The Financial Impact of Personal Decisions

Mrs. TheFinancialCocktail and I were having a discussion the other day about a topic I found to be thought provoking. Decision making that directly or indirectly impacted financial well-being. I figured the CRNA community could get something out of this.

Let’s start with a personal decision that is already behind most of us:

Career Selection

I’m a bit bias but being a CRNA is a good gig. Amazing career choice if you ask me. Community and patient impact. Vital to healthcare. Opportunity cost – high. Income – high.

Which brings me to another personal decision relating to CRNAs…

School Selection

We have already said that the decision to become a CRNA is a strong financial decision. But how to get there? Not all schools or clinical opportunities are created equal. No argument from me. But every license is equal because it affords the opportunity to pass gas.

Work to have the best clinical experiences possible. But when the training is over, pass boards and find somewhere to work. Decide if a $300k program is worth the debt over a cheaper program. It’s largely your decision if you apply to high-cost programs in the first place.

Note I didn’t say degrees are equal. Clinically equal, but academia wanting doctoral degrees and all.  

In the age of doctoral programs, a $30,000 CRNA program is non-existent. Find a program that gets the job done and doesn’t break the bank.

Job

So many choices including practice type, location, work-life balance, and hours. Another personal decision that will greatly impact all aspects of life, not just financial ones.

From my job research, the independent practice setting in rural areas provides the highest compensation. This isn’t without major drawbacks including limited resources, lots of call, and a remote/undesirable area.

This may be good for the bank account, but not so much for family life. Conversely, an urban setting bursting with amenities may be more your style. Maybe you are hit with a “sunshine tax” or a high cost of living. No setting or location is right or wrong. It’s your decision as to what is best for you and your family.

Work extra hours or locum. Anyone can do these things, but not everyone wants to do them. Rarely conducive to free time or family life. Still a decision.

Injecting my 2 pennies -- If you chose one of those expensive programs or like shiny things, I’d consider getting on the right side of compounding interest before I kicked back to enjoy the good life.

Marriage

Making a 90 degree turn here. This really deserves its own post as the considerations are numerous. As a team, it’s important to discuss all aspects of money. Even the skeletons you hope to keep buried in the closet such as Grad PLUS loans or credit card debt.

How to pay the bills? Are both of you working? What is yours, mine, and ours? Are financial goals aligned? So many talking points.

There is usually one “spender” and one “saver.” At least relatively. Open communication about financial goals is essential. Agree upon a general strategy and smooth out the wrinkles from there.

Money is the biggest factor for divorce. Not even a lack of money, just disagreements about management. Have discussions early and often to save yourself from the mental and physical distress of problems down the road.

How we handled money

I am a saver and Mrs. TFC is a spender. All of the tough talks were handled prior to marriage. Way, way, way before marriage. We agree that becoming financially independent by age 35 is the goal. Straight forward enough. This creates the outline of where our income needs to go to reach our FI number (25x cost of living).

Who you marry influences your financial situation just as much as a career. You can make all the money in the world, but if one of you spends as quickly as you earn, there will be nothing left. Again, I reference the stereotypical lottery winner and professional athlete.

Emotions

Emotions influence everything from spending to comfort.

Emotional spending is absolutely a thing. Especially with credit cards and online shopping.

Maybe having a huge emergency fund helps you sleep at night. It’s not getting a great return, but who am I to argue with the feeling of comfort.

Everyone has a different risk tolerance. Asset allocation influences returns which compound over decades. Emotions influence finances a great deal.

Children

I figured this was appropriate to follow emotions as there appears to be a sort of emotional bond between child and parent. There are a significant number of variables at play here but conservatively expect each child to cost approximately $250,000 from birth to age 18.

Up that number if you expect to pay for college. Numbers vary, but just know, kids aren’t cheap.

Speaking of kids, are you going with daycare or a stay-at-home parent? Childcare isn’t cheap. Neither is losing an income. Eating out for $25 per plate just increased from a $50 bill to $100.

Events and vacations just doubled or tripled in price. Grocery bill goes up. Sports and activities. A car to get around. The list goes on and on.

Helping Adult Children

More folks are contributing to their adult children than ever before.

Thehill.com writes cites a survey reporting half of American parents support their adult children. The average monthly financial support -- $1,442. The same group of parents average $635 per month towards retirement. Interesting.

Parents, ask yourselves if your adult children are putting in the work to accomplish their goals. Do they assume that mom and dad are well off so they can slack a bit? Make them put in the work and do the research for their own good.

My parents helped me by talking about money early on. And working construction. I could go without that ever again.

They matched a few scholarships totaling $5,000 or so, which I am grateful for. But I just worked and delayed gratification knowing the massive tuition numbers I would face in the coming years.

I paid for my $60,000 undergraduate degree from a public university. This amount includes tuition, meal plans, and room and board. I worked as an RN for 2.5 years and saved a bunch of money to pay for CRNA school. Tuition was $100,000.

Maybe the thought is to help your children early in life so they can repay the financial favor later. Just know the financial implications of paying for an adult child’s education or expenses when that money could be placed into investments for your retirement. See that study from Thehill.com. The only person truly watching out for your finances is the one in the mirror.

Remember, in the event of an emergency, secure your oxygen mask before helping your neighbor. Your kids are likely making personal decisions listed in this blog post that influence their financial situation.

Handouts

While we are on the topic of helping family, let’s talk about others asking for money. Win the lottery and everyone comes out of the woodwork looking for a handout. Well, the same can happen when people know you are in a lucrative career.

There may be expectations to pay for a big dinner. Maybe pay for a group vacation. Mrs. TFC and I experienced the expectation that we give expensive gifts for birthdays and holidays.

Side note – we are “:experience people,” so lavish gift giving isn’t up our alley regardless of income.

Be careful “spreading the wealth.”

Charitable Contributions

Now this is the way to “spread the wealth.” Find a cause you can get behind. Religious tithing. Career affiliation organization. Disease support group. Military support. Whatever floats your boat.

My favorites are local. Fewer dollars eaten by overhead and more to the true cause. One local thrift shop that is a bit rough around the edges is my historical favorite. My grandparents used to volunteer at this place. I have donated many clothes and furniture pieces. I buy their goods. I recommend their business regularly.

Again, I’m a sucker for local stuff, especially youth activities. How can you tell the little dancer gal, “I’ll pass on the homemade cake pops.” Budget for charitable giving because it adds up.

Physical Health

As healthcare providers, I don’t need to explain the importance of physical health. Doctoring isn’t cheap. Find an active activity you enjoy and keep the controllable comorbidities off your chart. And your disability and life insurance premiums will thank you.

Past Experiences

This is the reason I wait to fault anyone for their financial decisions. Your upbringing influences what you are comfortable with. If you grew up without money, it was common to spend everything that came in because if you didn’t spend it, collection companies would take it.

If overdue bills are endless, it’s tough to argue with that reasoning. Same goes with investments.

My grandparents held most of their assets in CDs (Certificates of Deposit). That was decades ago when CDs were returning 7-12%. This translated to my mother choosing CDs as her preferred investment with any money that didn’t go back into their small business.

During the greatest bull run in the history of the stock market, my parents’ investments were averaging 0.5%. Rough. But for much of their early lives, the stock market was flat, so it wasn’t worth the “risk.” Perfect example of emotions influencing finances.

Upbringing

The house many millennials knew as their childhood home was actually the third or fourth upgrade for their parents. Same with vehicles. That relatively new car or pickup was likely leagues from the rusty beater they drove all too many years.

The young folks just starting their careers think this 4th generation purchase is the norm. The starting point. I watched a documentary about how the $20,000 new car was disappearing because there was no demand. Young folks want power windows, leather seats, a touch screen display, and a sunroof.

Boomers can afford more car so they don’t buy entry level. Millennials don’t want entry level. No point in manufacturing a car no one buys.

Houses are progressing the same way. 900 sq. ft. ranch houses just don’t sell. They don’t even build new 900 sq. ft. homes any longer. Young folks want the same level they grew up in without working for 15+ years.

I am of course generalizing, but that’s what nationwide statistics do…generalize. Past experiences influence current financial progress.

Financial Literacy

I consider the acquisition of knowledge a choice to some degree. I’m referring to a Dunning-Druger effect situation here.

In the internet age, knowledge is immediately accessible. And statistics show that simple financial strategies compete with the most complex approaches. This brings us back to the index fund vs mutual fund argument.

A simple total stock market index fund outperforms the majority of fund managers who have a team of dozens or hundreds of skilled traders with vast knowledge of the markets and valuating companies. And the simple index fund prevails. Comical isn’t it?

Personal finance works the same way. Save half. Spend half. Granted, Uncle Sam dips into the spending half. But generally, if you put away a big chunk of money, you will be ahead.

Spend less than you make. All of those cliches. A single book such as The Simple Path to Wealth by J.L. Collins tells you everything you need to be successful financially. If you made it through anesthesia school, you can read a couple hundred pages from J.L. Collins.

Not everything needs to be maximally efficient to win with money. Just get the big stuff. Hit the high points. Maximize tax advantaged accounts and minimize tax burden. Adjust as you go through trial and error.

Everyone has the option to educate themselves just a little bit.

I don’t intend to tell anyone what to do. I do my best to provide options and considerations. Hopefully you give thought to these aspects of life. And tell your family members and children to be considerate of how their personal decisions impact their financial future.

Best of decision making to you all!