Author Topic: Why do financial planners enable doctors?  (Read 13318 times)

Dr Kidstache

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Why do financial planners enable doctors?
« on: November 23, 2014, 06:07:11 PM »
I'm thinking about starting a website for my fellow young physicians to improve their financial literacy (which is essentially absent) and subtly turning them frugalitarian. I just drafted a post and, since you are all expert Mustachians, I wanted to float it and see what you think. It's specific to physicians but the concepts are MMM.

Why “live like a resident” is dangerous financial advice

“Live like a resident”. I bet this advice on how to get out from under the burden of our student loans sounds familiar. If you’re like me, you nod your head “Oh, yeah, I should totally do that” and then continue to do absolutely nothing differently.  It's so frustrating to be living on a resident salary in your 30's while high school and college friends are all debt-free except for what they've overspent on their McMansions and Mercedes. Every time I hear a financial advisor tell a group of residents, fellows, or young attendings to “Live like a resident,” I facepalm.

Seriously??? Who would make it out the other side of residency and choose to plunge back into the fires of medical education purgatory? When most of us finish residency, we smile in the graduation party pictures while secretly imagining flipping a match as we walk out the door. Being told to “live like a resident” might be intended to encourage us to avoid lifestyle inflation, but tapping into our collective PTSD doesn’t motivate anyone.

Even worse than being advice that we can ignore with impunity, telling us to “Live like a resident” is perversely counter-productive.  Somewhere along our medical education, we are instilled with a sense of entitlement. We develop a belief that we deserve to live it up once we finish residency or fellowship.

Why? Maybe it’s because the hierarchy of academic medical centers suggests that once we complete training we move up a rung and should act accordingly.  Maybe it’s because our non-medical friends or families expect us to be rich or have no problems once we start making an attending salary. Maybe it’s because we need to picture ourselves in a shiny new car or our kids in a house with a big yard to make it through the rough shifts. It becomes normal to pretend like we don’t have to let six-figure medical education debt get in the way of our lifestyle. Telling us to “Live like a resident” during our early attending years does nothing more than remind us how much we feel like we deserve to be living better.

I watched a session on financial planning for residents the other day. The session was a panel of “experts”, two financial planners and one young attending who still has more than $100,000 in student loan debt. I’ve been to my share of useless financial planning sessions as a resident and fellow. Same advice, over and over again, that nobody knows how to take. But this session was particularly bad.

One of the financial planners on the panel opened with a cautionary tale. A doctor that he works with finished residency with nearly $500,000 in student loans.  He and his wife bought a condo as soon as he started his first job. After a few years, their young family had outgrown the condo but he had trouble selling it.  So, about 5 years out from residency, this doctor had two mortgages and student loans totaling over a million dollars in debt.

What do you think came next from that financial planner?  A truckload of truth being served upon the residents in the audience? A harsh dose of reality about how bad things can get if they try to bury their heads in the sand? Nope. The follow-up was “Through no fault of his own, this young doctor has found himself in a rough situation.  Let’s talk about how to decide whether to invest in taxable or tax-sheltered investments.”

Are you kidding me? It’s mathematically impossible that this guy could ever invest his way out of a million dollars in debt. The interest on that debt will eat his life. It will eat his childrens’ lives. Even worse, in what universe did this guy end up over a million dollars in debt “through no fault of his own”? Owing a million dollars is not a congenital disease. The doctor in the story made choices that resulted in his debt.  I made choices that resulted in my six-figure educational debt. We have all made choices, some good and some bad, that have consequences for our financial bottom line as young physicians. Graduating from residency doesn’t erase them and we’re not entitled to anything.   

We are not special snowflakes. We have to acknowledge where we stand financially, just like the barista at Starbucks that has student loans from her English literature degree. We aren’t entitled to have our troubles melt away at the end of medical training.  But we do need help in managing our debt while having a fulfilling personal life. We need advice that is candid and realistic.

Hey, financial planners who give advice to young physicians, I’m looking at you.  Get relevant or get out.

matchewed

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Re: Why do financial planners enable doctors?
« Reply #1 on: November 23, 2014, 06:19:36 PM »
IMO putting the onus on the financial planners and advisors is the wrong direction. People may not want to hear that exact phrase, to live like a resident, but that advice isn't bad. It is still the right advice. Maybe after your claim about it being off putting you could continue down that track and explore different ways to give that same advice without the off puttingness. Honest feedback from me being that you let your ending slide, the scope of your article drifted away from your initial points.

Abe

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Re: Why do financial planners enable doctors?
« Reply #2 on: November 23, 2014, 06:43:34 PM »
Instead of "live like a resident" we can say "live like a middle-class family". The former implies working 24hrs at a time, dealing with nonsense on a regular basis, etc. The latter sounds much more pleasant.

Regardless of how it's framed, the advice works well if followed. For example, my wife is an attending, I'm still a resident. Our salaries as residents was enough to live on. Putting the extra money she now earns into savings/loan payback allows us to maintain the lifestyle we're used to without going nuts and buying a lot of bling.

"Telling us to “Live like a resident” during our early attending years does nothing more than remind us how much we feel like we deserve to be living better." - I think it keeps us grounded, though maybe it can be rephrased as mentioned above. I think on your post you should focus more on this aspect rather than the rant about financial planners, as it doesn't fit that well with your main point about frugality.

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Re: Why do financial planners enable doctors?
« Reply #3 on: November 23, 2014, 06:56:42 PM »
I don't know why "living like a resident is bad"... my sister is in her residency and she makes $60k/year at least and it increases each year, she makes as much as the average family does. Once out of residency, she wouldn't be working 80-100+hours/week so she'd have more free time to relax, I don't know why that means spending more money now that she'd be making more.

But every doctor friend I have seems to have this problem, and not doctors either but all high earners (100k+) seem to have this problems.

Dr Kidstache

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Re: Why do financial planners enable doctors?
« Reply #4 on: November 23, 2014, 07:20:10 PM »
You guys are awesome! Thanks for all the feedback so far. Keep it coming.

Matchewed: Totally called me out on the ending. I've been struggling with it and I'm glad that you could tell. Inspires me to refocus.

Abe:
Quote
Instead of "live like a resident" we can say "live like a middle-class family". The former implies working 24hrs at a time, dealing with nonsense on a regular basis, etc. The latter sounds much more pleasant.
  You nailed what I was trying to get at.  I personally think that living like a resident is perfectly reasonable (I live very comfortably and I'm a PGY-6) and great advice. But it doesn't resonate with most young docs who aren't already on MMM forums. Everyone nods and agrees when told to "live like a resident" their first few attending years but very few actually do. I love the suggestion about middle-class family.
 
Eyem:
Quote
I don't know why that means spending more money now that she'd be making more. But every doctor friend I have seems to have this problem, and not doctors either but all high earners (100k+) seem to have this problems.
  Yep, that's the disconnect that I'm trying to get at.

MrFrugalChicago

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Re: Why do financial planners enable doctors?
« Reply #5 on: November 24, 2014, 06:05:15 PM »
But every doctor friend I have seems to have this problem, and not doctors either but all high earners (100k+) seem to have this problems.

Not all high earners. Computer programmers can work 20-40h a week and earn 100-150k.

lifejoy

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Re: Why do financial planners enable doctors?
« Reply #6 on: November 25, 2014, 09:32:26 AM »
I like the idea and I encourage you to go somewhere with it. My husband is a resident and people often tell me that it will be so nice once he's done and then we can buy an $$$xyz.

Agh!

lifejoy

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Re: Why do financial planners enable doctors?
« Reply #7 on: November 25, 2014, 09:33:30 AM »
PS - not sure if it's financial planners so much as it's a culture thing where people EXPECT doctors to have a certain kind of lifestyle, and also doctors feel like they've earned it. Maybe?

Bob W

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Re: Why do financial planners enable doctors?
« Reply #8 on: November 25, 2014, 10:29:55 AM »
Daughter just got her first real doctor job at 300K.  Her financial life as a resident far exceeds ours.   Nice home,  fancy cars,  trips to Europe,  vacations,  Starbucks etc...

She has a Financial Advisor -  I assume he will advise her to give him her money to invest in full load mutual funds. 

The problem is that with her husband to soon be a Doc too that they can literally earn their way out of bad financial decisions.   I do feel sorry for her 67 year old ER doc father-in-law who still works.   But I assume that is because they are paying him 500K per year.   Yeah,  I would work and spend like crazy if I was paid 500K a year. 

When I was a stock broker the worst clients where known to be doctors --  They were all apparently know it alls and few of them had any reasonable amount of money to invest in relation to their incomes.

If our daughter worked and invested wisely she would have like 60 million by age 62.  My guess is she will have closer to 2 million with the majority of that in her last few years.   


Dr Kidstache

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Re: Why do financial planners enable doctors?
« Reply #9 on: November 25, 2014, 12:17:27 PM »
libraryjoy: So true! I think you're totally right about the social expectations. They're incompatible with the amount of student loan debt that many of us have accrued during our education/training even when we come out making $200k/year.  It's astonishing to me how many docs I know who have many making $200k+/year for 10 years who still haven't made any headway on their educational debt and it has mushroomed. 6.8% interest on $500k of debt is no joke year after year. Thanks for the encouragement!

Bob Werner: Great perspective. Doctors are know it alls (myself included!) and make such dumb financial decisions. Being smart about medical stuff doesn't automatically translate into being smart about financial stuff. Some docs really are able to earn their way out of bad financial decisions, but I know quite a few who have gotten a beat down from compound interest that they hadn't planned for. It's terrible to hear how someone made $300k+ a year for years and then changed specialties with literally <$10,000 in the bank.

RetiredAt63

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Re: Why do financial planners enable doctors?
« Reply #10 on: November 25, 2014, 01:12:46 PM »
Libraryjoy - my impression is that with Medicare Canadian doctors don't make the big money American doctors do - but then their student debt should be lower also.  Not so?

GardenFun

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Re: Why do financial planners enable doctors?
« Reply #11 on: November 25, 2014, 01:28:08 PM »
Is there any documented "burn out" rate - i.e. doctors start getting really grumpy about the work after x years?  Maybe use that for motivation to get rid of the debt and start saving.

What is the going rate on medical school loans?  Use that as basis of income minus taxes minus student loans minus (fill in blank - house, 2nd house, cars) leaves xx left.   

I know a few doctors who would love to quit their stressful jobs and go into their own specialized clinics, but don't have the financial knowledge to do it, so they are stuck achieving less than their true dream - to help people on their own terms. 

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Re: Why do financial planners enable doctors?
« Reply #12 on: November 25, 2014, 08:20:10 PM »
Also check out whitecoatinvestor.com

lifejoy

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Re: Why do financial planners enable doctors?
« Reply #13 on: November 25, 2014, 08:46:22 PM »

Libraryjoy - my impression is that with Medicare Canadian doctors don't make the big money American doctors do - but then their student debt should be lower also.  Not so?

As far as I know, you're partly right. A Canadian med student might be "only" $100k in debt, but it depends a lot on how long they stay in school for (family doctor vs. neurosurgeon). Also, a family doctor might have less debt and make only $200k/year, but a specialist could make $200k-$500k.

These numbers are from an outsider looking in, so take them with a grain of salt. Word on the street is that Canadian doctors could make way more money in the states, but they'd have a higher probability of being sued, and I've heard there is more paperwork, and some Canadians find privatized healthcare a tough pill to swallow.

Anyways.

Bateaux

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Re: Why do financial planners enable doctors?
« Reply #14 on: November 26, 2014, 01:03:56 AM »
There isn't anything special about being a doctor.  I don't care what you earn you can spend yourself into bankruptcy.   You also don't live long healthy lives.  One of my best friends was a doctor, worked till his 70s.  A collection hat was passed around for his funeral.   He died broke.  My neighbor who just passed away in his 60s, was a doctor, was a household name in Baton Rouge.  A divorce and lung cancer took it all away.  His home which is complicated with several leans I could write a check for.  When he was at his peak earnings I was working with jack hammers, shovels and wheel barrows for $10 an hour.  I'm still a blue collar worker.  I invest most of my income.  He spent more than his.  I know many more doctors who have died or will die broke.  You ain't owed chit.
« Last Edit: November 26, 2014, 01:05:50 AM by Bateauxdriver »

The Little Whisker

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Re: Why do financial planners enable doctors?
« Reply #15 on: November 26, 2014, 01:44:45 AM »
It seems like a simple spreadsheet or chart would go a long way to clarifying for anyone where they are with debt.  The chart would communicate something like this:

You have $X of debt at Y% annually, which accrues $Z of interest every year.  If you pay $R per year, you'll be debt free in S years.  So now they can set how much they will need to pay each year, and how long that will take them to pay off their debt.

Then do the same thing with retirement saving, so they can see how their money will grow when the debt is paid off.  If you save $T per year, earning an average of U% each year, in V years you'll have $W.  Again, this gives them the same road map, but instead of paying off debt, they're looking at financial independence as the goal.

Their expectations are set, and they know how much to pay/save.  Knowing what the road looks like is a huge step for a lot of people.

Then you explore with your fellow no-longer-residents various ways in which they can earn that U% each year.  That would be the financial education part you wanted to explore.

That's my $0.02.

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Re: Why do financial planners enable doctors?
« Reply #16 on: November 26, 2014, 07:46:20 AM »
it isnt just debt though, not with my sister anyways. she wants to pay off loans, or rather have it forgiven for public service (forget program name). But after it's paid off she doesnt want to save more than 10-15%. she has a mba as well so she knows economics. like above poster, she wants to earn her way out of mistakes. like if she needs 10-20k for another vacation, she can pick up an extra shift or few to make it back. i feel med school stresses being a doctor is a lifestyle so they cant see themselves not being a doctor so they keep working so debt doesnt matter to them. or they saw they could pay off 500k school loans without much issues so they step it up to a million dollar house. a game of pushing their financial limits vs hours per day?

greaper007

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Re: Why do financial planners enable doctors?
« Reply #17 on: November 26, 2014, 08:26:20 AM »
It is interesting when people like doctors or athletes blow all their money, though we kind of expect it more with athletes that have had 5+ concussions and made their way through college with athlete courses.

Still, who cares?   Most doctors I've met have a fairly decent grasp of arithmetic, they have access to high speed internet, and the older ones generally could hit their local library.    If they want to live paycheck to paycheck how does it affect anyone but themselves?   

My dad is a pilot, and has been since that was actually a good job.    He's going to retire with north of $7 million this year and he hasn't really been that extreme with his savings.   He drives a Lexus, lives in a luxury high rise downtown, and eats every meal out.   He's been making 6 figures since 1986 and just invested about 20-40% of his salary every year (this was with a divorce halfway through).     It isn't really rocket science and you don't have to be mustachian if you have a high salary.

We just have to accept that a Mercedes, 2 houses and a golf membership is more important than financial security to some people.    It doesn't really compute for me, but who cares?

Left

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Re: Why do financial planners enable doctors?
« Reply #18 on: November 26, 2014, 09:31:14 AM »
um, saving 40% is pretty mustachian though. nothing wrong with them spending money, i just dont see why they dont save more for their future selves. or at least hit fi THEN spend paycheck to paycheck because they can live without the next paycheck if it stopped.

greaper007

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Re: Why do financial planners enable doctors?
« Reply #19 on: November 26, 2014, 10:30:00 AM »
um, saving 40% is pretty mustachian though. nothing wrong with them spending money, i just dont see why they dont save more for their future selves. or at least hit fi THEN spend paycheck to paycheck because they can live without the next paycheck if it stopped.

It is, but saving 40% on $250,000+ a year isn't really that extreme.    Like I said, we always had newer cars growing up, lived in a McMansion, ate the majority of our meals at restaurants and went on at least 5 vacations a year.    We just drove Toyotas, never remodeled, generally used coupons for food and took advantage of airline employee travel discounts.

The difference between living austerely (40% savings)  and modestly on a salary north of $200k just means you drive a normal new car instead of a BMW or Mercedes and you don't have a country club membership or $70,000 boat.    You can still do all the things that most of America (not this forum) would consider luxurious.   Saving this much doesn't really take forethought on that kind of salary.

My family makes less than a third of what my dad makes and we're still generally doing what we want while we save and pay off student debt.

Poopsio

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Re: Why do financial planners enable doctors?
« Reply #20 on: November 28, 2014, 08:32:49 PM »
There isn't anything special about being a doctor.  I don't care what you earn you can spend yourself into bankruptcy.   You also don't live long healthy lives.  One of my best friends was a doctor, worked till his 70s.  A collection hat was passed around for his funeral.   He died broke.  My neighbor who just passed away in his 60s, was a doctor, was a household name in Baton Rouge.  A divorce and lung cancer took it all away.  His home which is complicated with several leans I could write a check for.  When he was at his peak earnings I was working with jack hammers, shovels and wheel barrows for $10 an hour.  I'm still a blue collar worker.  I invest most of my income.  He spent more than his.  I know many more doctors who have died or will die broke.  You ain't owed chit.
Anecdotal evidence does not mean truth. Studies show doctors live as long as anyone else and the highest of any educated profession.

Goldielocks

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Re: Why do financial planners enable doctors?
« Reply #21 on: November 29, 2014, 01:10:05 AM »
Best advice might be to not buy anything over $30k in your first year, and save x%.  Give yourself a year to adjust, get settled into new role and then make solid financial decisions.

I bet a doctor is like other careers, many of us changed location or employer in first two years... Or regret decisions made too fast with too many changes at once.

Abe

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Re: Why do financial planners enable doctors?
« Reply #22 on: November 29, 2014, 10:11:53 AM »
Most doctors will change jobs two or three times in the first 10 years of their career, especially if in academics. Afterwards, they tend not to move much once kids are in school, etc.

Most physicians get little to no financial planning education during college or medical school. Most of my co-residents' knowledge about financial planning comes from me, which is sad. A big factor that limits young physicians' savings rate is the large, high-interest loans needed for most tracks leading to medical school. However, that is the price of getting into the profession, and is very manageable.

For a typical family physician:
Salary: $150k
Taxes: $35k
Loan: $45k (Assuming a loan pay-off goal of 10 years for a $250k loan @ 6%)
Take-home: $70k

One can definitely support a family well on $70k a year! In addition, this is only for the first 10 years. Afterwards, there's an automatic $45k/yr saving from the loan being paid off. Also, family physicians and pediatricians are the lowest-paid of the medical specialties.

If we'll be bandying about anecdotes, I'll give one too. My uncle is a pediatrician in rural Kentucky, taking care of almost 100% Medicaid/CHIP insured patients (i.e. paid very low compared to other locales). He managed to make a nice house and save far more than they need for retirement. His secret was not buying extravagant nonsense. Same for my parents. I'll be happy to report they are all well into theirs 60s and quite healthy.

MrsPete

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Re: Why do financial planners enable doctors?
« Reply #23 on: November 30, 2014, 09:52:17 AM »
Doctors are all very intelligent people, and they've worked super hard to reach that position -- and I can understand that, right or wrong, there's an expectation that those special attributes and hard work should be rewarded.  And, honestly, if you're NOT going to be able to "live large", what's the point of going through all that? 

I like the suggestion to tell people to live "like a middle class family" -- and to spell out what that means.  However, I'd add, "Until you reach ______ point."  That point could be when your student loans are repaid, or when your loans are paid AND you have a liquid million in the bank, or some other attainable point. 

Then at that point, you could upgrade ______ amount.

And when you attain _______ goal, you could upgrade ________ amount.

You know, stair steps to an "upgraded life" while also staying realistic about the fact that any salary -- even a large one -- has limits.

Do I understand correctly that your target audience is NEW doctors who've just graduated?  I can only assume that doctors are like most other folks in terms of STARTING their careers:  When they're young and new to the "real job" thing, it's natural to focus on doing well in the career, starting to invest, etc. -- but an exit strategy seems so far away that they don't think about it much.  You want to encourage young doctors to consider their exit strategy NOW so that they can plan towards that goal.



Poopsio

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Re: Why do financial planners enable doctors?
« Reply #24 on: November 30, 2014, 11:01:33 AM »
What do people think of the idea of building equity in a 100k condo during medical school?

Live in it for 4 years
Residency--during this time rent it out
Sell as primary residence--7 years of equity=majority owned, likely gone up in price, tax-advantaged capital gains on sale of primary residence

Thoughts?

waltworks

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Re: Why do financial planners enable doctors?
« Reply #25 on: November 30, 2014, 12:51:55 PM »
Fire up the NYT buy-vs-rent calculator. It will depend on rent/price ratios, assumptions about investment returns, and the local/personal tax situation of the resident.

In general, no, bad idea. If you want more details go read some rent-vs-sell threads on the RE forum.

-W

What do people think of the idea of building equity in a 100k condo during medical school?

Live in it for 4 years
Residency--during this time rent it out
Sell as primary residence--7 years of equity=majority owned, likely gone up in price, tax-advantaged capital gains on sale of primary residence

Thoughts?

Calvawt

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Re: Why do financial planners enable doctors?
« Reply #26 on: November 30, 2014, 05:05:03 PM »
My company employs about 150 physicians, dentists, PAs, FNPs, and psychologists.  I continually see them not taking advantage of our 403b and 457b plans.  I know they get loan repayment assistance due to our non-profit status and location in a medically under-served area, but it just boils down to cultural norms of high spending.  It is just not as much fun pushing extra dollars towards debt as it is to buy a new car and take fun, expensive vacations!

I have started giving a credit scoring, budgeting, and retirement class to employees.  I know want to talk to just the highly paid providers to tailor it more to their situation.  I also was thinking of doing the same with he medical students we have working with us.

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Re: Why do financial planners enable doctors?
« Reply #27 on: November 30, 2014, 08:12:58 PM »
I leased my former home to a fresh-out-of-med-school ER Doctor and his wife. It was a beautiful four bedroom colonial on a quiet cul-du-sac in the suburbs, but nonetheless not "doctor residence" material. I thought he must have been Mustachian to be renting from ME.

 Anyway, on the rental application he listed his starting salary at $20K/month (I charged him 2K/month in rent). I'd say he was living well below his means on that end. Maybe he had student loan debt? Likely.

As far as burn out though he seemed to have it pretty good. He told my husband once that the hospital didn't allow their ER doctors to work over 32hours per week, so I thought he had a pretty good gig.

After three years he transferred to Chicago and then we sold the house. I knew I'd never get another tenant as great as him!

Poopsio

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Re: Why do financial planners enable doctors?
« Reply #28 on: November 30, 2014, 08:44:47 PM »
I leased my former home to a fresh-out-of-med-school ER Doctor and his wife. It was a beautiful four bedroom colonial on a quiet cul-du-sac in the suburbs, but nonetheless not "doctor residence" material. I thought he must have been Mustachian to be renting from ME.

 Anyway, on the rental application he listed his starting salary at $20K/month (I charged him 2K/month in rent). I'd say he was living well below his means on that end. Maybe he had student loan debt? Likely.

As far as burn out though he seemed to have it pretty good. He told my husband once that the hospital didn't allow their ER doctors to work over 32hours per week, so I thought he had a pretty good gig.

After three years he transferred to Chicago and then we sold the house. I knew I'd never get another tenant as great as him!

ER docs have good hour amounts but horrible schedules. It seems to be good for some people though.

iwasjustwondering

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Re: Why do financial planners enable doctors?
« Reply #29 on: November 30, 2014, 08:53:14 PM »
The ER docs I know have awesome schedules.  It's why they go into ER.  You can easily work four 12-hour shifts per week and make a fortune.  The shifts are predictable, too, unlike something like OB/GYN.  Some ER doctors work too much, because they can pick up extra shifts very easily and make an even larger fortune, but I don't think it's necessary.

A good friend of mine finished his ER residency last year, at age 43.  He paid off his $180K loan within the first year, which I just thought was amazing.  He's extremely frugal, and has been very anti-car, pro-bike from way back when we were in college together 20+ years ago.  He is like the prototype MMM. 

Poopsio

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Re: Why do financial planners enable doctors?
« Reply #30 on: November 30, 2014, 10:45:42 PM »
The ER docs I know have awesome schedules.  It's why they go into ER.  You can easily work four 12-hour shifts per week and make a fortune.  The shifts are predictable, too, unlike something like OB/GYN.  Some ER doctors work too much, because they can pick up extra shifts very easily and make an even larger fortune, but I don't think it's necessary.

A good friend of mine finished his ER residency last year, at age 43.  He paid off his $180K loan within the first year, which I just thought was amazing.  He's extremely frugal, and has been very anti-car, pro-bike from way back when we were in college together 20+ years ago.  He is like the prototype MMM.
Right, I may be thinking just in residency. But I'm sure it varies, someone has to pick up those late-night shifts in non-teaching hospitals, and that's attendings, whether they are EM or FP or IM docs. That's impressive about the loan being paid off in the first year. On doctors' forums (Student doctor network) there's a big thread about how "congress is mandating a junk bond rating for medical students" because loans at private med schools combined with high interest rates and declining salaries of every specialty a small but substantial portion of doctors' med school debts actually go into default. Someone taking on loans who goes to a private school and then a private med school and then pediatrics actually can't really do it anymore. It will be somewhere north of 500K in loans and with a 40K salary in residency I believe the payments and interest will be too much to handle. The 130K job afterwards is not worth it either. So someone going that path definitely needs some sort of help whether it is from parents, a scholarship from the navy, or loan forgiveness working in an underserved area.

That's what's going on in medicine...but I think it's forcing doctors to re-think money. Things like SoFi are helping doctors out. But medicine is no longer a road to riches (and it shouldn't be).

PhysicianOnFIRE

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Re: Why do financial planners enable doctors?
« Reply #31 on: January 31, 2016, 10:31:05 PM »
I see nothing wrong with the "live like a resident" advice. I did locum tenens my first 2 years, spending like a resident, but with free housing and travel.  It was awesome.

I started a site something like what was proposed, although I'm not so subtle.  The White Coat Investor http://whitecoatinvestor.com/ is a well established site to help physicians and other high-income professionals understand and manage their finances.  My angle is to focus more specifically on FI & RE and other non-financial physician issues.

RFAAOATB

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Re: Why do financial planners enable doctors?
« Reply #32 on: February 01, 2016, 02:36:51 PM »
Ugh... is it too late for me to be a doctor?  Considering Ben Carson is so good at doctoring and so bad at everything else I'm starting to wonder if I should go after that high income.

HipGnosis

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Re: Why do financial planners enable doctors?
« Reply #33 on: February 02, 2016, 12:59:39 PM »
Could someone please explain what 'live like a resident' means?   I can't put any of this in context without that.

dandarc

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Re: Why do financial planners enable doctors?
« Reply #34 on: February 02, 2016, 01:08:36 PM »
Could someone please explain what 'live like a resident' means?   I can't put any of this in context without that.
A resident (first 3ish years after medical school) makes relatively little money - say around $50K.  Whereas an attending physician makes quite a lot more than that - depending on specialty, it can be on the order of $300K or more. 

So live like a resident means live as if you make $50K-level money even when you are making $300K-level money.

Bertram

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Re: Why do financial planners enable doctors?
« Reply #35 on: February 02, 2016, 02:01:29 PM »
but it just boils down to cultural norms of high spending.  It is just not as much fun pushing extra dollars towards debt as it is to buy a new car and take fun, expensive vacations!

I used to think that, but now I tend more towards the idea that different people have different ways to handle stress. Or they are able to organize their work so it doesn't feel as much like stress.

High spending is like binging on chocolate cake and other sweets, it's usually a sign that the person are unhappy about something else and the short term high of spending money is their way to cope with it. I maintain the theory that people with high saving rate have not figured out how to save more, but the key is really to figure out how to be just as happy (or happier) while spending less. But this requires that you are happy first(!), that you are not drowning in stress but are only exposed to limited amounts of stress that you are able to handle (which is different from person to person). It's like the difference between a diet where you force yourself to eat less calories for some amount of time and always go hungry vs. changing your diet to something more healthy and dropping weight without going hungry. One is sustainable, the other is not.

Yes, knowing about finance, math and the plumbing of FI can help with the how, but it can not replace the "why". It does not give purpose.

PhysicianOnFIRE

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Re: Why do financial planners enable doctors?
« Reply #36 on: February 02, 2016, 02:31:23 PM »
Could someone please explain what 'live like a resident' means?   I can't put any of this in context without that.

On the financial side, it means to spend like the average American, because a medical resident's salary is pretty close to the average American salary.  Of course, large debts make it a bit tougher, but there are deferment & forbearance programs to delay paying some of those debts (and allowing them to grow!)

It can also be understood as "work like a resident" which means long days, 80-hour workweeks, and little time off.

A practicing physician can pay off a lot of debt in a short amount of time after residency by embracing one or both of these ideas.

accolay

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Re: Why do financial planners enable doctors?
« Reply #37 on: February 02, 2016, 03:30:11 PM »
PS - not sure if it's financial planners so much as it's a culture thing where people EXPECT doctors to have a certain kind of lifestyle, and also doctors feel like they've earned it. Maybe?

Plus that Doctoring is imagined as a wonderful life-long career that every doctor loves and would want (and society would expect) to continue for another 30+ years.

Gracie

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Re: Why do financial planners enable doctors?
« Reply #38 on: February 02, 2016, 07:28:56 PM »
1. Financial Planners are basically of no help to Docs; they're mostly looking for a quick payday with someone they can churn-and-burn.

2. Most of the doctors I work with are FI. That is the culture here. We also prefer this detail to remain private because it is like painting a target on your back.

 3. No one "needs" a fancy vacation. Working a couple extra shifts per year to pay for one so the rest of your life stays on autopilot isnt foolish.

4. Jim Dahle has a great website mentioned once above called the WhiteCoatInvestor.com

5. If you like your job, working a few extra shifts isnt painful. (See above, most of my group is FI and still working). Also, you reach FI that much faster.

6. People with high earnings can live a fancy life and still reach FI.

abhe8

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Re: Why do financial planners enable doctors?
« Reply #39 on: February 02, 2016, 08:14:27 PM »
From the perspective of a doctor 1 year post residency... One thing I see missing is the fact most doctors LIKE their jobs, and have no plans for early retirement. The work is good, the pay is good, it took a decade+ of studying and working not only 80+ hour weeks, but very stressful, demanding jobs to get here... I don't want to quit in five years.

I hate the "live like a resident" phrase, because it is way more then the income or spending level. I would never choose to do that again. It was terrible. That saids, I don't spend that much more then I did as a resident but I"live" so much differently. Less stress, less work, way more job satisfaction... I could go on and on. I agree that if the financial planners or whoever really want to reach new attendings, they need a much better tag line.
« Last Edit: February 02, 2016, 08:16:39 PM by abhe8 »

EnjoyIt

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Re: Why do financial planners enable doctors?
« Reply #40 on: February 02, 2016, 08:37:02 PM »
1. Financial Planners are basically of no help to Docs; they're mostly looking for a quick payday with someone they can churn-and-burn.

2. Most of the doctors I work with are FI. That is the culture here. We also prefer this detail to remain private because it is like painting a target on your back.

 3. No one "needs" a fancy vacation. Working a couple extra shifts per year to pay for one so the rest of your life stays on autopilot isnt foolish.

4. Jim Dahle has a great website mentioned once above called the WhiteCoatInvestor.com

5. If you like your job, working a few extra shifts isnt painful. (See above, most of my group is FI and still working). Also, you reach FI that much faster.

6. People with high earnings can live a fancy life and still reach FI.

Having financial security allows you to enjoy your job so much more that you may not want to retire.  There are so many people here who hate their work so much that all they want to do is raise enough money and get out.  With medicine it does not have to be that way.  Medicine can be very fullfilling if you are financially secure and don't need the money.  With financial security you can be more picky on the work that you do.  Since the money is less important, you can hire a personal assistant to help with some of the bureaucratic red tape that is now demanded of physicians.  Maybe a scribe or even a physician's assistant or nurse practitioner.

I think the quote shouldn't be to "live like a resident"  I think it should be to "grow into your income gradually."  If you are used to living on $50K/yr, then as an attending for the first year out live on $60K. Nothing changes except you maybe get a couple of nice vacations to relax.  The next year make it $70K and so forth up to whatever you feel is appropriate spending for your income.  During those several years debts will be paid off and you will have a really nice nest egg so that you too will have financial security.

Abhe8,
I think most doctors like being doctors, but most physicians hate what the government is doing to their practice and are extremely frustrated.  Add financial insecurity and they start to get burned out and hate their job.  They only put on a show on how much they like it.  What else are they going to do?  The bills must get paid.  Personally I thought I wanted to retire early.  But once I cut my work hours a bit, I see myself working part time for a very long time to come.  I like the idea of working 6-8 days a month even when I am 65.

thingamabobs

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Re: Why do financial planners enable doctors?
« Reply #41 on: February 02, 2016, 09:19:11 PM »
From the perspective of a doctor 1 year post residency... One thing I see missing is the fact most doctors LIKE their jobs, and have no plans for early retirement. The work is good, the pay is good, it took a decade+ of studying and working not only 80+ hour weeks, but very stressful, demanding jobs to get here... I don't want to quit in five years.

I hate the "live like a resident" phrase, because it is way more then the income or spending level. I would never choose to do that again. It was terrible. That saids, I don't spend that much more then I did as a resident but I"live" so much differently. Less stress, less work, way more job satisfaction... I could go on and on. I agree that if the financial planners or whoever really want to reach new attendings, they need a much better tag line.

Not sure what specialty you're in, but I would say most doctors TOLERATE their jobs and LIKE their incomes. The work is eh, the pay is good... I want to pay off my loans and GET OUT!

To OP: also would agree with other posters that there is nothing wrong with living like a resident. As a resident I frequently ate out as I was too tired to go grocery shopping and cook. I shopped online quite a bit. Now as an attending, I don't eat out as much because I have time to do more prep and I really would like to demolish my loans. There is a developing market of financial planners geared towards doctors that have better understanding of our SL situations, Doctors without Quarters is the first to come to mind.

Veritasvosliberabit

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Re: Why do financial planners enable doctors?
« Reply #42 on: February 04, 2016, 03:17:14 PM »
I'm thinking about starting a website for my fellow young physicians to improve their financial literacy (which is essentially absent) and subtly turning them frugalitarian. I just drafted a post and, since you are all expert Mustachians, I wanted to float it and see what you think. It's specific to physicians but the concepts are MMM.

Why “live like a resident” is dangerous financial advice

“Live like a resident”. I bet this advice on how to get out from under the burden of our student loans sounds familiar. If you’re like me, you nod your head “Oh, yeah, I should totally do that” and then continue to do absolutely nothing differently.  It's so frustrating to be living on a resident salary in your 30's while high school and college friends are all debt-free except for what they've overspent on their McMansions and Mercedes. Every time I hear a financial advisor tell a group of residents, fellows, or young attendings to “Live like a resident,” I facepalm.

Seriously??? Who would make it out the other side of residency and choose to plunge back into the fires of medical education purgatory? When most of us finish residency, we smile in the graduation party pictures while secretly imagining flipping a match as we walk out the door. Being told to “live like a resident” might be intended to encourage us to avoid lifestyle inflation, but tapping into our collective PTSD doesn’t motivate anyone.

Even worse than being advice that we can ignore with impunity, telling us to “Live like a resident” is perversely counter-productive.  Somewhere along our medical education, we are instilled with a sense of entitlement. We develop a belief that we deserve to live it up once we finish residency or fellowship.

Why? Maybe it’s because the hierarchy of academic medical centers suggests that once we complete training we move up a rung and should act accordingly.  Maybe it’s because our non-medical friends or families expect us to be rich or have no problems once we start making an attending salary. Maybe it’s because we need to picture ourselves in a shiny new car or our kids in a house with a big yard to make it through the rough shifts. It becomes normal to pretend like we don’t have to let six-figure medical education debt get in the way of our lifestyle. Telling us to “Live like a resident” during our early attending years does nothing more than remind us how much we feel like we deserve to be living better.

I watched a session on financial planning for residents the other day. The session was a panel of “experts”, two financial planners and one young attending who still has more than $100,000 in student loan debt. I’ve been to my share of useless financial planning sessions as a resident and fellow. Same advice, over and over again, that nobody knows how to take. But this session was particularly bad.

One of the financial planners on the panel opened with a cautionary tale. A doctor that he works with finished residency with nearly $500,000 in student loans.  He and his wife bought a condo as soon as he started his first job. After a few years, their young family had outgrown the condo but he had trouble selling it.  So, about 5 years out from residency, this doctor had two mortgages and student loans totaling over a million dollars in debt.

What do you think came next from that financial planner?  A truckload of truth being served upon the residents in the audience? A harsh dose of reality about how bad things can get if they try to bury their heads in the sand? Nope. The follow-up was “Through no fault of his own, this young doctor has found himself in a rough situation.  Let’s talk about how to decide whether to invest in taxable or tax-sheltered investments.”

Are you kidding me? It’s mathematically impossible that this guy could ever invest his way out of a million dollars in debt. The interest on that debt will eat his life. It will eat his childrens’ lives. Even worse, in what universe did this guy end up over a million dollars in debt “through no fault of his own”? Owing a million dollars is not a congenital disease. The doctor in the story made choices that resulted in his debt.  I made choices that resulted in my six-figure educational debt. We have all made choices, some good and some bad, that have consequences for our financial bottom line as young physicians. Graduating from residency doesn’t erase them and we’re not entitled to anything.   

We are not special snowflakes. We have to acknowledge where we stand financially, just like the barista at Starbucks that has student loans from her English literature degree. We aren’t entitled to have our troubles melt away at the end of medical training.  But we do need help in managing our debt while having a fulfilling personal life. We need advice that is candid and realistic.

Hey, financial planners who give advice to young physicians, I’m looking at you.  Get relevant or get out.

Full disclosure: I'm not a physician, but the fiancee is (4th year resident).  Residents make 50-60k per year.  No one is suggesting that new physicians live on ramen after fellowship, just that they live off the 60k salary that they are used to for a few years after the bigger salary starts.  If living off of 60k is the "fires of purgatory" for you, you've got bigger problems than financial ones.