Today we're going to talk about most docs. In Medicine, it is usually good to not be an oddball. You don't want to be the first or the last to change your practice style. But that is not the case when it comes to your finances. Be an early adopter. What do most docs do? This is what most docs do:
Most docs borrow more than they need in medical school.
Most docs start saving for retirement too late.
Most docs buy too much house.
Most docs don't save enough money.
Most docs carry credit card balances.
Most docs get bad advice.
Most docs are too comfortable with debt.
Most docs pay too much for advice.
Most docs have the wrong life insurance policy, if they have one at all.
Most docs don't have the ideal disability policy for their gender, specialty, state, and health status.
Most docs don't have a written investing policy statement.
Most docs haven't done any real estate planning.
Most docs don't manage their student loans the right way.
Most docs don't refinance their loans as soon as they should.
Most docs carry their student loans too far into their careers.
Most docs buy cars on credit.
Most docs buy second houses, vacations, private school tuition, and college educations they can't afford.
Most docs work more hours per day than they'd like more days per week than they'd like for more years than they'd like.
Most docs don't negotiate contracts, and those that do negotiate from a position of weakness.
Most docs don't max out their available retirement accounts.
Most docs don't even know what their available retirement accounts are, much less what the fees, available investments, and distribution options are.
Most docs don't rappel off a tarp full of sand, but these two do!
Most docs don't meet with their partner regularly to discuss finances.
Most docs have investments that cost too much.
Most docs have an inappropriate asset allocation.
Most docs get suckered into a bad investment.
Most docs buy a house before they should.
Most docs are embarrassed to talk about money.
Most docs have to worry about money after they retire or end up not being able to spend as much as they would like.
Don't Be “Most docs.”
You can do this. We can help.
What do you think? What else do most docs do that they shouldn't? Comment below!
One person I know is a resident in one of the lowest-paid specialties, is about 350k in debt (or more), and is now leasing a 43k a year luxury suv.
Another resident in a similarly-low paid specialty but about 250k debt has a similarly expensive car.
Others in above-average income specialties finance international trips with credit cards. Crazy.
Good post. As a doctor closer to retirement than the beginning of my career, I can only agree with all the points made (sadly). I “woke up” about 5 years ago and I can tell you it’s possible to recover from these mistakes. I will retire poorer than I would have if I knew about these stumbling blocks, and instead made a financial plan for my life that I followed (doing that now). Getting my debt to zero while maximizing my retirement funding finally. Good thing I actually like my job but not working to the day I die is my top goal. Sleeping in some days, traveling, and enjoying time with my family and life outside of work has made me a happier and better person.
I agree with most all of these. I see it every day in my co-workers and residents. I have one resident who is going to be about 700K in debt by the time he finishes, and has not registered for PSLF (what I recommended to him) or done the private resident refinancing programs to lower the impact.
I will say I am guilty of the car loan, and know that it is not ideal. Wouldn’t ever argue that it is a great idea. It is an intentional faux pas. And I don’t recommend it to anyone else.
I avoid almost all the others, though.
I do think that there is room in there to make a few mistakes if you a high earner and a big saver otherwise. You don’t have to get all of this list right to be successful, but you do have to get the vast majority of it right to be successful (in particular, to be successful quickly).
Thanks for the run down from some classic posts!
TPP
For sure, a physician income will bail you out of a lot of mistakes. Not all mistakes, but a whole lot of them.
Since we’re disclosing some of our stupid doctor mistakes:
1. We bought too much house right after finishing my fellowship. It was the late 90s in the Midwest, and we paid $320k for a 5000 sq ft house on 2 acres. It was a great house, but we decided to move just 4 years later. Had trouble selling, and it took over 12 months to get $325k.
2. To make matters worse, we bought another house on the West Coast. Having two mortgages during that year was miserable! I vowed never to have two mortgages again.
Your problem wasn’t 2 mortgages….you just bought an illiquid asset in a rural area and decided to move relatively quickly. What did you expect?
Make certain your postmortem is accurate before writing off an investment strategy that could actually work in different circumstances.
JustSayin ….
What did you expect? I didn’t expect to be moving as quickly as I did. That’s what I didn’t expect. I made a financial mistake early on in my career, and fortunately, I’ve been able to learn from it. I understand the concept and benefit of a mortgage, if it is done for the purpose of purchasing a primary residence. I even understand using multiple mortgages if they’re used for the purchase of income-producing properties. Never again, will I use a second mortgage to purchase a second non-incoming producing property. I paid cash for the enjoyment of my beach property.
JustSayin …
https://www.npr.org/2010/12/18/132160770/its-rude-its-crude-its-stupid-just-sayin
‘Financial mistake’ is judged by hindsight – don’t be too hard on yourself. Interestingly if it took 12 months to sell – you probably paid top dollar for the place. Even rural areas clear inventory faster than a year
I’d be mad at your realtor who ‘sold you’ the house rather than got you a good below market deal
Most of the above recommendations made are based on past financial events – stock market trends, real estate prices and interest rate fluctuations. Hindsight is helpful, but driving a car by using just the rear view mirror is a dangerous proposition.
Notice it says ‘Most’ not ‘All docs’ because some docs break these ‘rules’ and still do quite well
Forget the Dunning Kruger effect- trust that you can teach yourself anything – learn and prosper.
Find one thing that works and work it until it doesn’t
JustSayin’ (one can google anything and find a hater)
It’s quite an indictment of physician behavior, but unfortunately, I think it is on target. I thought of examples of doctors I know as I read each item on the list.
I’m never more proud to be abnormal.
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I read this a couple years ago and shared it with all of my siblings. Pretty sure none of them read it.
Heard a radio show where a financial advisor said you need NO ONE to pick stock/bond investments
ITS TOO SIMPLE but an advisor can make sure u r in the lowest cost vehicles, make sure youi rebalance, use tax efficient vehicles, keep your behavior in check, etc etc etc
Paying .25% might do most a big benefit especially in the beginning; then you will know enough to DIY going forward
You could title this “Most Americans.” Docs aren’t a whole lot different than anyone else. We just add an extra zero to everything.
Dr. Cory S. Fawcett
Prescription for Financial Success
Amen.
Thankfully not MOST docs, but too many docs spend less time choosing and working to keep the right spouse than they did and do with their initial and continuing education. As we always say, prenup prenup prenup! No, JK, as we always say one house, one spouse. Cheaper to keep her, and if you foresee a life with serial trophy partners why not just stay single? Doctors are like Bruce Wayne, we should always be able to find a dinner date. Especially if we don’t have alimony and child support payments limiting our restaurant choices.
Cheaper to keep her OR him.
Most docs care too much about what other people think. Being a people pleaser is a common trait that is fostered on the road to a medical career. However, marching to your own drum, not only in finance, but in doing the things in life that you feel important is great. For example, I love travelling in a motorhome with my wife, two kids, two large dogs, and a guinea pig. I also enjoy making wacky things in my workshop with my kids, like an insulated travel habitat for said guinea pig.
I have made some of the above mistakes but mostly I did not. This is a great list to increase awareness.
Most docs think that because they are good at medicine, they are good at all other facets of life.
I have met several colleagues where the Dunning-Kruger effect is strong within them.
Hey bro could have saved us by including a link …thanks for being fancy – justSayin
For the common folk on the page – Dunning-Kruger wiki link below
https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
Thanks for showing off GK
JustSayin’
Happy to be an outlier.
I’ve been guilty of buying more house than needed and not having an airtight asset protection plan, but in most ways, I’m not like most docs. Thank goodness.
Cheers!
-PoF
Glad I am not the only one who has made one or two of these mistakes.
TPP
Sometimes I wonder if I’m too averse to debt. I feel like I would have more opportunities if I could become accustomed to things like mortgages, leverage etc. The stock market is pretty much the only way to invest without debt, and I wonder if I should diversify.
WCI likely to agree…Leverage works both ways!
I have done some of these. I also happen to have read your book which taught many of us well.
I’ve been lucky to avoid most but not all of the Don’ts. I mostly have to thank my parents who grew up during the WW2 era. No debt except for an affordable mortgage, pay off the credit card every month, lightly used cars bought with cash, no load mutual funds even before Vanguard existed. I’m glad some of that financial sensibility rubbed off while I was growing up.
Too many docs and other highly educated individuals FOOLISHLY think they can beat the unbeatable stock mkt
Sounds like someone lost money in the stock market…Thanks for the confession….Just Sayin….
Sounds like someone thinks they’re pithy and clever……just saying……
Not sure what your original comment means – there are two sides to every trade – so not sure what you mean by unbeatable. I buy from a seller who either made money or not based on price I pay. Same goes for me in a trade.
See GK’s Dunning Kruger effect above
JustSayin’
https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
I would also like to add that:
Most docs are TOO RISK AVERSE and often play it too safely, which may inhibit entrepreneurial pursuits
Most docs are PERFECTIONISTS who fear failure, which inhibits their potential for growth
Luckily, in many aspects of life, I’m not like “most docs”
I would agree. A career in medicine is a “safe” choice for most, especially if we minimize, eliminate, or never initiate student debt, housing debt, CC and auto debt. This leads to a comfortable, but not extravagant, life for the doc and his/her family. (I realize the definitions of comfortable and extravagant are all relative.)
Most never initiate an income-producing side gig, and most will never start their own business. Having been in clinical practice for over 20 years, I have always worked for academic centers or large health systems. In the last few years, however, I’ve been part of a startup company, and that has added an exciting new dimension to my work.
It’s sad but true that practicing sound financial moves throughout your career will make you an outlier and a weirdo. Most of my technicians have better phones and cars than I do, which is perfectly fine by me.
Most of these issues that afflict the doctor of masses come down to lifestyle inflation. That jump from a student life to the doctor life is just too much to handle for some docs. Keep lifestyle inflation in check and most financial problems can be avoided.
An easy way I like to counsel colleagues is that whenever you get a raise or bonus of any kind, commit to spending half of it and saving the other half. Do this and you’ll never have to worry about money. But as this post shows, most docs don’t listen.
Was guilty of many of the above- from bad investments to unnecessary life insurance policies to not being financially literate and the consequences as a result.
Thanks to WCI and all the merry contributors here on the forum/blogs, I’m down to being guilty of just a few (still need to address asset allocation better, get rid of the folks with poor advice in a diplomatic way, and make better investment choices for the future).
This post is a reminder to me as to how far I’ve come along in the last 5 years! Thanks, Jim.
Enjoyed the post WCI
Glad I’m not most docs…to have such an opportunity and foul it up with silly mistakes…tisk tisk
And most docs – work hard but not SMART!
I’ve used this example before, but cut back your FTE and moonlight for higher hourly rate (bet that statement gets a bunch of excuse makers to comment).
Life is what you make of it- Work SMART – WORK HARD and enjoy
Just Sayin…
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