(For Physicians) Your #1 Monthly Expense Isn't Your Mortgage

Have you ever wondered what your biggest monthly expense is? Odds are it isn’t your mortgage or car payment. Nope. For the average physician it is your tax bill to Uncle Sam.

Let me give an example with some averages. As always, I’m going to keep this example super simple.

The most recent data I have access to shows the average physician salary is estimated to be $350,000. Again, I am going to simplify this scenario and say there are two incomes in this married household and the total income is $350,000.

After all your retirement contributions and utilizing the standard deduction, your ordinary income for tax purposes is $275,000 (I am rounding this a bit so be patient with me).

This puts you in the 24% marginal tax bracket this year.

Your total Federal tax bill is roughly $52,000.

For rounding purposes, you get to pay Uncle Sam $4,300 a month.

What about other monthly expenses?

For giggles, if you had a $750,000 mortgage and locked in at a 3% rate a few years back for that 30-year mortgage, your monthly mortgage payment should be around $3,200.

Also, car payments are not the highest monthly bill as my typical physician client drives a beater. At least that is what they tell me. And I don’t know anyone who drives a car that costs more than $4,300 a month.

Student loans certainly are applicable in the world of being a physician, however, the majority of my physician clients come to me after paying off student loans so I don’t spend much time in that world. But for those I do the costs are less than their monthly tax payment.

Again, your situation may be different, however, for the typical physician household your largest monthly bill is what you pay Uncle Sam. And this is a bill!

And in case you were wondering, for the average household earning $200,000 taxes make up 30% of their monthly expenses while housing comes in second at 20%.

 Finally, similar to some of these other expenses, there are ways to reduce this monthly tax bill and that is where tax planning comes into play. I will share one quick example and let you get back to your stethoscope. I helped a physician client save about $58,000 this year in taxes. I don’t know about you, but that seems like a good return on my flat fee.