[Editor’s note: The following post is by ESI from ESI Money, a blog about achieving financial independence through earning, saving, and investing (ESI). It’s written by an early 50s retiree who achieved financial independence, shares what’s worked for him, and details how others can implement those successes in their lives. He also has a free ebook, Three Steps to Financial Independence. We have no financial relationship.]

It's almost a cliché that doctors are bad at managing money. Just Google “why are doctors bad at managing money” and you'll get over 35 million results!

There's much debate on whether or not this is true (though below we'll add some facts to the argument), but even if we assume it is, most people would give doctors a bit of a break here. After all, many doctors became high earners not because they were greedy, but simply entered a high-paying career for altruistic reasons — they wanted to help people. So most would give doctors a pass even if they aren't the best money managers. They never set out to be.

Greedy Little Boogers

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But you know who did? Business executives. These greedy little boogers are all about money. That's why they go to business school — to make money. They get MBAs to make even more. They climb over the top of each other to earn more. And almost none of them go into business for a higher calling other than to make a boatload of cash.

So it might surprise you to know that executives are bad at managing their personal finances. In fact, their finances are often in shambles. They deal with and manage money for companies on a daily basis and yet their personal finances are a mess. This is why I'd say they are worse than doctors — executives should at least know better.

How do I know this? Part fact and part experience.

As for fact, look no further than the book Stop Acting Rich, written by The Millionaire Next Door author Thomas Stanley. He conducted research comparing high incomes versus high net worths to see which professions were best at turning their salaries into wealth. Top of the list? Engineers and farmers. Executives (managers) were close to the bottom. The only professions worse were attorneys, chiropractors, and physicians/surgeons. Guess the doctor stereotype is true after all.

[Editor's Note: As discussed in The White Coat Investor: A Doctor's Guide to Personal Finance and Investing, remember that Stanley and Danko's simplistic formulas and thus the conclusions drawn from them are fundamentally flawed as they do not account for a physician's late start and debt load. That said, I'm a firm believer that their conclusions are right anyway!]

As for experience, I know because I lived among executives. In fact, I was one of them (MBA and all). For 28 years (20 at vice president level or higher) I worked at Fortune 500 companies all the way down to $10 million businesses, eventually becoming the president of a $100 million company. Along the way I made many friends who shared their finances with me (I always had financial books in my office, so it was a natural topic of conversation) and I can tell you I experienced exactly what Stop Acting Rich found — executives' personal finances leave a lot to be desired.

I'm going to share four (of the many) stories from my career that illustrate this issue. Then we'll take some time in the comments to chat about why a group that seems positioned to do well financially is falling on its collective face.

President With Cash Flow Issues

I was the vice president of marketing for a $300 million retailer. One of my projects was to create a company-branded credit card (BTW, a company-branded credit card is a gold mine — for the company). A key part of this process was selecting the bank that would issue the card.

I started out with ten or so bank options, then whittled them down to five. We had those five come in and present at our company headquarters. The meetings were attended by bank executives (three people or so — the stodgy, full-suit-wearing types you'd expect) and a group on our side (me, my director of marketing, and the president of our company.)

During one of the presentations, my president asked the bank representatives a question. The conversation went something like this:

President: Do you put inserts into your card statements?

Bank representative: Yes, we often include various offers we think customers will like.

President: How about those checks where a consumer can get cash and it's charged to their credit card? Do you have things like that?

Bank representative: Yes, we send those out maybe a couple times per year.

President: You know, I just discovered that those carry very high interest rates…

Bank representative: Uh…

President: Did you know that?

Bank representative (loosening tie): Uh, well the rates are in line with industry averages.

President: Well let me tell you this. I was having some cash flow issues so I filled one of those out. And I discovered how much those rates were when I was later charged for them. Very high. The rates are very high.

Bank representative (starting to sweat through his Brooks Brothers suit): Uh…

At this point I was trying to crawl under the table from embarrassment. I had spent months with this bank negotiating back and forth, creating a professional image for our company, and developing a solid business relationship and now my boss was looking like the Barney Fife of money managers.

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Let me say that this man was very accomplished in his field. He was the president of a $300 million company. He was sharp. He had worked at Walmart in the early days with Sam Walton and had cashed out a good amount of Walmart stock years later. He had taken our company private, then sold it to private equity investors for a near fortune. Many executives made a bundle (before I got there) and his take had to be even bigger. Finally, his salary had to be good because mine was good and I worked for him.

And yet:

  • He had cash flow issues.
  • He didn't understand how to read an offer.
  • He didn't know that credit cards (and associated products) had high interest rates.


If you're wondering how it turned out, the bank executives looked at me and I mumbled something like, “We should get back to the presentation.” After it was over one of the bank guys asked me in private, “What was that all about? Is he clueless?”

What could I say?

The Subordinate with Cash Flow Issues

Unfortunately, it's not just my bosses who have trouble managing their money. Of all the awkward conversations you can have with an employee, their personal financial situation is among the worst. But that's what I had to do with one employee. Twice.

We had company issued credit cards that had to be paid off every month in full. This was no problem since 1) we were only allowed to charge company expenses on the card and 2) the company reimbursed us within days of completing an expense report so we had the money prior to the credit card bill being due.

On two different occasions I was asked to come into my boss's office and told that my second-in-command, a guy making $90,000 a year in the 1990s, had not paid his credit card bill that month. The boss said I needed to talk it over with him. The first time it was more of a “find out what's going on” issue while the second it was more “tell him if this happens again the card will be taken from him” conversation.

So I went to my employee and brought up the subject, which was awkward in and of itself. Each time he said he had “cash flow issues” and just couldn't afford to pay it off. I asked about the reimbursement checks the company was giving him. Those were supposed to cover the card's charges. So what was the problem? He said he used the reimbursement money for other spending and couldn't pay the bill as a result.

I wanted to ask him if he was a financial moron. Instead I told him that if it happened again his card would be closed. It was never a problem after the second visit.

It should be noted that this guy handled our department's budget and he was very good at it. He saved the company a ton of money and could squeeze a nickel out of a penny. And yet at home he was having cash flow issues.

Living Paycheck to Paycheck (or Worse)

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Fast forward to when I was company president. I hired a high-powered consultant to help us with strategy and program implementation. He was very accomplished and had been for three decades. He consistently talked about how much money he made, the expensive trips he went on, and other aspects of living the high life.

I first met him 20 years earlier and we stayed in touch. So in addition to being a business acquaintance he was a friend. He was also a mentor, helping me as I confronted the challenges of being a first-time president. I actually had two money-related incidents with him, one personally and one through a very close friend.

The first was when the consultant and I were having a private conversation before a meeting. He said to me, “There's a rumor going around the company that you may only be here five years.”

I said, “Yep, that might be true.”

He asked, “Why is that? Is it because you have a boatload of money saved up?”


He then proceeded to tell me how he could be retiring (he's about 10 years older than I am — in his early 60's) but this happened, that happened, and so forth. Basically he spent too much and made bad investments. But that was only the tip of the iceberg. I didn't know how bad it was.

A couple years later a close friend of mine was working with the consultant (I had since left the other company and I was no longer working with the consultant). The friend did some sub-contracting work for the consultant and was owed about $6,000. He had tried and tried to get paid, but the consultant gave him one excuse after another, then promised payment several times only to not pay. In the end the consultant told my friend that expenses were just too high to pay him (remember, the consultant had been paid by the company and yet hadn't passed that money to my friend). The consultant said he had to travel to Europe with his daughter, needed to take his wife on a tropical vacation, and so forth. As such, he just couldn't reimburse my friend.

Basically, the consultant was living paycheck to paycheck to fund an extravagant lifestyle. At this rate he'll never get close to retirement. No wonder his wife keeps working as well — she probably has to.

Executive Without $2k to Spare  

Another executive was a really good friend as well. Our wives were friends too. We went out together several times, our kids played sports together, and we visited each other’s homes.

One day we were chatting at lunch. He said he wished he could make some simple remodeling changes to his basement that his wife really wanted. I asked why he didn't. He said they didn't have the money to do them.

I asked what the cost was and he said “somewhere around $2,000.”

First of all, this doesn't seem like that much money to me, especially for a vice president of a company who's probably making $150k a year (20 years ago too!)

Second, I knew he had just gotten a large bonus since our entire leadership team did (from the credit card deal I talked about above). He had probably received close to what I did, somewhere around $15,000.

“What about your bonus?” I asked. “Why don't you just use part of it?”

“We can't,” he responded. “It's part of our budget to cover basic costs.”

At this point I was surprised that he even had a budget, but I asked, “So you count on earning your bonus to make your budget balance?”

“Yeah,” he replied.

“And you don't have $2,000 saved to do what you want?” I asked.

“Nope. Don't have any savings at all,” he responded.


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BTW, this guy's job dealt with products, margins, and sales EVERY DAY. He was a master of making things work financially, getting good deals, and meeting or exceeding his financial goals. At work. At home, not so much.

So What's Going On?

Why are executives in this mess? Why don't money principles they learn on the job and apply every day seem to filter into their personal lives? Granted, the financial issues aren't exactly the same, but many of them translate (balance sheet = net worth statement; income statement = cash flow plan/budget; budget = planned expenses). The principles are pretty close to being the same.

I'll offer a couple suggestions, then leave it open for comments below:

It's likely due to the same issues that plague all those who suffer with money issues. As our own Dr. Dahle commented on Investopedia:

“The common reasons that most people struggle with money apply to doctors. These include, a lack of financial literacy, poor financial discipline and a lack of long-term perspective.”

I'm guessing it's the same with executives. Despite having plenty of opportunities to connect the dots, somehow they don't apply their business skills to their finances. Maybe because they see them as two distinct issues? Maybe they think because they are high earners that things will be fine on their own? Or maybe they just get caught up like much of the rest of America and want it all (and then some).

Of course a few simple money tips could straighten them out in no time. This money stuff isn't rocket science, after all. It's common sense mixed with a bit of knowledge and a lot of discipline — all qualities executives are supposed to have in abundance.

But for now, dear doctors, rest assured that you are not alone in the “don't know how to manage money” camp. Your neighbors, the executives, who should know better, are there to keep you company and deflect at least part of the ridicule.

As for the attorneys, they're probably hoping that someone dares to try and ridicule them. 😉

What do you think? Would you have guessed that many business executives can't manage money either? What is it that keeps otherwise intelligent people from being able to do this? Comment below!