The Moneymoon Phase
I already know what you are thinking. What’s a moneymoon? The beauty of being the author and editor of The Financial Cocktail, I can make up words and continue to publish them in a blog post.
A moneymoon is similar to a honeymoon, a new and exciting phase that occurs after a major event, but through a financial lens. All CRNAs go through a moneymoon when they first pass boards and begin working. A sign on bonus and paycheck heftier than anything previously experienced.
Why is this “moneymoon phase” relevant you ask?
As with a honeymoon phase, the moneymoon doesn’t last forever. Approximately 1-5 years depending on the individual. These years are crucial for setting one’s financial trajectory. How an individual chooses to live, spend, manage debt, invest, and save during this time sets a baseline. A sense of normalcy.
I’m all about trading time for money early in the career. Then immediately putting that money to work. Every dollar is a little worker bee producing a bit of honey. Throw together enough worker bees and they will produce great results with minimal effort on my part. That’s financial efficiency. Easier said than done.
Hedonic Adaptations
Hedonic adaptations and the hedonic treadmill are tough to quantify in studies. Commonly referred to as lifestyle creep, this is when an aspect of life that used to be considered a luxury is now essential – the baseline.
Lifestyle creep comes in many shapes and sizes. Living situation, transportation, vacations, clothes, food, entertainment, etc. The list goes on indefinitely.
You likely lived in a dorm once – and survived. Probably even had a great time in that 8x10 concrete box -- with a roommate. Admittedly, it was pretty fun. Try living that way today. People do it. After upgrading, good luck going back.
Graduation Day
The moneymoon starts with a broke CRNA $150,000 in the hole earning $200,000 annually. Crushing debt is the notable downside to the fantastic income. On the plus side, the cost of anesthesia school is typically less than the annual salary. Makes it a reasonable return on investment.
A reasonably low standard of living (somewhat) offsets massive debt. New grads, take advantage of being accustomed to SRNA living for a couple more years. The moneymoon is the only time this will ever be perceived as acceptable again. Remain in the CRNA dorm while preparing your financial house.
Entitlement
This is an obligatory short paragraph. Graduating from CRNA school and passing boards entitles you to work as a CRNA and carry the title afforded by your degree. It also includes an immense feeling of accomplishment. And don’t forget about making your family proud.
Becoming a CRNA does not entitle you to irrationally spend money, buy a mansion, or drive a luxury car because you “earned it.”
Back to the scheduled programing…
I wrote a post not long ago titled, CRNAs: Financially Independent within 10 Years, which upset more than a couple readers. At it’s core, I examined an average cost of living, which is $41,000 annually for an individual, $69,000 for a couple, and $93,000 for a family of 4 and applied it to a CRNA income.
My assumptions in the blog post were to illustrate a point. There are a significant number of variables in the equation, but statistics from the United States Bureau of Labor Statistics are what they are.
For the CRNAs commenting this annual cost of living is unrealistic, they have graduated from the moneymoon phase. Hedonically adapted to a higher standard of living. These are the national average cost of living numbers meaning many live on less. For those saying the numbers are unrealistic, 200 million people in this country would disagree.
As a broke new CRNA, continue to live conservatively on a small portion of your income. Don’t mistake unrealistic for undesirable. Don’t blindly follow your peers. Don’t succumb to societal norms.
Savings Rate
The average American saves just over 4% of their income. This is the societal norm. We did not have the luxury of investing early in life because of the high opportunity cost of a terminal professional degree. We must compensate for missed compounded interest with an increased savings rate.
Using the SRNA standard of living, it is reasonable to assume saving 25% of your gross income is manageable. For a family of 4 on a single CRNA income, that’s $50,000 to Uncle Sam, $100,000 for cost of living, and $50,000 that gets put to work.
That’s a nice chunk of change going towards Grad PLUS loans at 6%. Putting money to work. Assuming a lower cost of living or a second income, the amount of money going to work dramatically increases.
Eliminating high interest debt quickly is a great way to go. Once you transition to the beneficial side of compounding interest, that’s when personal finances become fun. Pretty nerdy, but I think everyone enjoys seeing their accounts grow.
I’m already feeling the adaptations…
I track savings rate closely. That’s how I measure adaptations. If income increases, but the savings rate remains unchanged, the money had to go towards expenses. Mrs. TFC and I agreed on an aggressive savings rate as DINKs (dual income, no kids) because we knew our expenses would only increase.
There is a statistic encouraging early investing stating every $1 invested at age 18 grows to $88 when you retire at age 65. This accounts for a 10% annual rate of return over 47 years. Not directly applicable to CRNAs, but a strong argument for compound interest.
I look for a 6-8% annual return. Applied to my situation, every dollar invested this year grows to $8-15 when I turn 65. And $14-32 when I turn 75. It’s not $88, but I’m not 18. I’m a decade behind.
It’s not about the return per say, but rather investing early and consistently. Building a hive of worker bees to produce more substantially than I can. I’m trading time for money, so later, my money will buy me time.
Maybe backwards thinking for the YOLO crowd. Only time will tell. I’m betting on the long game. If I’m not there to enjoy my earnings, my family will be taken care of. A worthy feat in my eyes.
I have a well-paying job and a high savings rate. We easily surpass our monthly savings goal. It will be difficult for me to accept future positions that do not match or exceed my current income. Even if the new position satisfies our monthly savings goal, it’s a mental roadblock.
Admittedly, I work too much and am not very good at spending money, which is probably a good problem to have (for the moment). After building a large enough nest egg to supplement my income, compensation will become less of a priority. The trick is building the nest egg.
We live comfortably spending near the national average. Mrs. TFC and I don’t feel deprived with our current standard of living, but we are in the moneymoon phase. Still adjusting to anesthesia money.
Almost imposter syndrome knowing our monthly investments to the brokerage are more than some individuals earn annually. It wasn’t handed to us. We are hardworking, disciplined, and extremely fortunate.
The take home message…
For those of you in the moneymoon phase, if you raise your cost of living to match your income, it will take a career to reach the financial finish line. Don’t save like the average American. There is a time and place to enjoy your earnings. Break through to the beneficial side of compounding interest prior to decreasing your savings rate.
Moneymoon sprint -- May you find yourself in a position to pick up a couple shifts early in your career. Those dollars add up quickly. Work hard to pay off your student debt in 2-3 years.
During the moneymoon, delay major purchases. Money is expensive to borrow. Renew that apartment lease instead of taking on a mortgage. Spend $1,000 repairing your current vehicle instead of buying a new one. Indulge in the little luxuries, not the big ones – just yet.
After paying off your consumer debts, savings will pile up faster than you know what to do with. Before you become one of those people saying a family of 4 can’t live on $93,000 annually, have your financial ducks in a row. The earlier the better. Think about each dollar invested today effortlessly multiplying 10-fold 3 decades from now.
