Live Like a Resident: Why It Still Matters

I’ve been telling people to “Live Like a Resident” since at least 2011,and while I do not claim to have come up with the phrase,I’m pretty sure I’m almost singlehandedly responsible for popularizing it. I was even pleased to hear Dave Ramsey using it recently on his show. However, we get enough pushback on it that it made the list of The White Coat Investor’s Most Controversial teachings.

Apparently,some people really don’t like hearing that phrase. Perhaps most prominent was a thread from the WCI subreddit. The funniest part about that thread was the reaction to it on the WCI Forum. reddit skews younger (mostly Gen Z and Millennials), while forums and Facebook groups skew older (mostly Gen X and Boomers). The whole discussion basically devolved into the Boomers/Xers saying the Millennials/Zers were lazy, undisciplined bums, and the Millennials/Zers saying the Boomers/Xers were out of touch and could have bought mansions for less than $500,000 while the younger generations can’t even get a condo for less than seven figures.

What does Live Like a Resident Mean?

Live Like a Resident (LLAR) is a principle, not some sort of exact prescription.It’s a recognition that the greatest wealth-building tool for high-income professionals, like doctors, is thier income. Harnessing this tool and turning your high income into wealth (i.e., a high net worth) is the key to financial success. No matter who you are, when it comes to personal finance, the secret to success is to spend less than you earn and to take the difference and use it to accomplish your financial goals like:

* paying off debt
* Investing for the future (spending less now so you can spend more later)
* Buying stuff and experiences you want
* Giving to people and causes you believe in.

LLAR is a recognition that the easiest time to use a massive chunk of your income to build wealth is in the beginning, before you get used to the income. It’s a behavioral finance thing. Last year,you lived on $60,000 because you made $60,000. What would happen if you STILL lived on $60,ooo while earning $360,000?

Live Like a Resident (LLAR): A Path to Financial Freedom for Doctors

Many doctors want to build wealth, and one strategy gaining popularity is “Live Like a Resident” (LLAR). This means maintaining a lifestyle similar to what you had during residency, even after your income significantly increases as an attending physician.

I believe that doctors who live like residents for 2-5 years usually end up in the top income bracket.While it’s possible to become wealthy without LLAR, why risk it when this approach makes success much more likely?

It’s crucial to understand that LLAR doesn’t mean living exactly like a resident. most doctors increase their spending a little. the goal is to avoid a dramatic lifestyle change that often happens with a jump in income from around $75,000 to $400,000.Many doctors commit to a more expensive lifestyle – a large mortgage and car payments, for example – even before their first attending paycheck arrives. Then, when student loan payments come due, thay find themselves struggling financially despite earning $250,000, $350,000, or more. That’s a stressful situation.

Almost everyone increases their spending somewhat. A 50% raise is important in many fields, but it can still align with the LLAR principle. For example, if you earn $300,000 gross ($225,000 net) and increase your spending from $60,000 to $90,000, you still have $135,000 to invest and build wealth.That’s a ample amount. However, LLAR shouldn’t feel restrictive. If you feel financially deprived, it won’t be sustainable.

The LLAR period should be relatively short – typically 2-5 years. In my case, it lasted four years, matching my service obligation to the Air Force for medical school funding. The length of your LLAR period should depend on your financial goals. If you’re still living like a resident at 35 or 45, you may have missed the point.The better your financial situation, the shorter your LLAR period should be. Consider where you want to be when your LLAR period ends, and make choices that will help you get there.