By Dr. James M. Dahle, WCI Founder
This was a post on Sermo, with 437 responses in about a week. I'm going to cite what I thought were 15 of the best ones. The entire White Coat Investor site consists of my answer to the question.
Q. How Can I Become a Millionaire as a Physician?
How can I become a millionaire as a physician? Straightforward question. No BS please. I would love to retire in 10 years, but worked in Massachusetts as an employed doc and realize that my present situation – income minus lifestyle expenses is definitely not cutting it. And yes, I know I could drink only water and drive a used Prius and live in a shack. . . My question is how can I EARN more, a lot more? How have YOU done well?
A. 15 Best Crowdsourced Answers from Sermo
1. Income vs out go. Live below your means. I still eat hamburgers off the grill instead of only fillet mignon steaks. I do have some toys. I've got the same Jag that I purchased 11 years ago. Amazing how cheap title and taxes are. Still purrs down the road. Still have the first wife, same house for 20+ years. Put more than you think you need to away before you see your paycheck. Can't spend what you don't have. Don't have kids.
2. For most docs the truth is that nothing will pay more per hour that what we earn in clinical medicine. Want to earn more as a doc? Straightforward way is to move to a more lucrative practice. There are a lot of docs who live in flyover country and Alaska who do really well. Also save well and learn about investing.
3. Live frugally, spend wisely, invest conservatively and keep working. Read The Millionaire Next Door.
4. The days where you could be a good doc with a good practice and become a millionaire from that alone are all but gone, except for a few specialties. It also used to be that you could work harder/longer and make more money. That too has become harder to do, especially as a PCP. Now, to retire early and well, you almost have to have made some money from a outside source, investments, real estate, side business, etc. [Ed note- Almost being the key word.]
5. First of all, why do you want to be a millionaire? Then the next question is? How many millions? Is 1 enough? or 2 , or 10? You will never be satisfied, whatever you make. Like many said above, live below your means, and try to find happiness in things you do well. Be nice to your family. Have 1 or 2 good friends and spend time with them. Live life to the fullest. Being a millionaire really doesn't give you happiness, if that is what you are aiming at. Being jealous of the neighbor who is an investment banker living in a million dollar home is only going to bring sadness in your life. Move away and live in a different community !!!
6. I once heard Bill Gates say that the only way to become really rich is to be in a position where you make money while you are sleeping. He said that many copies of Microsoft office were sold throughtout the world while he was asleep. I do not know many docs that make money while they are sleeping.
7. $150/hr x 12=$1800/shift x 12 shifts/month =$21600/month x 12 months/year =$259200/year. Live on <$100k/year. Save the rest. Bingo, done in 10 yrs.
8. I can tell you my story – I recently turned 40, and have a plump 7 figures in my brokerage account. I've done well with investments, in particular a well timed, long investment in the markets upon the election of Pres Obama. I've worked in academic medicine, have 2 kids in private schools, but live in a modest home. My wife does work full time, but earns less than half my salary. We take 2-3 decent vacations a year (places like Hawaii, Costa Rica, Europe, etc), but generally live well within our means. We don't go out to dinner regularly, we don't go out to movies regularly. We spend lots of time at the public library, etc.
9. THINK OUTSIDE MEDICINE. Most physicians are trapped in a SINGLE realm of thinking. Here is my advice to you: 1. NARROW your practice to the 3 to 4 areas you do best. 2. Transition your practice to become less dependent on 3rd party payors (if you are an independent practitioner) and which carry the least amount of risk. 3. Team up with your spouse to start ventures outside of medicine. Demanding careers as doctors often stifle the dreams and ambitions of our spouses. 4. Invent a product. 5. Become an effective speaker and presenter. Even a semi-professional speaker will not accept an engagement below $3,000. Physicians undercharge for their value and their time as speakers and presenters. 6. Pay off your debts and live slightly BELOW your means.
10. Move to a place – if you can tolerate the lifestyle – a bit out of the way. Income will be the same or even maybe more, but overhead – your house mainly – drops. It works. Lots of well to do docs in dem dere out of the way places. But the key thing; could you tolerate the lifestyle for 10 or so years? Like you, I wanted out, so added it up, made-do with the lifestyle, saved up the money, and it worked. But don't expect that after a long hard day, you are going to be able to say, hey honey let's go jump in the car, hang out downtown, and re-invigorate ourselves. The option doesn't exist.
11. Follow the good old advise of buying what you need not what you want. I think if you cannot park your car in the garage because it is being used a storage, you are spending too much on stuff. Save 30% of your income and invest in index funds.
12. I hit that mark before 40 as a part time FP and a husband who refused to work. I have always been thrifty, always maxed out retirement plans, and started saving with my first job. Having children who studied and earned scholarships to private schools helps a lot. When you start saving at a young age you have time to compound your money, too. I have always taken nice vacations, but have not been extravagant.
13. If you earn 250K annually and pay 50K annually in taxes (if you take advantage of tax advantaged investments this is feasible), put away 100K annually and that leaves 100K to live on. After ten years this would give you $1 million, assuming zero growth in the money you put away.
14. This allows you 100K annually to live on, post tax and post investments. If you can't live on 100K annually, you are doing it wrong. This is a pipe dream for most Americans, many never earn anywhere close to this level much less have it to live on after investments and taxes.
15. I cannot fathom why, if you are 10 years from retiring, and assuming you are 50+, you are not a millionaire now. My daughter just finished residency, makes $125K working for a medical school teaching and in clinic and has begun saving at level that will have her in excess of $1 Million in 15 years assuming reasonably expectable gains. Too many docs live the high life and don't save. I have little sympathy for them. Anyone who makes a reasonable living and does not may out their 401k, SEP, Keogh, etc. is foolish. Spending too lavishly is often the reason folks find themselves where they are. I can trace a fair amount of my wealth to the fact that I have never driven anything more luxe than an Accord or Camry, and then I keep those for a long time. Those got me everywhere I needed to go. Ironically, at 66 I could easily afford a BMW or the like and may do it since my future is secure.
What do you think? Comment below.
Most doctor’s biggest expense is taxes. The way to become a millionaire in 10 years is to radically and legally reduce your taxes, and then take that savings and invest it. The vast majority of the tax code is about how to reduce your taxes. Basically, it is a big stimulus package for real estate investors, farmers, gas and oil drillers, business owners, etc.
Real Estate is probably the most accessible to most doctors. When real estate is invested in correctly, one can usually enjoy the cash flow tax free via depreciation. This paper loss also helps one avoid the new 3.8% medicare tax because even though one has money in his or her pocket from the cash flow, the paper loss from depreciation keeps this tax at bay.
Lastly, with paper assets, when it comes time to sell, one has a capital gains tax to pay. With real estate, when one desires a liquidity event, he or she can defer the tax via a 1031 exchange, or one can do a refinance (equity harvesting) which is always tax free.
All doctors should have some real estate. What stops them is the headaches of management. Most don’t realize that they can invest this way and get the tax benefits without any of the management headaches. Unfortunately, you do not get these tax benefits with REIT’s.
Good advise especially living in smaller towns with lower costs. I live in Jackson Tn where housing and many services are cheaper than many big cities. Now we don’t have the big time things to do but that is part of not spending a lot of money.
I cant agree more with the first poster regarding saving on taxes.
I just became an attending 2 months ago, my paycheck last months’ gross was approximately 28. After taxes, my take home was 16. That after my parents mortgage (which I’m not deducting), student loan advance payment (non-deductible), car/insurance (non-deductible), I’m down to 5-6.
Any suggestions of ways to mitigate the taxes on my gross earnings? Same for my student loans, and car insurance?
Love the blog and always a valuable resource.
I can’t say I like the question this Friday but I really like the answers and the dialogue. Answer #5 resonates with me, “Being a millionaire really doesn’t give you happiness, if that is what you are aiming at.”
I wonder what responses you might get by posting a question to Sermo like, “How can I be the best doctor to my patients, the best husband to my wife, the best parent to my kids, AND save all the money I need for college and retirement?” Isn’t it myopic to focus purely on a meaningless number?
I also like #3. “Live frugally, spend wisely, invest conservatively and keep working. Read The Millionaire Next Door.” Every physician should read that book, especially Chapter 5 (“Economic Outpatient Care”).
I don’t understand one thing. If you just turned 40, and your daughter just graduated from residency, how old were you when she was born? 15? 14? That’s awfully young to be a father.
Something is amiss here.
John- All 15 of those comments are from different docs and none of them are from me. I believe the one with the daughter graduating from residency says he’s 66.
OK. Thanks. That explains it.
I guess I didn’t read the preface before the question.
Now it makes sense. I thought someone was being awfully prolific before they entered college and medical school.
Neil, if you are a W2 employee, then you have a tough road ahead of you. If, however, you own a business and are self-employed, then the tax code can be your friend. Get a good tax strategist, come up with a plan and work that plan. Probably a good place to start is Tom Wheelwright’s book Tax-Free Wealth. It won’t take the place of a good advisor, but its a start.
Unfortunately I’m a W2 employee. I’m looking into whether or not my group currently employs any self-employed physicians – will keep you updated.
Thanks for the response.
I would add that current generation; i.e. those graduating 2010+ will have even more challenging time. For example my wife and I have $430k at 6.8% (all are gov loans; interest rate is fixed for life of loan). With 10yr repayment its $4,948/mo.
I would like to know how much student loans that recently graduated resident has.
The most ridiculous thing I’ve seen is an intern buying a $70k Audi A7.
A few pointers to add:
1. For those in training, realize that your perception of what your life style SHOULD BE for a given income is probable off by a factor of 50k or so. I make around 300k, drive a nice car, live in a nice house, etc, etc and I’m a 3/4 millionaire in my mid 30s. If you’d asked me in fellowship I’d think I could afford this lifestyle on 1/2 that. However, taxes, retirement, etc, etc add up.
2. Kids are pricey. With day care college funds, etc, etc, you’re looking at at least 20k per year that you didn’t think about. They are worth it, but just keep that in mind.
3. Don’t target numbers, target goals. I’m pretty happy from a financial standpoint. I can buy what I want, don’t worry about the numbers, etc. However, when I look at my finances now my goals are not to reach a certain number, but to save for certain goals.
4. If you have 2 high income people, try and live off the one salary and bank the other
5. Enjoy your work. If your work is drugery try and find something else. I find many docs who are dissatisfied with their way view their job as a “job” instead of a part of their lives.
6. Recognize with savings on taxes you are effectively living on 1/2 of your gross. i.e. I put away about 25% of my money between short term savings, long term savings, retirement, college funds. Figure another quarter to the taxman and I’m effectively living on 1/2 my salary.
7. Automate savings. Set up auto transfers to retirement, mutual fund accounts, 529s, savings accounts, to get the money into savings before you can spend it.
Excellent article and some great comments. I give a lecture on personal finance to residents and mention most of these points. I would add that one needs to protect their assets. Insurance- property, umbrella liability, health, disability, life are all “must haves”. The comments about being a W-2 are all very valid. I can’t understand why any physician wants to be an employee. It isn’t that hard to be incorporated and employed by that corporation. The accounting expense is well worth it!
i just found your site. Great articles. It seems you and I share the same belief that at the core people know what they have to do to be rich, spend less than you earn, just like they know how to lose weight but few want to put in the effort. I actually have a post on my site http://www.yourwealtheffect.com titled “more education alone won’t make you richer or skinnier”. Keep up the good work.
I couldn’t agree more on #5. We should strive to be happy on whatever we do. I am not saying that we should indulge ourselves with Lamborghini but rewarding ourselves with modest things is not a bad idea. It may be me but I would rather buy a BMW when I was in my mid 30s rather than in my 60s. Who knows what the future holds anyway…
This is hilarious! What is the point of being a millionaire if you can’t enjoy it? Keep your million in retirement. I’ll take my BMW now!
agreed. Money are to be enjoyed. Live frugally your whole life so that you may afford a BMW at age 66, seems like a waste
First, commenting on here from an iPhone is a huge pain in the ass.
Second, everyone should Google “medium chill” and read both parts of that OPED.
Third, (following up the medium chill)
Why does being a millionaire automatically mean that I’m gonna spend the money on myself? Recall the last time you bought someone less fortunate some gift or gave someone some food. I bet you that felt way better than riding in a 5-series.
Fourth, if you’re a millionaire it is your choice to do what you want. That’s not to say that you can’t make a bad choice. I – personally – am of the belief that happiness is relative and so long as you have the basics to keep you and your family healthy, your wealth should be used to better others and help others achieve the medium chill. I’ve driven my mom’s 5-Series and while it’s definitely a VERY nice drive, I don’t need it. If I had the choice to help someone else with the extra $$ vs. please myself, I’d go with help someone else. If you have the power and can stay happy, earn the extra dough.
I think we are very rich because from residency we lived on only one salary. We spend yesterday’s money today and save today’s money for future. After I started work we started saving 80% all my income. I hade good investment decisions. Ten years later we have investment income four times my salary and now we don’t save any thing from my pay. We still compounding investment income. Paid up house, cars and lake house. I lived very frugal life till I was 40. But now life is great.
Awesome! Thanks for sharing your story. Would have been great for inclusion in the book.
Of course, that task is easier said than done. Practically everyone wants to become a millionaire and live the American dream, but the process of how to become a millionaire eludes most people.
[Ad hominem attack deleted]