Optimal Spending: Get a Bang for Your Buck

Optimal spending is critically important.  I’m often asked about my spending:   

“You make so much money.  How do you even spend it all?”  

“You don’t seem to spend much money.  What do you do with it all?”


Lifestyles of the Rich and Famous

People have preconceived ideas about what it means to spend 200K or more per year.  For the average household spending say 53K per year it is hard to imagine spending even three let alone four times that every year.  They imagine a grand life filled with country clubs, high-end cars, European vacations, and luxurious mansions. 

Somehow I spend a lot (despite my frugal nature) and I don’t have any of those indulgences listed.   How is that?  People who know me and my thrifty nature ask, “What in the world do you spend your money on?”  It is a reasonable question since they see me with homemade PB&J for lunch, driving a used Ford, working a lot, buying a refurbished TV online to save money, etc.  I have an iPhone but I didn’t buy it new and I pay a rock-bottom monthly service fee. 

It got me thinking, “Hey that is a good question – what do we spend our money on?  And what should we spend it on?”  My family spends a ton of money yearly and in a way that is unique to us.  You should too.   No doubt all of us could be more focused and efficient with our spending.  Extra income above our needs allows for a sloppy cash flow/budgeting system.  We don’t count every penny or plan our spending in detail. Still, things work out fine.


Uncle Sam

The shortest answer of what we spend money on is TAXES.  That is by far the largest outlay of cash every single year.  It is a bit surprising.  I have had tax bills over 200 – 300K.  It is much more money than I ever even dreamed of making in a year.  Even my family members didn’t guess that it was our largest expense. 

Taxes are painlessly deducted from the gross amount of each paycheck and then there is an amount due for capital gains and dividends.  It is all so complicated and we forget how big the impact really is.  Maybe that is part of the plan by our friends in the IRS?  For sure!  Back before payroll deduction of taxes the federal tax revenue was nowhere near what was due.  We are all so numb to the deductions that most think of April 15 as the day we “pay our taxes” rather than what it really is: a year-end reconciliation. 

Moving on to more pleasant categories:

I made a couple of mnemonics to remember how we choose to spend our money.  Some love mnemonics, some hate them.  I don’t think I would have gotten through medical school without them.  I’m sharing my two acronyms for our optimal spending categories.


Optimal Spending

We want our expenses to be aligned with our goals and values and also to bring us the most joy, pleasure or happiness.


HEATS (Health, Education, Assets, Travel, Security)


We value our health.  We have had several health scares and that highlighted the importance of a healthy body and mind.  Nothing else matters if that is lacking.  We spend freely on insurance premiums, fitness equipment, tests, doctor copays, labs, preventive work, fitness classes, mental health, organic foods, etc.  Optimal health does not come cheap and it is worth paying for in our view.


This also includes skills development or training.  We value a good public school education.  My wife and I chose to live in a more expensive city in order to have better schools for our kids.  The kids’ 529 accounts are a priority for us.  We buy books, go to conferences, teach in order to learn, etc.  I enjoy the teaching and learning.

Unless you are growing your knowledge and skills you are falling behind in your field.  It takes a lot of money to keep learning.  Brian Tracy recommends investing 3% of your income on personal development and learning.  That may be a big chunk of change (e.g. 3% of 200K = 6K / year).  As Warren Buffett said, “the more you learn, the more you earn.”


Or more specifically income-producing assets.  We put our money to work for us.  Some find investing boring and they have no interest in learning about it.  I find it fascinating and when my assets earn more income than I do by working all day that really gets my attention.  It allows me to wake up richer than when I went to bed.  What is not to love about that?  Money above our wants and needs goes to buy assets that produce more cash now or in the future.  That income stream can then build on itself and fund our future.  It costs money to get started though.  Bootstrapping in investing is difficult or impossible for most of us.  There is some truth in the saying, “It takes money to make money.”


Travel comes with some inconvenience, costs, planning hassles, etc.  Despite that, there is nothing more enriching than exploring a new world.  The culture, the geography, the tastes, the sights, the smells of a foreign and far-off land can be invigorating.  There is value in breaking your normal routine and meeting new people.  It is great to expose kids to this too.  We travel within the US and abroad.  I don’t want to wait until I’m elderly and decrepit to experience other lands.  This is a big investment though.  Airfare, food, hotels, time off work and associated opportunity costs are significant.  If you come back to work with a sense of renewal and rest though it can add to career longevity in addition to an increased quality of life.


This can be financial security or physical security.  I value both highly and they both cost money.  Since we cover financial security elsewhere, I will stress physical security here.  Our house alarm and external cameras provide invaluable peace of mind.  Similarly, for the few hundred dollars we shelled out for a Taser.  Tasers are a great way to defend yourself before the police arrive.  We live in a more expensive neighborhood that has a very low crime rate.  This illustrates how we align our spending with our priorities.   


POETT (Pre-payments, Others, Experiences, Treats, Timesavers)

Pre-paid Expenses

When we pay ahead of time we often enjoy the experience more.  It is a bit strange but is true for me and many others.  Part of why a cruise or Disney experience, for example, is enjoyable is that prepaid seems “free” when you are experiencing it.  Is there a way to prepay for goods or services in your life?


Spending money on others makes us feel better than if we spend it on ourselves.  Several studies confirmed this including ones by Michael Norton of Harvard Business School.  He is also the author of the excellent book on optimal spending: Happy Money.  Those who give to charity earn more and feel better than those who don’t. 

My wife and I started a donor-advised fund (DAF) at a mutual fund company.  We also give to a church, homeless shelters, food pantries, United Way, etc.  One of my favorite charities is Donors Choose.  It allows you to pick an educational need, for example, an inner-city school that can’t afford books.  In addition to the tax write off you get plenty of thank-you notes, pictures, and gratitude from the teachers and students.  That real and personal feedback helps the giver feel joy as well as the recipient of the charity.  Sponsoring a child through Children International is another great way to bask in your own charitable feelings while helping others.


I try to spend money on events or experiences as opposed to things.  Goods – even luxury goods – typically depreciate over time.  We enjoy them less over time as well.  They often clutter our lives and become a nuisance.  Larger items like a big house also add to our future expenses which in turn may force us to work more than we like etc.  Once the novelty of your new Corvette wears off you may regret that purchase. 

Money spent on a family vacation or lessens or adventure travel or concerts, etc. will create memories of a life well-lived.  Many of those memories will be replayed in the mind for decades to come.  The value may even grow over time as the minor hassles of the luggage delay in Ireland is forgotten and only the memory of a warm pub on a cool day or the double rainbow over Galway Bay is retained.


Sometimes a splurge on a pricey dinner or a carriage ride downtown or a visit to a high-end spa is “just what the doctor ordered.”  It is ok to pamper yourself now and then.  A rare treat –even an expensive or unnecessary one- can increase your happiness.  If it is often or routine that spending can backfire but an occasional splurge is actually a great way to go.  It helps remind you how rich and blessed you are.  Money is for the spending and for the enjoying.  Just make it infrequent to get the most pleasure from it.


Time is scarce.  Time is also very valuable.  The opportunity costs are extraordinary for physicians and other high-income professionals.  If there is something that can be outsourced for less than your hourly rate then consider getting someone else to do it.  If you make $100/hour and it takes an hour to mow your lawn and your neighbor’s kid will do it for $20 then let him do it.  Likewise with housecleaners, dry cleaners, travel agents, tax preparers etc.  Recently I outsourced my vacuuming to a robot!  I haven’t stepped into a grocery in months since a friend told me about Shipt

All this outsourcing will free up a lot of time for you to work or do something more enjoyable. You will spend some money in the process but your quality of life will go up.  Your income could go up too if you spend that extra time on money-making endeavors.

Optimizing your spending will maximize your happiness.  Feel free to discover the best mix for you.  Try out some of these tips if you find them helpful.  More importantly, be mindful of your own boosts in happiness after spending.  Have you noticed patterns?  Where should you spend less or more?  


  1. This is a great summary of the lifestyles of the frugal rich and famous. It looks a lot like my life. I buy practical things that make me or my family happy. It makes all the money seem like fun. I don’t need 7 homes across the country or a different car for every day of the week.
    Unfortunately, many people are confused as to what will make them happy. Then they spend money on things that don’t really matter and none is left for the real happiness generators.

    Dr. Cory S. Fawcett
    Prescription for Financial Success

    August 6, 2018
    • Cory,
      “Frugal Rich and Famous” I love it!
      Yes, so true. I do spend a lot of money. It just isn’t on country clubs, luxury cars, $20K watches etc. I don’t judge others who buy those things. I just know they aren’t important to me and won’t add to my happiness.
      Having assets that produce a passive income stream is probably my favorite thing to own. Cash flows to me providing freedom and options.

      August 6, 2018
  2. JSA said:

    Bang for your buck, or value, guides much of my decision making. Whether it’s choosing where to vacation, where to eat, what to buy, etc. That includes skipping on a european city that others recommend but I have zero interest in, or passing on concert tickets for my favorite band due to high ticket prices. For me, it’s most disappointing when I perceive to have gained a low value product/experience after the fact.

    August 8, 2018
    • JSA,
      That’s awesome. It sounds like you have a better handle on your spending decisions than most.

      August 10, 2018
  3. Xrayvsn said:

    Great mnemonics and ones to live by.

    It is true, I think everyone should pay for the vacations as far ahead from the time of travel. I put it on a credit card and pay for as much as I can. By the time vacation comes around that money spent is long forgotten and can really enjoy the experience.

    Right now my biggest “expense” is investing (which really to me isn’t considered spending in my definition. It is considered re-appropriation of funds (as if I put it in the savings account which I would say is spending).

    Food, experiences, and travel are the stuff I definitely try to spend on and don’t try to cut corners (trying to get the most luxurious experience within reason)

    August 8, 2018
    • Xrayvsn,
      Thanks for the comment (and later pointing out its absence. I found it in the ‘trash’ for some reason with several other comments). I will keep a closer eye on that issue now that I know it exists.
      I never used to pre-pay for things but now I do. We prepaid for our condo on this summer vacation and I loved checking out and not getting a bill. It is weird psychology, but that is how must of us operate so we might as well embrace it.

      August 10, 2018
  4. Xrayvsn said:

    Left a prior comment when post first came out but seems to have not gone through.

    Anyway the gist of it was that for me too I taxes are a significant bulk of my yearly expense.

    I don’t treat investing as an expense (if I do it would definitely be the largest component). I think of investing as the same as if I put money in a savings account which most people would not treat as an expense line item.

    I’m hoping to start building more expenses in the vacation category as I am due for a nice one and in the early stages of planning 2 for 2019.

    August 10, 2018
    • Xrayvsn,
      Thanks for making a comment – especially twice. That is a pain and I’m not sure why it happened.
      Taxes are paid so automatically and “painlessly” during the year we easily forget about the top line and don’t think of taxes as a monthly expense. The IRS demonstrates genius in that approach. That may be the only way they express such genius.
      I too am learning to take more and better vacations. That is a great way to spend money!

      August 10, 2018
  5. hatton1 said:

    Spending money on what is important to you is what is truly important. What is high status luxury today will be something only an old person wants tomorrow.

    August 12, 2018
    • Well said, Hatton1.
      It is so tempting to just copy those around us. If our peer group is made up of high-earning and high-spending people we tend to do the same. If our friend or neighbor buys a new BMW then we might too. That BMW may give my neighbor a boost of joy every day as he admires it and drives it. I might get more joy from being free to cut back on Friday clinic hours. It is best to figure this out for ourselves. Lacking that personal insight though, we can use some of the rules based on research (e.g. experiences > possessions, etc.).

      August 12, 2018
  6. gwoccmed said:

    My wife used to ask “can we afford xxxx” , the reply of course was we can afford any one thing we want – it’s both of us and all of them together that’s the problem. It all adds up – better ink pen, more expensive clothes, eating out (at even better/more expensive places), hobbies, the splurge items, etc. Fortunately bare necessities are rarely a problem for physicians.
    Budgeting (a dirty word to many) is key to optimizing spending ; spend it where you want, not where you don’t. Integral to budgeting is deciding and prioritizing what you really want, need, and value. It doesn’t have to be super strict but needs to be cognizant.
    BTW at the suggestion of wise friends, I put her in charge of the checkbook (the after savings part of the budget). Created some early strain but ultimately a better understanding developed for both of us and we retired at my 62.

    August 12, 2018
    • Gwoccmed,
      Thanks for the comment and congratulations on the early retirement. It is always great to hear from those who have actually done it.
      Every family may be different. For us, we have a joint checking account. My wife pays all the bills and records the day-to-day expenses. I tend to do the more long-term planning and big-picture investing. It has worked for us. We don’t track spending much or have a budget but that is rare. I think we are both so naturally frugal that we can get away with that.
      Rob Kiyosaki recommends instead of “can we afford ….” we should ask, “How can we afford ….” It forces us to think of expanding revenue or buying an asset that will produce enough cash flow to cover the expense. As physicians with high incomes, we can afford almost any reasonable luxury item. We just can’t have all of them. Or even several at the same time so we need to pick and prioritize.

      August 12, 2018
  7. Great post! Like you, my wife and I try our best to spend according to our values. Health is the biggest one for us too. We don’t mind spending more for good quality, organic food. We also bought a comfortable, organic, non-toxic bed earlier this year. It’s the best bed I’ve ever slept in and my sleep quality has improved dramatically. Investment in our health is the best kind of investment.

    August 12, 2018
    • That’s a great example, Dr. McFrugal.
      We spend maybe 50 hours or more each week on a mattress. What is the value of a good night’s sleep? Even the most expensive mattresses are a bargain from that perspective. I love our “natural rubber” mattress. There are no moving parts and no “out-gassing” of chemicals that fill the springs of other mattresses. My wife says she likes it except she feels the shocks when I flip and flop. I’ve been told I do that a lot. I would gladly pay more if I find a better option.

      August 12, 2018
      • Sounds like you have a fantastic mattress. I’m also impressed that it is natural rubber and that you are concerned with out-gassing toxic chemicals. Most people seem to be unaware or uninformed about all that. What brand of mattress do you have ? We have a Naturepedic one.


        August 12, 2018
        • That one looks awesome too. I will look into that brand for our next one if we don’t get the same kind. I think ours is a Sleep Science 9″ Natural Latex from CostCo. It says “The latex in this bed does not contain any chemicals, synthetics, pesticides, herbicides, or other man-made materials. Truly natural latex with great benefits for you and the environment.”

          August 13, 2018
  8. Death and taxes. Neither avoidable.
    I like the HEATS mneumonics. It was my go to method to memorize all those history and biology notes in high school.
    Now it’s easy to remember this article 🙂

    September 20, 2018
    • Financial Orchid,
      I’m glad you liked it. I need a memory device for everything. My friends in med school made fun of me for that, but it was the only way I got through!
      I guess it is appropriate that I used a picture of our friend Ben Franklin with this post. The “death and taxes” line came from a letter he wrote. It was true then and now. More on him here:

      September 20, 2018

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