By Dr. James M. Dahle, WCI Founder

Occasionally, I meet a brand new doctor who is in a bad place financially. A typical situation usually involves a combination of a relatively low-paying job in an expensive area and a large student loan burden. I usually try to provide a combination of empathy for a difficult situation and merciless tough love. I think part of the issue is that many of these doctors have not yet recognized their reality.

“But you didn't owe $500,000 when you came out of medical school!” they say.

This is true, but I did owe four years to an employer who paid me $120,000 per year, assigned me 1.5 FTE worth of shifts, and deployed me to war zones all over the planet. In reality, the difference between what I was paid as a military doc ($120,000) and what the average emergency physician at the time was making ($225,000-$250,000) added up to about $500,000 over those four years. Yes, I know what it is like to live not at all like a doctor for a few years. It was our reality. We recognized it, and we dealt with it. We came out of the military four years later with no student loans and a net worth of about $340,000. Rich? Not yet. But we knew we were on the pathway to get there.

“But the post-COVID job market really sucks and APCs are taking all of our jobs,” they say.

Yes, there are lots of stresses on the job market. There are a lot of low-paying jobs out there, and I suppose it stands to reason that there will be a doctor in most of them. However, the reality is that the intraspecialty variation in pay is far more than the difference between the average pay of a preventive medicine doc or a pediatrician and a plastic surgeon or orthopedist. There are emergency docs making $140,000 a year and emergency docs making $600,000 a year. There are pediatricians making $80,000 a year and pediatricians making $900,000 a year. There are orthopedists making $250,000 a year and orthopedists making $2.5 million dollars a year.

Are you a less-than-average doc? Then why are you working for less than average? Why can't you be earning more than average in your specialty? Is your job/situation so great right now that it is worth earning so much less? Recognize the reality that you have a crappy job. That's OK. Lots of us (including me) had a crappy job for a while. As you continue to work it to make your payments and put food on the table, be looking for a better one. I moonlighted. When you have a crummy-paying job, it doesn't take much extra to make a big difference. And as soon as I could, I got a better job. If you're in a crummy job, you should be job hunting. As soon as you line up that better job, you should take it. Remember that might be joining a partnership or even hanging out your own shingle.


I Don't Want to Live Like a Resident!

Waaaaah! Waaaah! Let me call the wambulance for you. It doesn't matter what you want. The truth is you made a decision about how long you would live like a resident eight or 10 years ago when you decided to attend that expensive medical school and borrow the entire cost of attendance. Now it's time to pay the piper. If you were lucky enough to get into a cheap school or get some family help or whatever, maybe you can get away with living like a resident for just two years. If not, maybe this will be a four- or five-year process for you.

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But what are we really talking about here? A resident makes about $60,000 a year, amazingly about the same amount as the median American household. Nobody is asking you to reuse your Ziploc bags and paper towels here. If you want to buy a home, it'll have to be an average home. If you want to go on vacation, you'll need to drive or stay with family when you get there. Just like the rest of America. You can't get a NetJets card, a Tesla, bottle service, or an $800,000 home. I'm sorry. You chose this lifestyle a decade ago. The good news? Unlike the rest of America, you only have to live like this temporarily.


It Doesn't Pencil Out

The truth is that your

  • Income,
  • Student Loan Plan,
  • Lifestyle, and
  • House

must all work together. I can't tell you that you can't do one of those things without looking at all of the others. But you can't take out the maximum student loan amount and then take a crummy paying job, buy a big house, and wonder why you can't pay off your student loans before your hair goes gray. If you have above-average debt, you need an above-average paying job and a below-average house. If that job pays less than average, it had darn well better qualify for Public Service Loan Forgiveness. You don't get a pass on math. It must pencil out. If it doesn't, you need to keep penciling until it does. Adjust the student loan plan. Change jobs. Cut back on the lifestyle. Dial back the house or even rent a rinky-dink apartment for a little bit. Maybe you really can't get those loans paid off in five years. Maybe it really will take you seven so you can get the house you need. The point is you need to keep massaging the four of those items until the plan works. Then, the stress goes away; because then all you have to do is follow the plan.


Putting in Some Numbers

Let's make this more real. Let's say there is a doctor who owes $500,000, makes $150,000 at a non-PSLF qualifying job, wants to buy an $800,000 house ($44,000 a year mortgage), and wants to live a lifestyle of $120,000 a year. That doesn't pencil out. Not even close. Let's massage some stuff until it does.

Income: This doc starts the $150,000 job but is looking for a new job. Eventually, a new job paying $210,000 is found, and it even qualifies for PSLF.

recognizing reality

Student Loan Plan: This doc's original plan was to pay off the loans, but now with a PSLF qualifying job, the plan changes to PSLF. Luckily, the doc made lots of little IDR payments in residency and that first year out and had not yet refinanced the federal loans. Payments are now about $20,000 a year for the next seven years; then the rest is forgiven.

Lifestyle: The doc decides that maybe a $10,000 a month lifestyle wasn't realistic, so they dial it back to more of a residency-plus lifestyle at $6,500 a month or $78,000 for the year.

House: The doc has a stable personal and professional situation now, and so buys a house. It's not as nice as many of the doc's residency classmates, but it only cost $280,000 and has a $1,300 mortgage—or about 20% of the doc's living budget.

If we assume the doc pays $50,000 in taxes, spends $78,000, and puts $20,000 a year toward the student loans, that leaves about $62,000. In the first year, the doc uses that to cover some closing costs on the house, pay off some credit cards and a car loan, and buff up the emergency fund. After that, most of it goes toward retirement savings, although admittedly there is a little lifestyle creep going on.

This doctor will now be financially successful. The reason? The doc recognized reality. No head in the sand here. No “hoping” it would all work out when it obviously wouldn't. The doctor took concrete steps (got a new job, got a new student loan plan, started budgeting, and dialed back the lifestyle moderately and the house size severely) to force it to work out.

If you find that you are in a bad place financially, recognize reality and start “penciling” until everything pencils out. It will probably require you to make some hard decisions and do some difficult things that not all of your peers and colleagues have to do. But it will work.

What do you think? What advice do you give to new doctors in a bad financial situation? Did it take you a while to recognize reality? Comment below!