[Editor's Note: If you’re wondering about physician burnout and how you can prevent it, Dr. Dike Drummond and Dr. Jim Dahle hosted a free training webinar on how to fight back against physician burnout. You’ll learn how to recognize burnout, how to build a more ideal practice, and how to create solid boundaries between work and home. Watch the webinar replay here and learn about the tools you need to fight burnout. It’s vital information that every high earner should know!]
By Dr. James M. Dahle, WCI Founder
I get plenty of resistance and pushback from docs because of what I teach about personal finance and investment, whether it's driving Teslas, buying whole life insurance, speculating in crypto, or timing the market.
However, the one that always surprises me the most is the reaction of some to four simple words:
Live Like a Resident
Take a look at a recent thread on Facebook. And no, not in some random Facebook thread. This is in The White Coat Investors Facebook Group. Check it out:
Now, that thread was a lot of fun. A lot of people were just joking around. Some actually tried to give serious answers to what probably wasn't a very serious question. But there were enough in there to demonstrate the very real pushback I see that it's worth talking about.
Live Like a Resident Is Temporary
First, let's discuss just for a minute what I'm talking about when I say live like a resident. I'm saying the most reliable path for physicians to pay off their debt and build wealth is to live like a resident for 2-5 years after finishing training. It works every single time. It is highly reliable. The greatest wealth-building tool for physicians is their income, and living like a resident unlocks that income so that it can be used to build wealth instead of funding consumption.
If you spend $50,000 on your lifestyle and earn $250,000 gross, you should have something like $150,000 to put toward building wealth each year, whether that is paying off debt, maxing out retirement accounts, buying real estate, speculating on the latest meme stock, or saving up a down payment. That's more than $12,000 a month. All while enjoying the average American household income.
However, note what I said, especially the part about 2-5 years. Not 10. Not 20. Not an entire career. If you're in a pretty good place financially, two years is plenty. If you're in a bad way, five years is still plenty. We're talking about your 30s (your 20s are already gone), not your 40s, 50s, 60s, 70s, or 80s. Once the live-like-a-resident period is over, your schooling should be paid for. That means 20% of your gross income should go toward retirement and YOU SHOULD SPEND THE REST on whatever makes you happy. Maybe some of it goes to college savings or charity or whatever, but you can have a pretty nice life on 80% of a physician's income.
More information here:
When Is It OK to Start ‘Enjoying’ Your Money?
Live Like a Resident IS the Answer
What too many critics don't understand is that living like a resident is the answer to many of the most important financial questions that doctors have.
Q. A pre-med student asks, “Does it still make financial sense to go to medical school and become a doctor?”
A. Yes, if you will live like a resident for 2-5 years after residency, you can easily pay off those student loans.
Q. A medical student asks, “Can I go into preventive medicine and still pay off my $300,000 debt?”
A. Yes, if you will live like a resident (or go for PSLF).
Q. A new attending discovers they hate medicine and asks, “How can I retire as early as possible?
A. Live like a resident.
Q. A senior resident realizes she wants to start a family and wants to cut back for a few years to raise the children. How can she make that work financially given her student loan burden?
A. Live like a resident.
Q. A new attending wants to know how he can max out his retirement accounts and pay off his student loans at the same time.
A. Live like a resident.
Q. A new doc wants to build a real estate empire and become massively wealthy but wonders, “Where can I get the cash to get started?”
A. Live like a resident.
Q. A tech-savvy doc sees crypto assets as the wave of the future and wants to get involved now. How can they get a meaningful amount invested ASAP?
A. Live like a resident.
Q. A dentist wants to move from being an associate to owning their own practice. How can they get the cash to pay for it?
A. Live like a resident.
Q. A senior resident dreams of driving a Lamborghini Aventador. What is the smartest way for them to get one within five years?
A. Live like a resident.
Q. A graduating doctor already has three kids and she doesn't want them to have the same student loan burden she had. How can she save up enough for them before they're 18 to go to Ivy League undergraduate schools and professional schools?
A. Live like a resident.
It doesn't matter how you want to invest or what your pathway to wealth will be. Whether it is index funds, entrepreneurship, real estate, or speculation, having a bunch of extra cash from living like a resident will facilitate it.
Nobody Actually Lives Like a Resident
I'm going to let you in on a little secret. Ready? Here it is. Nobody actually lives like a resident. Katie and I didn't even live like a resident. It's a principle, not an exact prescription. Most financially savvy docs give themselves a little raise. Heck, give yourself a 50% raise. That would be huge in corporate America. Go ahead. Live on $75,o00 instead of $50,000 for a few years. It'll still work for all but those with the very highest debt-to-income ratios.
More information here:
From Fourth Year to the Real World
You Can Do What You Want
Now, we get to where the rubber hits the road. You're going to stop reading, and you'll have to make some decisions. If you live like a resident or if you don't, it's not going to impact me one bit. I really don't care what you do.
If you make the sacrifice, you will reap the reward. If you don't, you won't. It's really that simple. The decision is yours. But if you choose to grow into your attending income instantaneously and then find yourself at mid-career working 1.5 FTEs and feeling burnt out with two big mortgages and two big car payments hanging over your head and still owing six figures in student loans, don't come crying to me. Choices and consequences. They're two ends of the same stick. When you pick up one end, you're going to get what is on the other end. There's just no way around it.
As for my family, we chose to live like a resident (or close enough to it), and it made all the difference. We became millionaires seven years out of residency (on an average income of $180,000), and we had massive financial freedom in our 40s that will allow us to live our ideal lives for the next 50ish years.
Now, it's your call. What are you going to do?
What do you think? Why do so many people think wealth-building requires endless sacrifice and never being able to enjoy the fruits of your labor? Why do so few people realize that the “Live Like a Resident” period is supposed to be temporary? Comment below!
I wrote about this recently from the Canadian standpoint. When you account for interest payments, you can live like the average Canadian as a resident. I think that one of the challenges is that we delay gratification for so long during training and think that each next stage is going to be the final one where we’ve “made it”. So, I think that your point about giving yourself some kind of increased spending is important. We all do it. The key that separates those who get clobbered doing that and those who don’t is the hangover. I bought $10K of weight equipment with my first attending paycheck. No ongoing maintenance costs. The people who buy a really expensive house (common in Canada with our housing market) or luxury car right out of the gates have more ongoing costs. That baseline makes it tough when other things happen (they always do).
-LD
Hi LD! Thx for your real-life mentorship, despite market downturns have socked away 500k USD NW in two years since training and just getting started. Hope you are well. -a former trainee
Hi LD! Thx for your real-life mentorship, despite market downturns have socked away 500k USD NW in two years since training and just getting started. Hope you are well. -a former trainee
I love your basis for early FI. For myself, early FI is not quit working entirely. FI allows you to have more leverage to say NO as time goes on. What if there is deterioration in the whole medicine in the next 20 yrs? What if you were burned out? What if your stamina drains out? What if you can not live along with the micromanagement from your group or hospital? If you do not have money by then , you have to be a slave.
Either that or improve income. It seems like someone doesn’t need to live like a resident if they’re willing to make an extra $100k above their speciality average by working more or living in a smaller town. They still have to live below their means, though. You can’t live in New York / San Francisco, work in a low pay or part time job, have a stay at home spouse, live in a luxury house, and still get ahead.
Amen to that.
https://www.whitecoatinvestor.com/you-cant-do-it-all-wrong/
I agree with Loonie Doctor. Physicians have sacrificed for so long when they finally made it, it can feel like a slap in the face to be told that they should continue to “live like a resident,” even though that is the prudent financial move.
Ultimately, the financial principles WCI discusses are great ones. The main issue here is the messaging. No one wants to be told to live like a resident (a lifestyle of being perpetually tired, underpaid, under-appreciated etc). Some people will get the true message, nicely explained in this post, which is to significantly live below your means for a short period of time.
As a side note, I’ve been a fan of the teachings here before it was even a blog (Bogleheads forum). I seemed to get plugged in at the right time because this advice has been truly life changing as I’ve progressed through school, residency and now almost 5 years post training. One needs to have the right mindset to take this advice to heart. Not everyone will have that mindset. Please keep up the good work.
I agree it does require some explanation. Never really thought about that negative connotation to being a resident. My residency was actually my favorite job that I ever had. Not that I’d want to do it again or anything, but I do remember it fondly even if I was broke and tired.
Preach on Jim awesome post! As a resident I would shamelessly grab food after a hospital meeting, sneak into OB grand rounds Wednesday, internal medicine grand rounds Thursday (reminder I’m a neurologist) and bring that food home to have for dinner later on. Living like a resident like I did might have been a little out of place when I became an attending as there seems to be a higher social standard. Like mentioned above the connotation of being a resident sort of implies you are allowed to scrap for food like I did, almost similar connotation to like a homeless man scraping for food. But as an attending it might have been less socially acceptable to bring a tray of food after a meeting onto the city bus back to my apartment. I remember the head of my neurology department had caught me taking a tray of food after a meeting that he was attending, and he admired my tenacity. I wonder if I was an attending he would’ve fired me!
Again, great article but I think you’ve hit on something where there is a social dynamic where when a resident becomes an attending they have crossed a huge social standard that includes spending more and acting like the “rich” doctor despite maybe only being a year or two out from being a poor resident.
For new attendings who are in work settings that are production based, the better advice would be “to WORK like a resident.”
https://ofdollarsanddata.com/its-time-to-work/
Yea, if you work and spend like a resident you can really get ahead. But there is the burnout thing…
I got diagnosed with cancer as a new attending second year in. Aggressively paying off my loans and putting money into my 401k was a huge mistake. Why did I work so hard to make 300k just to live like I make 70k then die soon after?
All the comments about living and enjoying your life are right.
I’m sorry to hear about your diagnosis.
However, if everyone did their financial planning with the assumption that they would get fatal cancer in their 30s we would have a ton of very poor 60 somethings.
Obviously if someone knew they were going to die of cancer in their early 30s they wouldn’t spend their 20s in medical school and residency. But hindsight is always 20/20.
You are right, no one should plan to have a catastrophe early on. However, I loved medical school and residency and still would have done it, as all my most meaningful relationships are through these experiences. I just wish I would have just paid minimums on student loans and enjoyed my money instead of chasing FIRE. Very jealous of all my coworkers in my group with all their nice cars, vacations, and partying. There is something to be said about living in the here and now. Telling someone to “live like a resident” just feels like an extremist Dave Ramsey-esque eat rice and beans only austere lifestyle. I know thats not what you truly mean, but that’s the message I feel some people get.
Anyways, I am just bitter about my whole situation. I still am glad I followed your advice about disability etc.
I am going to spend lavishly now. If I die, then I will enjoy what I have. If I live, then I will be so grateful to be alive I don’t care that I will have to work deep into advanced age.
I agree some people are getting the wrong message, but I’m doing the best I can. The truth is that most new attendings NEED to be told to spend less. Most of them 5 or 10 years into their career with two Tesla loans, a massive mortgage, still paying on student loans, and without any real wealth (or choices) really wish they would have lived like a resident for a bit because it would be really hard to go back and do that now.
What a difficult situation you are in! Even if you take all of the financial stuff away, it’s still a very difficult situation. May you find peace and joy in what time remains to you, whether that is 60 days or 60 years. May that peace wipe out the bitterness that is the natural feeling all of us have when we get news like you have received.
There’s a book out called “4,000 weeks”, which is a reference to the length of an average life. As I count up my weeks, I’ve already blown through 2,500 of them. Thinking about our own deaths does give a certain urge to make the most of our time on this sphere. A J.R.R. Tolkien/Gandalf famously said:
Please keep me updated on your situation as you move forward.
It’s interesting the emphasis on saving and living frugally so you can retire early and enjoy those savings.
But what if you die?
Suffer a catastrophic accident that cripples you and makes it impossible to enjoy all those things you pushed aside in your mega savings quest?
What if your identity is stolen, and all your savings gone?
I think living like a resident a year or two to pay off those student loans is great
Then have a savings plan, live in the moment, indulge in some expensive things that bring you immense joy, still live below your means, but don’t put off life in the name of building wealth
KA
Amen. Live like a resident isn’t a permanent life plan.
“no one really lives like a resident” is not actually true – when i became an attending i actually went the other direction – i lived (and still live) like a pre-med student. understanding how much work i put in to make that dollar (even though i have many more dollars) let me appreciate its value more and made life deflation easy. bringing tupperware to conference lunches, not adding guac to my chipotle burrito, picking up every penny on the ground will allow me to sprint towards financial independence.
That “no one” was not meant to be taken literally. But you really need to spend more on guacamole.
See this is the dilemma I have. Most docs need to be told to save more money and don’t read The White Coat Investor. Many regular White Coat Investor readers need to be told to spend more money but do read the stuff I write for those other docs here on WCI. This post is NOT for you. Here are the posts for you:
https://www.whitecoatinvestor.com/loosening-the-purse-strings/
https://www.whitecoatinvestor.com/8-ways-to-spend-more-money/
https://www.whitecoatinvestor.com/helping-natural-savers-to-spend-during-retirement/
https://www.whitecoatinvestor.com/enjoy-your-money/
https://www.whitecoatinvestor.com/spend-your-money-on-what-makes-you-happy/