You can’t do EVERYTHING wrong


    Doctors can actually screw up their financial lives far more often than others. The problem is, when doctors blow it, they blow it big.

    Today’s classic is republished by White Coat Investor. You can see the original Here.


    As is well known, St. Peter said: “Love covers a multitude of sins”. The doctor funding correlate is that a doctor’s income covers a variety of errors. But it cannot cover them all. You have to do at least a few things right. You have enough income to do anything you want, but not everything. Let me give you a few examples.

    A doctor cannot choose to use credit to finance a degree at an expensive institution, get married, have two children, stay at home, leave the spouse at home, borrow the entire cost of medical studies, including living expenses to attend a low-paying pediatric specialty, defer loans during residency and fellowship, then spend 3 years at an academic center before becoming a hospital employee at a non-501 (c) (3) for more time with the children to spend. In the meantime, buy a fancy doctor’s house in a high cost of living area, get two nice cars on credit, have three more kids during their education, take them all to private schools, go on vacation to Amsterdam, buy a boat, retire early, and get one Choose high-cost “financial advisor” who sells them lousy investments. It’s just not possible. There isn’t enough income to cover all of these decisions. You could do about a third of that and still be financially successful. Let me show you what this looks like:

    • Expensive Inexpensive high school
    • Borrow tuition fees Working through college
    • Getting married as a Bachelor Postpone marriage for a few years to study medicine
    • Stay at home spouse Spouse works for a few years to pay the medical school living expenses
    • Children born in Bachelor residence
    • Choose a low paying pediatric specialty
    • Loans in Postponement REPAYMENT during the stay and the scholarship
    • Remain as a faculty for 3 4 years and get PSLF before accepting an employee job
    • to buy fancy doctor 2X gross salary in home high moderate housing costs with good public schools
    • to buy two a nice car on credit and a racket
    • Have two kids while Medical school Residency and the other three as visiting
    • Use children Private public schools
    • holiday in Amsterdam California
    • to buy a boat Mountain bikes
    • Go into retirement early at 63
    • High priced Inexpensive consultant who gives Bad good advice

    This changed plan is likely working fine. You can still practice the specialty you want. You still get the lifestyle and family you want. But the numbers work. As a doctor, you can’t get by with mathematics.

    I don’t know why, but I see this great divergence among doctors. Really, I could probably break it down into four segments. However, these segments are not all the same size.

    Doctors who do it right

    At the top is a group of Docs who make all or almost all of these big financial decisions “right” (financially optimal). That’s maybe 5% of doctors, although it feels like more if you spend too much time on sites like this one. Maybe your choices look like this:

    Doctors who get it right most of the time

    Next comes a much larger group. Maybe 60% of the doctors. They make a few mistakes, but eventually they find out and are very successful.

    • Borrowed a few thousand for the bachelor’s degree
    • Choose internal medicine
    • Married a nurse as MS3
    • Had two children in the residence and one as a carer
    • Deferred loans during the stay
    • Worked as a hospitalist but lived like a resident for 3 years paying off loans and then joined a private group with minimal phone call
    • Went for a moderate cost of living but sent the children to public schools
    • Take an expensive vacation every few years, but not without a residence for the first 5 years
    • Borrowed one car, bought the other in cash
    • I bought a boat, but not until the first million was in the bank at 45
    • Dismissed her first “financial advisor” and turned her into a real one a few years after their stay
    • Reduce halftime at 55 and work until 65

    These documents do just fine. They have beautiful, happy, healthy careers, families, and lives. They pay for their grandchildren’s education and donate chairs to their Alma Maters.

    Doctors who do it right

    The third group is surprisingly small. I can’t explain why it’s so small. Maybe 15% of the doctors. Those are the ones who are getting it just right. Barely. You’re doing just enough things right to keep the ship from fidgeting. Never super successful, but they get everything they really want from life and still have no financial catastrophe.

    • Borrowed $ 50,000 for Bachelor
    • Academic neurology chosen
    • Marries a pediatrician with $ 400,000 in student loans
    • Had a surprising child in medical school and had to borrow childcare costs – two more in assistantship, which added six months to their assistantship
    • Enrolled in IBR but not before PGY3 year
    • I ended up getting PSLF, but not much remained to be forgiven
    • Stayed in a high cost of living area after training
    • Bought a 3X home just outside of residence
    • Do heliskiing once a year
    • Drive his and her Audis
    • Pay a 1% AUM advisor for a reasonable investment plan
    • Both worked well into the 1960s and then enjoyed a comfortable upper-middle-class retirement in Arizona

    I think the reason this group is so rare is because it is a very thin straight razor. Very few people can get it right. They will either fall on one side of the knife edge or the other. Let’s take a look at the other side of the ridge.

    Doctors in chronic financial trouble

    The fourth group lives on a financial glacier, which is covered by crevasses, over which thin snow bridges run. Your financial life is a veritable minefield. They do a few things right every now and then, but they do the big things wrong. They struggle financially their entire lives, work harder and longer than they want, and live mostly on Social Security in their short, sad retirement. Perhaps one version of this story looks like this:

    • Had a first career as a teacher
    • Went back to medical school before the undergraduate loans were ever paid off
    • Married an attorney while studying medicine, but not until I am amassed $ 550,000 in student loans and credit card debt
    • Family practice chosen
    • Got divorced at the residence after having a child – got a crappy maintenance contract
    • I was in a high cost of living area
    • Remarried to a business owner – companies always needed a cash injection, so no retirement plans in their 30s and 40s
    • In-laws have moved into your basement
    • Big burnout episode in the 40s and practice failed – worked as a hospitalist for a few years, then as an employee of another doctor
    • Divorced again because of in-laws
    • Moving to another high cost of living area and starting over at 52
    • Have one auto payment for life
    • Continued to use the same contracted seller as financial advisor – lost thousands in life insurance premiums and expensive mutual funds sold at the bottom of the bear market
    • Paying student loans until the 1950s
    • End up working until disabled at 64 and need to start social security early
    • Rent an apartment with a roommate and four cats and children do not come to visit because of cat allergies

    This type of scenario is far too common. Maybe 20% or even more doctors. Look around. You will see them. The details are changing, but the bottom line is that they have made too many financial mistakes / expensive decisions to be overcome with their income.

    Get as many things right as you can so you can afford to make your desired “non-financially optimal” decisions. Avoid unwanted mistakes. Start early. Fail quickly. Don’t beat yourself up for past mistakes. You don’t have to fix everyone to be very successful. But you have to get some of them right!

    What do you think? Why do we look at all of our decisions in isolation and fail to realize that what we lose in some areas of our lives must make up for in other areas? Comment below!


    Please enter your comment!
    Please enter your name here