Evaluating your Financial Fitness
The prerequisite statistics course for anesthesia school was far from my favorite, but the information was valuable. I developed a greater understanding of the normally distributed bell curse and standard deviations. This provided a deeper understanding of everything from study results to the ballistics data from my hand-load chronograph data. So naturally, I applied these concepts to finance and net worth.
When highly educated, high income earners such as CRNAs, physicians, and lawyers begin to place themselves on the various net worth comparison scales, they don’t fit well. Everything is skewed. Loads of debt on the front end. The opportunity cost for CRNA school is high. The DNAP program I attended had a tuition cost of $100,000 and an opportunity cost of approximately $550,000. Looking at the NBCRNA data, about 75% of SRNAs are age 35 and under. I don’t recall the average student debt statistic, but I want to say it is somewhere between $150,000 and $200,000. So where does this crowd fit in?
Fidelity Investments gives a net worth goal by the decade. Have 1x your annual income in savings and investments by age 30, 3x by 40, 6x by 50, and 8x by 60. Other financial advisory firms recommend having even more put away.
Let’s say a new CRNA at age 30 makes $185,000 annually. Student loans leave their net worth $150,000 in the red. That’s only $335K off the recommended mark, not bad. But when you consider the average family of 4 makes about $55,000 annually, CRNAs close the gap quickly with the general population assuming earnings are not figuratively lit aflame by frivolous lifestyle increases because they are now a big dog CRNA who drinks 30-year old scotch and drives a new Lexus SUV. This very sophisticated chart shows the drastic slope difference in the 10-year earning difference of the average household and CRNAs.
Not to anyone’s surprise, it takes those in high opportunity cost professions a while to catch up, but the lifetime earnings greatly surpass the national average. The Fidelity Investments recommendations have nothing to do with earnings and everything to do with savings and investments.
Note that the median and average net worth values by age differ greatly due to the far-right tail of the distribution. We can thank Vilfredo Pareto and Derek J. de Solla Price for laying out those statistical principles. Anyway, the Federal Reserve Board puts the median and mean net worth for those under age 35 at $13,900 and $76,300 respectively. By age 35-45, those values increase to $91,300 for a median and $436,200 for an average. For a CRNA who started at 30 making $185,000, 3x their income at age 40 would equate to $550,000. Half million dollars to barely meet Fidelity’s recommendation, but absolutely crushing it on the median net worth scale. That is an annual savings of $70,500 assuming loans are paid off and no wage increase (not in today’s market). Doable if one is intentional, but certainly not easy. It is really in one’s 40s where the earnings slope really shows its potential. Even with a low savings rate, 15-year veteran CRNAs easily surpass the national median net worth. I won’t bore you with more statistics, but there are plenty of online charts that list net worth, income, and many other metrics by percentiles that I have spent way too much time looking at. Check them out during your next 5 hour case.
So where am I going with this rant? These metrics are terrible for CRNAs. Set your own personalized numbers based on your financial goals. Use something like the 4% rule to have a rough idea of what a number for retirement might look like. If you want to live in the “here and now”, then make that your priority. If financial security is your thing, focus on a high investing rate like 50% of your net income. For the FIRE community (financially independent, retire early), look to balance expenses and income to reach the 4% rule quickly. I was/am caught up with the numbers. I don’t look at the national mean or median. It’s the 99th percentile I keep my eye on. Is it a greed thing? Nah, more of a challenge than anything. Ego, maybe. Financial security as a high priority, definitely.
Is money important? You bet it is. I wish people would quit saying it isn’t. Money isn’t something I worship, but rather something I use as a tool. A means to buy time, conveniences, and experiences. Time is the only limited commodity. My shovel is out, and I am furiously planting seeds of a money tree that I will later harvest to buy these aforementioned things. The CRNA community isn’t filled with generic, average people, so don’t use generic, oversimplified charts.
