Doctors with Money Problems
I was just about done with the original version of this post when the Wall Street Journal published this article with the apparent goal of making my profession look like it’s composed entirely of Tesla drivers who can’t do math.
This article of course popped up almost immediately in my social media doctor groups and in my social media finance / FIRE groups and got thousands of comments and shares and emoticon reactions.
The doctor group’s reaction was largely along the lines of “No one understands what doctors go through, student loans are the worst, school costs so much, the educational system / federal loan program is oh-so-broken, etc.” The FIRE group’s reaction was (to bring it down to PG vocabulary): “Stop whining and pay back your debts like you said you would, you spoiled rich brats.”
Things got so exciting that Dave Ramsey got involved.
Regardless of where you stand on student loan issues and on the situation in that WSJ article in particular, this conversation leads us in to the the broader topic of doctors with money problems. From where I sit seems to be a growing population, and lucky for me a quick internet search confirms that I’m not imagining it.
So what’s up with all these doctors making a bunch of money and not able to get ahead? Here’s what I think is going on, which boils down to two simple problems:
#1. We can’t (or don’t want to) deal with the basic math of personal finance despite all our years of formal education.
There is this whole group of decently bright people who have focused all their intellectual energy on formal education for years and have borrowed hundreds of thousands of dollars, but haven’t read a single personal finance book.
For about 10 years most docs treated their loans and their lifestyle with a “Whatever! I’m going to make a lot of money some day! Let’s have a drink!!!” attitude, with no understanding of how large the loans were growing, what their monthly payments would be, or even that the principal payments come out of after-tax income. They don’t understand true assets/liabilities or investments or what cash flow is.
If they are lucky they might stumble on a chance to own a practice and start accidentally building some net worth that way. BUT that’s hard to do with high debt because banks usually won’t give an unsecured loan to someone with a net worth of negative half a million dollars. So after that decade of school, many docs won’t even get to be their own bosses and will go to work for someone else or for a corporation.
Plus they’re not allowed to dislike their job (at least not out loud) because they just spent 10 years starting their career and they’re a doctor after all. And of course we all talk about work-life balance like it’s the new black, but there’s a whole lot of pressure to just crank out dollars regardless of what it does to the “life” part of that equation.
So we end up with a whole bunch of doctors in their 30s taking home the same net hourly pay as a 24 year-old with a Bachelors in engineering and trying to figure out why on earth they went to so much school.
They are so busy (and overwhelmed by the size of the debt numbers) they turn it all over to a financial “expert” who advises a 30-year debt payoff or seeking forgiveness of some sort, and fails to tell them they actually can’t afford a 5-bedroom house and a luxury vehicle at this exact time, sentencing them to a much longer mandatory working career than anyone making that much should ever have.
Doctors need the same kick in the pants that most other 1st-worlders do regarding debt and the whole “spend less than you make” thing. And most doctors are hella smart, so there’s really no excuse for the horrid mismanagement of financial resources that happens – especially in an era when excellent financial management information is available for free online.
Which brings us to…
#2: Our lifestyle inflation is insane and we can’t own up to it.
Many doctors start living like millionaires the minute they are accepted to their pre-doc program. We call it “living expenses” and don’t differentiate it from the actual cost of tuition when we start pulling student loans. I have witnessed this for years and was also guilty of it for a while. We buy the giant house and the giant car and get dogs and have kids and take luxury vacations before we even have a paycheck.
This doesn’t stop when we get out of school, and after a couple years of high income we can get big loans from banks with decent interest and terms… but we don’t use it to invest or get rid of previous high-interest debt – we use it to upgrade our already-fancy lifestyle.
Comments between doctors about what constitutes a “low” income would probably make most people vomit. The idea of supporting a family on less than $100k per year and actually paying back your debts quickly might as well be heresy.
Our self-image in being doctors has been tied to lifestyle and appearance since we first got that acceptance letter, and we can’t quit. Every other doc does it, the next round of pre-doc students sees us and copies it, the continuing education conferences promote it, and schools get excited because applications pour in from one side even as complaints about the cost of healthcare education pour in from the other, and so up and up tuition goes.
Meanwhile, we complain that our schools didn’t teach us anything about finance and the reason we can’t stop spending money is because there are all sorts of secrets being kept from us by the powers that be.
Doctors may also be embarrassed to come forward with the “I make a ton of money but I can’t hold on to any of it” problem. If they do come forward about their problems, it’s rarely with a demeanor of “I made the choices that got me here.” It’s a hard thing to admit to yourself, and much harder to admit to others. But we all know that the first step to fixing a problem is to admit that it’s there and stop trying to blame someone else for it.
It’s my observation that the above two factors (financial illiteracy and lifestyle inflation) are super powerful forces in many doctors’ lives. This contributes heavily to doctors being stressed about work, dissatisfied in their personal lives (the divorce rates are not low), feeling like they are “doing it all” without actually having it all (this is especially true for female docs, who had significantly above-average suicide rates last time I checked).
The icing on the cake is that we can’t switch careers, because there’s no way to pay back doctor-level debt on a less-than-doctor income.
This is all pretty depressing the way I’ve typed it out, so I should clarify that I do enjoy my job very much and I am very grateful for my education. I think many doctors feel the same way.
Light at the End of the Tunnel
Here’s the thing: We as doctors need to accept that we are not above basic financial advice.
Pay off debts. Live well below your means. Make a plan and follow it.
Sure, the classic money strategies do have to be adjusted slightly for doctors to account for crazy high numbers (both positive and negative) and the whole “all of your 20s spent digging yourself into a debt hole” issue. But this is not an excuse to throw up our hands and walk away.
It’s just math. In fact, it’s math that doesn’t even require a graphing calculator. Let’s please stop with the “I didn’t listen while my loan advisor was talking” sort of excuses, get some backbone, and handle our finances like responsible adults.
After we’ve wrapped our minds around that, we need to understand that a very good life can be had for less money than we think. I’m doing my best to prove this to myself and the doctor population at large with my spending reports for our little family of 4 in our high COL town.
I am very optimistic that we, as a professional group, are capable of getting a handle on our individual financial situations and playing our cards more wisely in the future.
(Note that these comments are my opinion from my own observations, and they are primarily about dental and medical doctors, since that’s what I am most familiar with. Also note that I am 100% guilty of doing almost everything I discussed above, so I write this with zero judgement for any one else’s situation.)