One term that has been getting a lot of exposure in the past few years is “first world problem”.  This refers to problems that only people of privilege have, such as your fries not being salty enough or not having a phone charger that’s long enough to allow you to browse your phone while in bed.  This is opposed to third world problems, such as not having clean water to drink, which unfortunately a frighteningly high amount of the world’s population suffers from.  While “first world problems” are made in jest, there is a real first world problem that afflicts many in America.  And that is lifestyle inflation.

Seeing your co-worker or neighbor with that new car (which costs them $400/month) or a new sweet Macbook (even though they bought a perfectly good one last year) can bring about many feelings.  Some feel jealousy, thinking that we deserve that as much as they do.  Some get angry, thinking that my neighbor has no right to have that since I work so much harder than him.  These negative feelings can usually lead to negative actions, such as buying the same things for ourselves when we don’t need them and/or can’t afford them.  Doing this once or twice may not destroy your finances (but it may get close).  The big problem starts once we make this lifestyle inflation a habit.  This can put a major hurting on your finances, leaving you deep in debt with little to no savings.

This is a big problem in this country and can really destroy your finances and your happiness.  Few people will ever say, “Gee I’m so glad I got that iPhone 5 20 years ago.  It really fulfilled me”  Stuff is just that.  Stuff.  We enjoy it for a while, it gets used, and we move on to the next thing.  However, once we realize how dangerous lifestyle inflation can be, we can turn it right on its head.  And it’s actually very simple to do.

First, make a list of all of your expenses and get rid of or minimize the stuff that’s not important to you.  If you feel everything is important to you, just pick your top 5 things and get rid of the rest.  It can be surprising how many monthly bills we have for things we rarely use.  If you found a way to shave off $200 from your monthly payments, you’re in a WAY better situation than before as this will be savings that last you a LIFETIME.  Use that savings towards various actions that will help your finances, such as paying off credit card debt or starting an emergency fund in an online savings account.

Now once you get a make some more money in the form of a raise, bonus or side income, put that towards your savings goals.  You already learned to live without that money, so you won’t really be missing it.  It’s okay to use new money to celebrate once in a while, but the majority of it should go towards helping your finances, not hurting them.  For example, I have a boatload of student loans.  When I pay one off, I just use the minimum payment I had on that loan and apply it to my next loan.  I already lived without that money before and I can do it again.  This will get me debt free even quicker.

Continue this pattern for years and years, and not only will you be much better off financially, you will most likely be happier as well.  Who knows, you might even be able to retire early and do whatever you want, while others continue working for things that ultimately don’t fulfill them.

There were many interesting sayings I learned during optometry school.  My favorite one was “Those who can’t do…teach.  Those who can’t teach…teach optometry.”  This saying was partially in jest, but partially not.  Anyway, another saying which applies to pretty much any healthcare field is “Prevention is better than cure”.  I really appreciate the wisdom behind this idea as I know from experience that it’s much better to nip problems in the bud by practicing what your doctor actually recommends.  I firmly believe that the majority of health problems that plague this country (diabetes, high blood pressure, high cholesterol) could be decreased drastically if people took steps to prevent them from happening in the first place.

I see this a lot with people who abuse their contact lenses.  I tell every contact lens patient to never sleep in their lenses and to always throw them out at the recommended intervals.  There is no other reason I tell them this than to minimize the possibility of an eye infection, which are painful, inconvenient and costly.  Most people start listening to my recommendations after getting an eye infection.  It’s great that they turned over a new leaf, but it would be even better if the proper instructions were followed in the first place.

Why am I venting about my non-compliant patients on this finance blog?  It’s really fun.  And also I think the same principle can be applied to our finances.  It’s awesome that someone saw the light after paying off their massive credit card bills that took 5 years and a lot of stress.  But it would be even better if that person never got into credit card debt in the first place.  It would have saved them a lot of stress if course, but it would also have saved them a lot of money.  Money that could have been used to increase an emergency fund, invest in an IRA or make a down payment on a house.

I realize that everyone makes mistakes in their financial life.  I’ve made a whole bunch of them.  Learning from our own mistakes is a key and essential trait to grow financially and in virtually every other way.  But we don’t have to make that many in order to learn our lesson.  Some things such as falling into credit card debt or not saving enough are easy to avoid but can lead to disastrous results.

Just like consistently eating healthy and moderate exercise will most likely keep us very healthy, small, simple things that we can do everyday such as networking or finding ways to make more money can make our financial situation very strong.  But just as neglecting exercise for a long time can all of sudden lead to heart disease, not doing the small financially responsible things can tear apart our finances.

So how are those 2013 New Year’s resolutions going?  Do you even remember what they were?  If they were something like “lose weight” or “stop spending so much”, you most likely didn’t stick to them.  And that’s okay.  Because it’s good to know what DOESN’T work as much as what does.

What doesn’t work is making abstract and lofty goals.  These goals can be motivating at first, but they will most likely lead you to burnout and eventually abandon the goal.  This is especially true with making financial resolutions.  Improving our finances is one of the most common resolutions made at the end of the year.  And who doesn’t want to improve their finances?  We all want to be able to spend money on what we want and save it for when we need it most.  New Year resolutions, especially financial resolutions, need to be very specific.  A goal such as “save for retirement” or “invest more” is still pretty abstract because retirement can seem so far away and we don’t usually realize investment gains after some time.  These resolutions need to be very specific and most important of all, measurable.

Here are a few guidelines when making your financial New Year resolutions for 2014:

Make resolutions early:  If you’re serious about making new habits for the new year, you should already be thinking about them in December.  The holiday time is crazy as it is, so waiting until the last few days to think about some serious changes you need to make in your financial life can lead to a rushed resolution.  Start planning early on and refine it as the month goes on.  Once January 1 rolls around, you’ll have had a lot of time to think about it and will be motivated to follow through.

Measure it:  This is usually the toughest part of a goal, and also the most crucial.  Most of us have heard of SMART goals.  This is the M.  If you can’t measure your progress, there really is no point in making the goal.  You have to know where you are starting if you ever want to get to your destination.  Luckily for you, most financial goals are measured in dollars so they can be measured pretty easily.  If one of your goals is to spend less money eating out, look at your past few months and average how much you spent on eating out.  Now you have a concrete number to compete against as you try to achieve your goal and decrease the amount you spend eating out in the next few months.

Be accountable:  Getting through a workout is a lot easier with a like minded buddy, and the same thing goes for achieving goals.  Find a spouse, friend, brother, sister or co-worker who has similar goals in mind and share with each other.  Make a plan to check in with each other periodically during the year to check up on each others progress.  The mere fact that you will be reporting to someone else other than yourself can be an extremely powerful motivator.

Wanna get even crazier?  Declare your goal on Facebook or Twitter.  Now you’ll have a bunch of people periodically asking you how you’re doing on your New year’s resolution.  You are pretty much forced to follow through or risk public humiliation.  There is a great post by Mr Money Mustache on the powerful effects of declaring your goal publicly.

Make it super specific:  Remember those SMART goals?  The S stands for specific.  This is very important with financial goals because you need to start specific in order to build anything worthwhile.  Instead of “start an emergency fund”, make it a very specific number.  If you currently don’t save anything at all in an emergency fund, it can be as small as you like.  Make a goal to save $20 a week, very attainable for most sane people.  That comes to about $80/month, which is almost $1000 by the end of the year.  That’s a heck of a lot more than zero.  Make it as specific as you can, and remember, you can always ramp it up later in the year if you’re reaching your number way too easily.

Following these guidelines when making your New Years resolutions can actually be a little scary.  If you make a goal early on that is really specific and measurable, and you tell the whole world about it, it means you have to answer to others including yourself.  It also means you will most likely achieve your goal, getting you more motivated to make more and more goals.  Achieving your dreams is nothing more than meeting one goal after another.  Happy New Year resolution making!

Everyone wants to know some new tactics or hacks to help improve their finances.  There are always apps and programs coming out for budgeting and tracking our money and net worth.  Many of these tools are wonderful and they work great, but tactics and tricks can only take you so far.  Many of the most successful and wealthy people alive today don’t have any use for such apps or hacks.  That’s because they have mastered the values that embody success.  One of these values, and the one I believe leads to the most financial success, is delayed gratification.

I like to think of our financial status as a tree with three main parts:  the roots, the trunk and the branches.  The branches of a financial tree are the various checking, savings, business and investment accounts that we use to get our money.  The trunk is our ability to budget, which needs to be sound to ensure our money is going where it should be.  And the root of the tree is the virtue known as delayed gratification, the ability to hold off on small wins now to hold out for possibly much larger wins in the future.  Most people focus on the branches, looking for little things we can do here and there to hack our finances.  Sometimes they work and sometimes they don’t.  If the roots and trunk of our tree are not steady, trying to improve the branches will not do too much.

The virtue of delayed gratification is present in many facets of life.   Many religions advocate living a good life in this world for the promise of a greater life after death.  In school it’s usually a good idea to study regularly instead of spending the day with video games so you can ace that test and enjoy the video gaming afterwards stress free.  And in our financial life there are numerous ways where delayed gratification can lead to a much bigger payoff.

There are 3 major ways that delayed gratification can lead to financial success:

1.  Saving for retirement:  This is one of the penultimate examples of the benefits of delayed gratification.  Young people starting their careers or businesses usually don’t have retirement on their mind, but they should.  Retirement is one of those few things that is almost guaranteed to happen in life.  Eventually we get old and aren’t able to work as hard as we used to or we just get tired of working hard week after week.  Many people are forced into a retirement situation because of disability or health reasons.  Any of those situations is pretty likely so it is imperative to save something, especially early on.  This can usually be done relatively painlessly with automatic contributions into a 401k or an IRA.  There are many retirement calculators around the web that can show you how much you can end up with based on different rates of return, but it is important to know that WHEN you save (earlier the better) and HOW MUCH you save (the more the better obviously) are the main factors determining how much money you will have when you can’t or don’t want to work as hard anymore.

2.  Putting in the work to start a business:  Starting a business from the ground up is a perfect example of the importance of delayed gratification.  Every business needs a strong foundation and this work is done early on without much reward.  But the payoff can be great if you stick to a plan and do not take any easy ways out.  Just like a building that has a faulty foundation will eventually collapse when there’s an earthquake, a business with a poor foundation will most likely fizzle out when times get tough financially.

3.  Studying a little longer for that lucrative career:  Many people who take the prerequisite courses in college for medicine, optometry, dentistry, pharmacy or any other potentially lucrative medical profession don’t actually go on to the respective professional school.  There could be many reasons such as poor grades, family situation etc. that would prevent someone from moving on to professional school, but I know of plenty of people who entered the job market with a bachelor’s degree just because they didn’t want to spend more years studying.  They wanted the payoff from their bachelor degree right away, despite the fact that they would most likely be better off financially if they studied diligently for a few more years and got their professional degrees.  Forgoing the payoff of a bachelor’s and choosing to go further with your schooling is another way delayed gratification can greatly pay off.

These are just a few of the many situations in which delayed gratification would be the wise decision.  There are a ton of examples in the world of finance especially.  Everyone has some example in their life in which delayed gratification was the best financial decision, so please share in the comments below.

Just a short post today on something I’ve been thinking about lately.  What spurred me to think about it was the scene from the recent Batman movie when Bruce Wayne was stuck inside the underground prison and the only way to get out was to make the treacherous climb to the top.  Anyone who wanted to try the climb had a harness tied around them and they were allowed to try their best while everyone watched.  Bruce tried over and over but always came up JUST short.

After some soul searching and listening to the advice of a fellow prisoner, Bruce realized that he had to go without the harness and climb with the knowledge that if he didn’t make it, he would fall to his death.  He ultimately made the climb and was able to escape the prison.  He realized that the harness that saved him in case he fell was just a crutch that was holding him back from his true potential.

I’ve been thinking about this idea and times in my life where I have performed well because the situation was desperate or had some urgency to it.  Now I wouldn’t go around putting myself in desperate situations just to see how I perform, but it is interesting to know how much better people could perform if success was literally the only option.

How could we apply this principle to improve our lives both personally and financially?  Please comment below and share your thoughts. 

Welcome to The Broke Professional!  This is the first post on my first blog.  Lots of firsts.  Allow me to introduce myself.  My name is Syed and I am a broke professional.  I also know that I’m not the only broke professional out there. Getting a professional degree is great, but in the past few years it has become a little less great mainly because of rapidly increasing tuition leading to large student loan debt balances after graduation.  Having a large negative net worth after finishing school is becoming commonplace nowadays.

Before going into much more detail, let me give you some background information about myself.  I am currently working as an optometrist for a national corporation.  I graduated optometry school in 2009 with all the potential in the world along with what seems like all the student loan debt in the world.  Receiving my first paycheck as a doctor was a great day, but it came with a sudden realization: I’m going to be paying off my student loans for a very, very long time if something does not change.  This really spurred me into action to learn as much as I could about money, student loans, investing, taxes and everything in between.  I devoured and applied as much knowledge as I could since becoming a professional.  The bottom line is I really wanted to optimize my education by learning the best way to handle my new-found money.

Naturally, discovering something as revolutionary as changing my financial health led me to talk about it with other optometrists and other professionals in general.  What I have found is that many of my peers do not have much interest in getting to know about their finances, let alone try to improve them.  For example, many doctors and professionals I have spoken with have not taken the time to contribute any money to their company’s 401k retirement plan, despite knowing that they can receive a matching contribution from their company.  This seemed more like a psychology issue that a strict financial knowledge issue so i started learning as much as I could about money and psychology and found some very fascinating things.  This is one area I will try to emphasize in my posts as well.

Why do we handle money the way that we do and what can we do to improve our situation?  This will be the overall theme of my blog and I hope it will lead to much discussion and, most importantly, implementation of ideas that produce real results in people’s lives.  This site is not only for working professionals but for anyone with interest in personal finance.

One last point I would like to make is about the actual phrase “personal finance”.  Right there in the name it says finance is personal, meaning everyone’s situation is different and there is usually no one size fits all answer for everybody.  There are certain principles that hold true for everyone such as don’t spend more money than you have and try to maintain positive social relationships.  But most financial decisions need to be tailored to each individual situation.  I don’t have all the answers, but I will try to provide as much objective information and direction as I can, but it is only through discussion and looking honestly at one’s own situation that a person will find the right answer for their problem.  This is a principle I try to apply to myself as much as I can and I hope others will also.