Living Rich Means Being Poor

JULY 06, 2015
James M. Dahle, MD, FACEP
Rich or Poor?I have been researching and writing extensively on physician-specific financial topics for over 4 years now at The White Coat Investor and in that time period I have noticed a trend that doctors need to be aware of. The typical image that the lay public has of the financial situation of a physician is one of abounding wealth. However, the vast majority of physicians I have interacted with do not feel their situation merits that description. In fact, a large percentage of doctors are not wealthy by any reasonable measurement. I am no longer surprised when I meet physicians in their 50s or even 60s whose net worth is less than their salary. With ever-increasing educational costs, many doctors in their 30s and even 40s still have a negative net worth.

Income Is Not Wealth

Few people, even among high-income professionals like doctors, ever read a book about personal finance or investing. The mainstream media often reinforces the idea that having a high income is the equivalent of being wealthy. Even the popular concept of “the 1%” is usually defined in terms of income, rather than real wealth. I hope this isn’t the first time you have learned this lesson, but income isn’t wealth. Wealth is defined by net worth, and net worth is built first by saving some portion of your income, then by investing it in some reasonable manner. Income is what you’re paid; wealth is what you have left.

Societal Expectations Are Against You

Your patients, your family, your friends, and probably even you have expectations of what your financial situation should look like. That is usually imagined in terms of what you spend—i.e. how large your house is, how nice your car is, where you vacation, how many toys you own, where your kids go to school, and what you do on your weekends. In fact, there are entire industries that wish to propagate this idea. I was once asked to write for a magazine aimed at physicians. They asked me to write my first column on what I felt was my best financial tip for doctors. I told them my best tip was for new attending physicians to spend dramatically less than they earn by continuing to “live like a resident” for a few years after residency. They actually told me I could not write on that topic because they were afraid it would hurt their ability to sell ads to their advertisers, all of whom wished to sell expensive items to high-spending doctors. If you are gauging how you spend on what you feel you are expected to spend due to your position or your income, then you are almost surely spending more money than you can while still becoming wealthy.

The Money Taboo

Society has a bit of a taboo about talking about money. However, that general taboo is nothing compared to what medical students experience from the time they start filling out medical school applications all the way through their careers. In most academic hospitals, any discussion of financial topics is looked down upon. You weren’t supposed to have gone into medicine for money. You try very hard to divorce the ability of your patients to pay for care from the care they actually receive. Being called “a rich doctor” is actually an insult. This attitude bleeds over into our personal financial lives, and leaves us vulnerable to our own natural tendencies to spend and also the tactics of unscrupulous financial professionals. Learn to fight against it! Learning how to properly manage your income will not make you a lesser doctor. In fact, it will increase your ability to practice medicine in any manner you see fit.



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