Real-Life Examples of Physician Budgets — From the Frugal to the Extravagant
According to the industry, the employment location, and the candidate profile, the average doctor’s income in the UAE is AED 22,500 per month and can reach AED 31,500. The total amount is made up of 44% in allowances and 56% in basic wages (housing, transportation, and other cash benefits). Healthcare is the sector that pays the most for doctors in the UAE. When cities in the UAE are compared, Dubai and Abu Dhabi offer the highest pay for doctors. In the UAE, salaries are tax-free.
Let’s use the example of a physician family making $20,000 per month after taxes to see how this works in practice. For the sake of calculation, they are assumed to be 30 years old, to have just finished their residency, to be debt-free, and to be childless.
Let’s say that this family of doctors makes the sensible decision to make full use of all of their retirement options, including the $20,500 (2022) cap on each 401(k) account, the $6,000 each for their Roth IRAs, and the $7,300 for the family HSA. (Take note that for 2023, those retirement contribution caps will rise to $22,500, $6,500, and $7,750, respectively.)
With an average monthly income of AED 17,500, the anticipated total pay for a doctor in the Dubai, United Arab Emirates, region is AED 101,500. These figures show the median, or the midpoint of the ranges, from our unique Total Pay Estimate methodology, which is based on data about wages gathered from our users. The expected monthly supplementary compensation is AED 84,000. Cash bonuses, commissions, tips, and profit sharing are all possible forms of additional compensation. The values in the “most likely range” fall between the 25th and 75th percentiles of all the payment information that is currently available for this role.
The Frugalistas have an average-sized home and drive older Hondas that have been paid off (in true WCI fashion!). They make fun of the fact that they frequently receive tickets for parking in the hospital physicians’ lot. The smaller size of their residence results in fewer upkeep expenditures. Their phones are connected to a cheap carrier. They frequently compare auto insurance quotes and enroll in defensive driving classes to get a better deal. They stopped watching cable and started streaming instead. They are careful to set aside money for each of the couples’ travel, entertainment, donations, and fun money while still keeping an eye on their restaurant and shopping budgets.
They don’t have country club memberships. In doing so, they not only live a full life but also save an extra $7,000 per month that they may invest (or use to pay down debt they may invest (or use to pay down debt). If they maintain their current lifestyle and invest at an average rate of 7% annually (compounding monthly), they can reach financial independence in about 10.5 years, assuming they have no college loans. So, by the time they turn 40, they won’t need a job anymore!
After residency, the moderates decide to slightly improve their lives. They join a country club and purchase a larger home than the frugalistas. They are a little less careful about looking for cheap insurance and phone rates, but they still set monthly spending limits of $500 and 750 for dining out and shopping, respectively. For holidays and travel, they make a little more of an investment. They create provisions for charitable contributions and entertainment funds for each spouse. At the end of the month, they have roughly $3,000, which they use for more investment. They will require an additional $1 million to be financially independent because their lifestyle is a little more extravagant than the Frugalistas’. Nevertheless, they will eventually become financially independent.
The high rollers
The High Rollers decide to buy a large house. They rent vehicles that need premium fuel. They take frequent outings and join a country club. They spend more money on dining out and traveling. They don’t frequently compare insurance quotes and have the most expensive cable package. Despite all of their expenses, they continue to attempt to donate, but they are barely getting by each month and are spending everything they earn (aside from maxing out their tax-advantaged accounts). They truly don’t have room for entertainment money. They will be financially independent in their late 50s since they are currently living at the upper limit of their income while still saving the maximum amount for retirement.
How much do children cost?
What happens if these families wind up having children, enrolling them in private schools, and funding their college expenses through 529 plans? All three spending identities’ progress toward FI would probably be slowed significantly, bringing them closer to the usual retirement age. Here, I’ve added an entirely random amount of $2,000 per month for expenses related to childcare, private school, or anything else for children (we all know kids are expensive). The FI ages of the High Rollers, Moderates, and Frugalistas are now 64, 52, and 43.5, respectively.
As you can see, $20,000 in after-tax income is plenty to live comfortably and save for retirement. But seemingly insignificant spending increases and lifestyle inflation can mount up and have a big impact on how quickly doctors become financially independent.
Recall Diderot. You can wear your lovely robe, but try to keep the rest under control. Trying to restrain the urge to continuously upgrade as a result of lifestyle inflation can pay off in the form of early financial freedom and more breathing room in our monthly budgets. You can have anything but everything, as Paula Pant once said. Choose accordingly.