Another area where bad behavior trips up investors is in investment selection. The psychological rush that some people get from gambling can be re-created by selecting a winning individual stock, an actively managed mutual fund, or a hedge fund. However, this is not only a losing strategy mathematically (since most stock pickers, mutual fund managers, and hedge funds underperform the market over the long run), it is a losing strategy behaviorally. By focusing on choosing investments, the investor doesn’t focus on what matters most: saving more money, using an appropriately risky asset allocation, minimizing fees, and paying less in taxes. Investing primarily in boring old index mutual funds will help the physician investor not only mathematically but also behaviorally.

Happiness studies show that we rapidly acclimate to a higher income and higher levels of spending. The best strategy for maximizing happiness is to have a constantly increasing standard of living throughout life. However, this does not line up well with a typical emergency physician career and earnings pathway. Therefore, wise physicians will create this scenario artificially by growing into their attending income as slowly as possible after residency. Having to decrease spending in mid to late career in order to accumulate an adequate retirement nest egg is psychologically painful. Of course, that pain would be less than a dramatically decreased lifestyle in mid-retirement due to running out of money!

Finally, it is critical for emergency physicians to realize that the future may not resemble the past. Emergency physicians currently make one of the highest hourly rates in the entire house of medicine. Over the past decade, many specialties in medicine have seen pay cuts of 25 percent or more. Emergency medicine could be next. The current and potential financial pressures on the incomes of emergency physicians cannot be ignored. Emergency physicians would be wise to “make hay while the sun shines” by maintaining a high savings rate, eliminating debt early in their careers, and investing wisely. If you expect a 25 percent drop in income halfway through your career and it doesn’t materialize, you’ll be that much better off. If you don’t plan on that increasingly likely possibility, you may find yourself working far more night shifts than you prefer in your 60s.

Personal finance is both personal and financial. Be sure you attack it from both behavioral and mathematical perspectives.