Do your friends assume you are a “rich doctor,” and thus you feel pressure to meet that expectation?

Do you want to reward yourself after all the years of training and stress with some nice luxury toys?

Doctors often find themselves caught between two choices: living a luxury lifestyle and securing their financial future. It’s a delicate balance that requires careful planning and strategic decisions. But it doesn’t have to be an either-or outcome. You can do both if you start off with a plan.

Here are a few areas to focus on to strike the right balance between financial goals and living a luxury lifestyle.

Driving luxury without draining funds: the depreciation advantage

Luxury cars are synonymous with status and comfort, but their steep initial depreciation often makes buying a new one a bad financial decision. Consider a scenario where you’re eyeing a brand-new luxury car worth $70,000. In the first two years, it’s estimated that the car’s value will depreciate by about 30 percent, resulting in a loss of $21,000. This means that your $70,000 investment becomes a $49,000 asset in a short span.

However, by choosing a two-year-old luxury car that’s already experienced the steepest depreciation, you can purchase it for around $49,000, the same value that the new car drops to after just two years. This allows you to enjoy the luxury experience without the commensurate loss in value.

Moreover, the monthly payment for a car loan on a $70,000 car can be significantly higher than that for a $49,000 car. For instance, with an 8 percent interest rate over five years, a $70,000 car would require a monthly payment of around $1,427, while a $49,000 car would only be around $993 per month. By selecting the slightly used option, you’re preserving your financial resources and ensuring a more manageable monthly expenditure.

Think about $500 more per month or $6,000 per year that could go to investments that will grow your wealth. And when you factor in taxes of about 40 percent, that means you don’t just save $6,000, but closer to $10,000 a year in pretax dollars!

Strategic tax management: Leveraging tax-deferred accounts

One powerful tool at your disposal is the utilization of tax-deferred accounts. For example, earning $300,000 annually and contributing $20,000 to a tax-deferred retirement account will effectively reduce your taxable income to $280,000. Assuming a combined state and federal income tax rate of 40 percent, that’s a savings of $8,000 in taxes.

This translates into more take-home income, allowing you to maintain your lifestyle without compromising your financial goals. By strategically allocating a portion of your income to tax-deferred accounts, you’re building your retirement funds and optimizing your current financial situation. Examples of tax-deferred investments include municipal bonds and some annuities.

Maximizing employer-matched savings: free money for your future

Many medical professionals overlook the significant benefits of employer-matched savings plans. Let’s say your employer matches up to $15,000 of your contributions to a retirement plan. By contributing the maximum amount, you’re effectively receiving an additional $15,000 as free money from your employer.

This contribution isn’t just a bonus; it’s an investment in your financial future. Furthermore, since employer-matched funds are tax-free, their impact on your financial security is even more substantial. That $15,000 in matching funds is closer to $21,000 income when you factor in taxes.

Homeownership: smarter buying, wiser equity

When it comes to buying your first home, it’s common to follow the conventional wisdom of borrowing up to three times your annual income. However, think more strategically: purchasing a home closer to 1.5 times your income.

This may mean starting with a smaller house, but it allows you to build equity more quickly. With time, as your income grows and your equity accumulates, you’ll be in a better position to upgrade to a larger home. This way, you’re not committing to a large mortgage from the get-go, which can free up funds for other investments and safeguard your financial stability.

It’s essential to note that a larger home comes with higher costs beyond the mortgage. Property taxes, maintenance, utilities, and insurance expenses tend to increase with the size of the house. By starting with a more reasonably sized home, you’re not only saving money on the initial purchase but also reducing the burden of these ongoing expenses, leaving more money for you to create financial stability in the long term.

Building financial security as a doctor doesn’t mean sacrificing your current lifestyle. By making strategic choices like purchasing a slightly used luxury car, maximizing tax-deferred accounts, smart home purchasing decisions, and taking advantage of employer-matched savings, you can strike the perfect balance between enjoying your present and securing your future.

By just taking these few examples in combination, you effectively give yourself more than a $40,000 lifestyle raise and improve your financial stability.

Amarish Dave is a board-certified neurologist with over 20 years of experience in both neurology and active stock investing. In addition to his medical career, he holds a background in business from the University of Michigan and has successfully passed the SIE exam administered by FINRA. Dr. Dave is founder, FiscalhealthMD.com, a website dedicated to educating doctors at all stages of their careers, ranging from residents to retirement, about financial planning.