One of the lessons frequently taught to me growing up was that I was free to choose anything I like, but that I wasn't free to choose the consequences of my choices. Those were attached to the choices, like two ends of a stick. Lately I've been thinking a lot about the consequences of financial choices made relatively early (both time-wise and financial education-wise) in our lives and careers.
For example, when I was 23 and single and signed up with the Air Force I thought traveling around the world and deploying sounded like a lot of fun, a great adventure. When the consequences of my choices presented themselves 9 years later (when I was married with children living in a state far from any family support), it turned out that I wished I had made a different choice. Future Me simply cared about different things than Young Me and was a lot more experienced and educated. Traveling the world didn't mean as much to me as having my child recognize me when I came in the door.
Likewise, I now see many physicians reaping the harvest they have sown. The classic example is the new attending with a big fat loan burden. When you make these choices:
- Go to an expensive med school with no savings or family support
- Have kids as an undergrad/med student
- Have your spouse stay at home
- Pay all your tuition, fees, and living expenses for four years using borrowed money
- Pick a low-paying specialty
- Pick a high cost of living area to settle in
- Choose a below average paying job
There are some financial consequences that inevitably result, no matter how much you wish they had not. Those choices affect the length of your career, whether or not you can send those kids to private school, when you will have your education finally paid for, when you can buy the dream house (if ever), what kind of vacations you will have, what you will drive, and what your retirement will look like. Two ends of the same stick.
You can choose where to get on the sled, but not what it hits on the way down
Docs in Trouble
20 years ago, perhaps 5% of doctors were in financial trouble. We see the results in the net worth surveys given to groups of physicians today. Among doctors in their sixties, about 1 out of 9 has a net worth of under $500K, despite 30 years of physician paychecks. Half of them are worth over $2 Million. But half of them aren't.
Now, among young physicians, I suspect the number of docs in financial trouble has reached something like 25% and that number will continue to rise. A commenter asked “When will people stop applying to medical and dental school as a result of these monstrous student loan burdens?” Well, the fact remains that 75% of people who choose to go to med school are still doing okay. The reason why is they didn't make a string of bad decisions. Perhaps they went to a cheaper school. Perhaps their spouse had a career as well. Maybe they chose to be an anesthesiologist instead of a pediatrician. Maybe they chose to live in the Midwest. Or delayed kids. Or chose a high paying job and did a second one on the side for a few years after residency. Whatever the case, they made different choices and the end of that stick had a different consequence attached to it. If you only made 2 or 3 “bad” choices (perhaps I should say “costly” choices), you're probably okay. It's the folks making 6 or 7 of them that are getting crushed.
Your Second Job
One choice that gets a lot of doctors in trouble is ignoring the fact that they have a second job. Your second job in our increasingly financially complex “401(k) world” is a pension fund manager, whether you want it or not, whether you do it or not, and whether you know how to do it or not. You, along with any “consultants” you hire, are 100% responsible for the performance of your retirement pension. You get to decide how much to contribute to it, how to invest it, and how to spend it down in retirement. But choices have consequences. If you choose to invest only in low risk investments, you will have less to spend (or work longer.) If you get burned with speculative investments (or buying high and selling low), you will face the financial catastrophe. If you mistake a commissioned salesman for a financial advisor, you know who is going to bear the pain. If you inadequately fund it, or wait too long to do so, YOU will reap the consequences.
A lot of times when someone finds this blog, or reads my book, or listens to me speak they get really anxious. Usually it is for a good reason. They come up to me after the talk (or send me an email) and we chat about their financial advisor, or their savings rate, or their investments or goals. The light has gone off in their head and they've realized that their past choices will have consequences, and they want to make some changes. Most of us have felt that anxiety at some point. Maybe some of you are feeling it now as you read this. Let that provide the motivation to get out there and get the education you need and make the changes that need to be made to secure your financial future. You can do this. Others have done it before you. While you cannot change the consequences of the choices you have made in the past, you are certainly in control of your future going forward from here.
What do you think? How have you felt about facing the consequences of the financial choices you have made in life? How did you avoid making “a string of bad choices?” What should be done by someone who is in financial trouble? Comment below!
Great perspective. It highlights the fact that physicians can afford to make many financial mistakes, but not every financial mistake in the book. Even if they make every mistake in the book early in life, working in medicine, with its high salary, allows you to (partially) recover in mid or even late-career. However, with increasing student loan burdens and potentially reduced compensation, the margin for error is narrowing.
It goes along with Jim’s other point – you can have anything you want, just not everything you want.
I love this post because it gets back to the notion of personal responsibility. Each of us can decide that we value different things. I may want flexibility at work and no kids and my spouse has a high-paying job as well.
Someone else may want a couple kids, a stay at home spouse, etc. Neither of these is right or wrong, but they come with their own consequences. You simply can’t avoid them!
“I was free to choose anything I like, but that I wasn’t free to choose the consequences of my choices”
AWESOME. This is the second time in two days this theme was presented to me. It also showed in the Behavior Gap book (by Carl Richards) that I’m reading right now. It’s such a true statement that many of us never pause to consider. Thanks for sharing this!
So true!
People act so helpless at times. Or blame genes or outside forces when really it was mostly their own decisions that drove it. This is true a lot of times for people’s health too. They eat crap, watch TV hours a day, and never exercise and then blame their “family history” for their health problems.
I got a chuckle the other day when someone posted that PoF’s financial success came from the fact he “fell into” a high paying job at the right time and “happens” to live in a low cost area. The high income and low expenses that he “lucked into” account for his FI. Wow. That is one way to rationalize why the rest of us can’t make better choices I guess.
I was going to mention that I touched on this topic in The Sunday Best just yesterday. Some people like to think I lucked into a good spot in life. Sure, there was some luck involved, but also many good choices made knowing the consequences. I like to think I’ve made the most of my opportunities.
“Opportunity is missed by most people because it is dressed in overalls and looks like work.” – Thomas A. Edison
As you have mentioned in other posts, many outcomes in life are a consequence of the hand we have been dealt, and dumb luck. On top of this layer, we have the choices we make.
It’s simpler to evaluate these choices retrospectively; in the thick of things, it can be more difficult. As a single 25-year-old, that condo you bought in a walkable neighborhood might seem perfect, but as a married 40-year-old with 2 kids, you realize the school district sucks and you are faced with a move or private school costs.
I chose one of the higher paying specialties, but my wife did not. Her choice was motivated not by money, but by a “calling.” It was a choice nonetheless, with consequences. Between us, a few less-than-ideal financial choices have been compensated for by a plurality of good choices, and I think this can be the case for most docs.
From my observation during my 40 years in ER medicine, another equally (most?) important decision a young doctor can make is one’s selection, or lack there-of, of a spouse. I’ve seen many examples of a wrong selection making or breaking an otherwise potentially successful career. Also the obsession if “just being married” compels many into serial (sometimes three or more) marriages, can and usually does ruin the path to a happy, secure future life in medicine, financially, socially, and psychologically. The WCI’s advise of “one spouse” is right on. I’d even audit this a bit into the “right spouse”. Being single has given me, I hope, an unbiased, and perhaps unique, position on this matter. Thanks for the informative post.
Good point.
I’m going to buy my wife some flowers on the way home. I’m so grateful to have her (the one and only wife) in my life. That is an area where I truly lucked out since she turned out to be even better than expected.
I started my career in consulting, rather than medicine, but the dynamics are similar (except much less job security). One of the senior gazillionaire partners was asked the secret to a comfortable retirement. “One wife, one house, no boat.”
I have a boat, its lot of fun
My best financial decisions:
1) Going to the least expensive medical school at which I was accepted
2) Getting an inexpensive starter home for $100,000 and living in it for nine years
3) Putting Max in 401K since age thirty
4) Working in a job with a pension worth $30K a year from my age 65 to…
My worst financial decision:
1) Building a “dream house” for $500K on a 90K piece of land and moving out of the starter home. That home has $500/month electric bills and $700 a month taxes and is only worth $500K today
2) Not managing my retirement monies as if my date of retirement depended on it.
I’m still on track for being in the group with $2,000,000 net worth in my sixties…I hope. I did pick psychiatry which is frequently in the bottom few specialists as to pay, but it’s been a good life as far as hours.
Awesome motivational post! Thanks!
It is posts like this that caused me to restructure my office (and personal) retirement program and stop using a financial advisor a few months ago. I now breathe easy and smile every time I read this stuff. And I am very grateful for the wakeup call.
Fortunately I think medical students are as a whole realizing that they are in trouble and are starting to take these issues into account.
Increased debt loans have pushed people towards loan repayment programs, and graduates coming out seem to be slowly becoming more saavy (probably due to this site and other educational resources). I hope this trend continues and do everything I can on a personal level to help fellow residents and students.
The biggest “smart choice” I made was taking the MCATs. I had been accepted early selection into George Washington University without the need to take MCATs. Looking at the tuition at that time (2001) it was $50k a year, not to mention living in DC for 4 years.
So I took the MCATs, hit the average score, and went to my state school- University of Tennessee in Memphis. When I started tuition was around $12k and cost of living was way less. I easily decreased my debt from high $300k to $150k.
A “bad” move I made was deciding to take a low salary at my first attending job. I thought it was a good fit because it was academics, etc. but at the end of the day the low salary made me frustrated and dissatisfied. Never sell yourself short!
I see this all the time, although in non-medical fields. People feel like the “world is against them” when it’s really the combination of their long-term choices finally coming to a head. I’m taking responsibility for my crazy-high student loans, for example, and we’re delaying having kids until they’re paid off.
I wouldn’t recommend delaying family for money reasons. Just remember the older we get the less fertile we are. Kids dont have to be expensive if you’re careful.
Good post. I really liked the concept of realizing that you have a “second job”. In my mind, it is a huge responsibility that needs to be tended to. Calling it a job is a great idea.
All people in our economic system get rewarded for their inputs of Capital and Labor. When we are young, we have little Capital input, and it is all reward from our Labor. At the end of life, we cannot provide Labor, and live off our our accumulated Capital instead.
Life gets so busy we forget to tend to the slow inevitable transition that is going on. I think giving it a name is a great way to frame the concept and keep it front and center!
I think I pulled off about 3.5 of these before I found WCI. My biggest one was being a mediocre undergrad in a state with hyper competitive state med schools, leaving me one (expensive) US allopathic school as my only choice. Thankfully I make about 20-25% more (according to medscape) than the average doc in my “low paying specialty.” So lots of work to do but thanks to WCI and bogleheads have a plan and a path.
“I was free to choose anything I like, but that I wasn’t free to choose the consequences of my choices” I think we had the same mother! I can’t even count how many times I heard this growing up.
Thoughtful post. I see lots of docs in trouble in their 60s or late fifties. It is usually from one or two divorces and children from multiple relationships. No body plans for this type of catastrophe.
^^ strongly agree. The 40+ year old docs with 2nd wives who want babies and private schools. Catastrophic. Worst. Cases. Ever.
Another incredible post! That old chestnut, “If I knew then what I know now…” is oft said for a reason. And by me! It seems like a movement of frugality has taken some hold in younger people with awareness of debt’s consequences, but it’s an uphill battle. That anxiety of realizing things are way off course can be parlaying, too, but taking action is empowering.
Excellent point about having the second job as CFO that you neglect at your peril.
Many examples of the “prodigal doctor” out there.
With apologies to Paula Pant’s tagline at Afford Anything:
Thanks to high income, doctors can afford to screw up anything
We just can’t afford to screw up everything.
I’ve definitely done several of those that have dramatic financial consequences. All of 1-4. They are, however, consequences I accepted before making those decisions, and several of those consequences are really great and they better my life: my wife and children were a major source of motivation through undergrad and med school. They also brought a lot of joy to my life that I never have found in my academic life or in any other venue.
All the medical schools to which I was accepted had very similar tuition, but I chose the one with the lowest COL city. I still graduated medical school with $377K in student loans. I suppose I could have reapplied the next year, attempting to get into a school with lower tuition, but I wasn’t willing to sacrifice the time or wait around a year.
I lived, along with my family, completely on student loans through school. It allowed my wife to stay home and raise our children, which has always been a great priority for us.
I know that these decisions are far from the best ones financially speaking, but they’ve been the best ones for us. I will never escape their consequences, good and bad.
Fortunately, the specialty that I selected is on the higher end of the earnings spectrum, and the income is even more than I ever expected.
Timely post for me, I just wrote a post a few weeks ago on the same topic mainly to remind my older self not to forget mistakes. I made a few mistakes as a young doctor before I got wise. Here is the confession if interested:
https://agoodlifemd.com/priorities-make-choices-how-the-road-to-financial-independence-is-changing-my-priorities/
I like your second job analogy about personal finance, very appropriate. It’s a job front loaded though for most, with less work required as time goes on.
Is that a brand new physician financial blog? Welcome to the club!
Interesting post. Agree that we have to own the consequences of our choices, but interesting that one persons poor choice may be anothers good choice. I also used the military to help reduce the cost of medical school, never expected to stay in, but it has been one great job after another, even admiring the stars from the desert in Iraq. Two kids born far from home in Germany, but Grandma’s took turns flying in for support. Germany was probably the best three years of my military career, working vacation for three years in Europe visiting many sights, although that slowed a lot once the second kiddo came along. Picked family practice, not high on your list, but that “jack of all trades, master of none” medical education has served me well now that I have gone farther on the dark side of medical administration, now Commander or “CEO” of a small military hospital. With a pension in a few years of 80-100k depending when I decide to exit, and a current net worth over 1.5 mil, not regretting those choices. Now investing with First Command about 20 years ago when they charged insane loads, that was a bad choice. Where were you then WCI, I could be past 2 m by now!
Sorry about that. I definitely should have warned you about First Command when I was a sophomore in college. I don’t think I could have warned you about First Command before 2006.
I would have loved to have been stationed in Germany, but at least in my specialty, that was reserved for those willing to sign up for a second tour.
Dental school private is approaching 500k in the northeast and probably elsewhere
Sad but true
We need graduating students to be mentored on finance and led to sources to further that education
Wonder if many students come from wealth and do not give a darn
I started in the red upon graduation and LUCKILY was led in the right direction where to invest, VANGUARD INDEX FUNDS l977
Unfortunately you can make good financial decisions, but if your partner doesn’t, it can still affect you. I am a partner in a 2-physician owned practice. We are going through the buyout now, and my partner is not as well off financially as he should be due to financing his married adult kids. He is trying to get every penny out of me that he can, and it has ruined our relationship permanently.
I’ve seen this before. Your accountant can be your source of support.
Great post. I think it’s important to mention that even if you’ve made mistakes in the past it’s not good to dwell on them. Learn from them and move on. Life is short and needs to be enjoyed now.
One of the best things I ever did was move out of NY after 13 years of practice. The lower cost of living here in the Midwest along with higher salaries, better retirement plan allowed me to quadruple my net worth in the subsequent 10 years to >2M at age 49. NY felt like a hamster wheel of high tax, overhead and lower reimbursements. We now can’t believe we stayed there so long, but we have family there so it was hard to pull up stakes.
This post rings so true. The hardest thing about youthful immortality is that we can be so short sighted to the long term consequences of poorly contemplated choices. Picking a career is not simply about what excites us in the moments when we are young, but reqires long term vision regarding what fits and is adaptable to our changing lifestyles and priorities through the many phases of our personal and professional lives. Financial fitness is a learned skill that has genetic and environmental inflences. Sticking your head in the sand and abdicating control of your financial health in the hope that it will take care of itself is a recipe for disaster, much like ignoring the scale, eating without reflection, and wishful thinking that you would lose weight. We are human. We will make mistakes. We can change, but only with conscious disciplined intention. I was a financial Rip Van Winkel who awoke to the depths of my unconscious financial illiteracy at 50. I am not where I should be, but I am now aware of where I am, and have a plan for where I wish to go. I will be working longer at a financial pace in a field that no longer means to me what it did when I began my career, but I at least now have a realistic idea of where the horrizon is and am no longer in the dark with a mouth full of sand.