
Dear ukdoctoronfire.com webmaster, Your posts are always well-supported by research and data.
Wow, fantastic weblog structure! How long have
you ever been blogging for? you make blogging glance easy.
The overall look of your website is excellent, as
neatly as the content!
Hi, this weekend is fastidious in favor of me, since this point in time i am reading this wonderful informative paragraph here
at my residence.
Hey! Would you mind if I share your blog with
my myspace group? There’s a lot of folks that
I think would really enjoy your content. Please let me know.
Cheers
Great beat ! I would like to apprentice while you amend your website, how
could i subscribe for a blog website? The account helped me a acceptable deal.
I had been a little bit acquainted of this your broadcast provided bright clear concept
Hi to all, it’s in fact a good for me to pay a quick visit this web page, it consists
of helpful Information.
To the ukdoctoronfire.com webmaster, Thanks for the well written post!
Hello ukdoctoronfire.com administrator, Your posts are always well received by the community.
Im obliged for the blog post. Great.
I must say, as a lot as I enjoyed reading what you had to say, I couldnt help but lose interest after a while. Its as if you had a wonderful grasp on the subject matter, but you forgot to include your readers. Perhaps you should think about this from far more than one angle. Or maybe you shouldnt generalise so considerably. Its better if you think about what others may have to say instead of just going for a gut reaction to the subject. Think about adjusting your own believed process and giving others who may read this the benefit of the doubt.
hey there, your site is cheap. We do thank you for work
Your style is very unique in comparison to other folks I have read stuff from.
Many thanks for posting when you’ve got the opportunity, Guess I will just book
mark this site.
Hello ukdoctoronfire.com administrator, Your posts are always well written.
I’d like to thank you for the efforts you’ve put in writing this website.
I am hoping to check out the same high-grade
content by you later on as well. In truth, your creative writing abilities has
motivated me to get my own site now 😉
Great looking site. Assume you did a great deal of your very own coding. acheter ponstel à Montréal
835960 368380As I site owner I believe the content material here is very superb, thanks for your efforts. 378355
641989 599235Woh I like your content material , saved to favorites ! . 860288
Hello there! I could have sworn I’ve been to your blog before but
after browsing through many of the articles I realized it’s new to me.
Anyways, I’m certainly delighted I came across it and
I’ll be bookmarking it and checking back regularly!
Yes! Finally someone writes about amazon weathertech еден төсеніштерін сату.
Wow, awesome weblog format! How long have you been running a blog for?
you made running a blog look easy. The total look of your
website is excellent, let alone the content! You can see similar here ecommerce