Physicians have an unusual relationship with money. We’re the highest-paid profession, but we have lower-than-expected wealth. (Physicians on average make more than twice as much as attorneys according to the Bureau of Labor Statistics.) This physician wealth deficit is due to our late start in achieving a high income, shorter careers, frequent large college and medical school debt, and, perhaps, our lower money management focus and skill.

My topic for today is how your earnings and proportion for saving/investment can and should be planned for across your career. This article’s goal is to provide an impetus to start thinking and start talking to your significant other about a plan. When you are ready to make that plan, there are many resources available that can guide your strategy.

Every type of professional’s income varies across their career, but ours does so along a different trajectory. For example, if you graduate with a degree in technology, law, or business, you may make a pretty good income as soon as you graduate in your early to mid-20s, depending on your degree. Then, as you gain on-the-job skills and seniority, your income gradually rises from your 20s into your early 50s before starting to dip in your late 50s and 60s.

However, as a doctor, you spend your 20s not only not making money but adding to your debt. Once you – agonizingly late in life – complete your training, you can make a very high salary immediately. From this high level, it may increase further if you start a practice on your own or with others. But for many physicians across many specialties, income is based on a percentage of collections which, in turn, are based on how hard or how many hours you work. Your effort may be greatest during the first 5 or 10 years following training. Thus, for many physicians, their income across their careers may be high but flat.

So, consider your earnings and savings/investing trajectory from today going forward through major life milestones and ending in retirement. Money management for many doctors is not a very interesting topic and, thus, becomes an undermanaged part of life. Especially overlooked is taking a long-term longitudinal view. Here are some scenarios to consider.

One positive aspect of a sudden rather than gradual increase in income, as occurs as we start to practice after completing our training, is that a sudden large increase can be more easily set aside for savings and investment. If you’re a computer engineer, you start early and realize gradual income increases. It’s easy in this scenario to expand one’s lifestyle indefinitely as one’s income gradually increases. Those big houses and nice vacations can suck every available dollar and more. It takes greater discipline to set aside a portion of earnings. However, as a physician, your income can increase from $50,000 to three, four, or five times that much from one month to the next. In this scenario, it is easier to both increase one’s lifestyle spending AND to set aside a substantial percentage for paying off debt and adding to one’s savings/investments.

Next, consider the milestones you wish to realize in your life. Perhaps you want to have kids 3-5 years from now and plan on spending time at home with them and working less or not at all. In this case, you know your income at that point will become constrained or will stop. You can take steps now to prepare. If you’re in a long-term relationship, discuss a plan with your spouse/partner now. Decide on what you can do now to optimize your savings and investments, and what income you’ll need as one or both of you work less.

Here’s another scenario: I’ve spoken to several doctors (a dozen, perhaps), who decided to take a job in a geographic area or setting where the need was great and earnings high.

They made a conscious decision to work their butts off for about 5 years (that’s the most common duration I’ve heard) and then slow down and/or move to their preferred part of the country. Not coincidently this is the group of doctors who consistently talked about their investment plans. After all, their explicit plan was to suffer adversity (in their view) for a manageable part of their life span now to make excess money for the future.

Another scenario is to start considering how to slow down in the latter part of one’s career. Psychiatrists for instance, are blessed with work that is not physically demanding, although certainly can be stressful and emotionally/mentally draining. They often can work into their 60s, 70s, and 80s. Surgeons, on the other hand, with more physically demanding work, are more dependent on the continued good function of their bodies. These scenarios I’ve described may be relevant to you or not. Asking yourself (and your significant other) these questions and pondering your future is important for everyone.

That’s one of the reasons I created the Art of Smart free seminars. These are clinician-focused seminars that can help you maximize your financial and career growth.

One parting thought: one of the best things I’ve done is getting life insurance and having an estate plan. I’m married and have three children. Knowing I won’t leave them in financial straits gives me great comfort. It is a gift that keeps on giving in terms of my peace of mind. For anyone with dependents, I highly recommend taking these steps. This is but another aspect of considering one’s financial health.

Until next time,

Dr. Jack

Language Brief

“Formal education will make you a living; self-education will make you a fortune.” – Jim Rohn

“You must gain control over your money or the lack of it will forever control you.” – Dave Ramsey

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki

“It takes as much energy to wish as it does to plan.” – Eleanor Roosevelt