By Dr. Jim Dahle, WCI Founder
Katie and I have been very fortunate the last few years, mostly due to the financial success of The White Coat Investor, LLC. This has put us in a financial situation we never expected to be in. Now don't get me wrong. We always expected to be financially successful. We always expected to eventually be multi-millionaires. I went to medical school and expected to have a decent income as a result. I started learning about personal finance and investing in residency and realized that becoming wealthy on that decent income wasn't really particularly difficult. Sure, we became wealthy a little faster than we expected to for various reasons. But honestly, back in 2010 when we were deciding whether to get out of the military or stay in, we ran our projections with an income of $225,000 per year, which was the average emergency physician income at the time and I assumed I would never make any more money than that. We certainly NEVER expected to have a seven-figure income.
As a relatively new seven-figure-earner, I'd like to give those who have not yet had a seven-figure income a look behind the scenes at what it is really like. I thought for a long time about whether or not to run this post after writing it, as I'm sure the subject will attract a certain amount of hate. I hope it doesn't come across as a humblebrag, but since blog readers already know what WCI, LLC makes due to our transparency efforts, and since that figure dwarfs an emergency physician salary, our income shouldn't be surprising to anyone. This entire website is dedicated to solving “first world problems” already. If you don't like reading about first world problems, you're in the wrong place. I hope you find the post interesting and perhaps even useful. We've made a habit over the years of writing about the financial issues we personally face and figured why stop now even if this issue is admittedly fairly rare for our target audience.
Survey of the Land
There aren't very many Americans with a seven-figure income, even as the number of millionaires increases each year (remember a millionaire has a seven-figure net worth- what she owns minus what she owes.) In fact, the 1% starts at something around $350-400,000/year. Half of the 1% makes less than $500,000 a year and more than 3/4 of the 1% make less than $1 Million a year. It's important to realize that when you look at the 1% all together that you're lumping doctors and billionaires together, and there is a dramatic difference between a $1 Million income and a $100 Million income. One has a $50,000 ski boat on a trailer in the driveway and the other has a $10 Million yacht.
Inflation Is Part of the Story
The truth of the matter is that eventually, at some point in the future, most Americans are going to have a seven-figure income. Just like most good savers who invest wisely can retire as millionaires these days even with average earnings, inflation changes things over decades. The image of a millionaire in our public consciousness comes from the gilded age of the 1920s (like the guy on the Monopoly game box.) Well, a millionaire in 1920 is the equivalent of a decamillionaire now. At 3%/year inflation, 100 years from now, even with no increase in our productivity or standard of living, the average American household income of $55,000 will actually be $1 Million. So if your idea of a seven-figure income is rooted somewhere in the past, well, it's not quite the same thing. It's still a ton of money, of course, but maybe not as much as you think.
We Weren't Here for Our Entire Careers
Most of us seven-figure earners are first-generation rich. We weren't here for our entire careers, much less our entire lives. Many of us aren't even wealthy yet. Remember that wealth is a net worth, not an income. We're often HENRYs- High Earner, Not Rich Yet. Thanks to a heavy and increasing student loan burden for professional school, sometimes we even have a negative net worth and often we have a net worth less than our income! Much of the time, we're not even financially independent, meaning that if we stopped working we couldn't maintain our standard of living for long.
In my family's case, we've been in every single tax bracket at one time or another. We know what it is like to live on $20K because we've done it. For years. Same for $50K and $100K. We didn't grow up with a silver spoon in our mouths. Going to McDonalds was a treat, and it didn't happen often. Even once we started working, we weren't making a million a year. In my experience, that's pretty typical of most seven-figure earners.
What Do We Do for a Living?
The typical seven-figure earner is a business owner, although if they are an employee they likely work in finance, in real estate, in the C-suite (CEO, COO, CFO), or as a particularly successful specialist physician, dental subspecialist, or attorney (probably a dual professional couple). We generally work far more than a forty hour work week and are no strangers to working evenings and weekends.
We Don't Expect to Be Here Forever
Just as we haven't been making this much money our entire careers, most of us don't expect to be here forever. It's a little bit like a professional athlete or artist. Yes, the income is high, but the career can be very short. The average career in the NFL is three years. Three years of the minimum player income of $600,000 doesn't last very long, especially after-tax. Even a professional cyclist or other endurance athlete is washed up by forty. Other seven-figure earners may only be making “the big money” for 5 or 10 years. You get burned out. You're hitting retirement age. The business climate changes and the business becomes less profitable, fails, or is purchased. Something happens, and that high income goes away. So for many of us, there is very much a sense of “make hay while the sun shines” and trying to build real wealth as quickly as possible for when the income goes away.
We Pay a Lot of Taxes
We pay a lot of taxes. Our government pays for itself primarily with income taxes because we tax income, not wealth (except at death with the estate tax, which applies to even fewer people after the recent tax law change). Spending is somewhat taxed in most states, but for a high earner, that is relatively minor compared to the income tax. We understand and are okay with the fact that our tax system is progressive, meaning the more income you have, not only the more absolute money you pay, but the higher percentage of your income you pay. We get frustrated that many Americans don't understand how the tax system really works. Far too many people think they pay a lot in taxes because they see the difference between their gross pay and what actually hits their paycheck. They ignore that many (sometimes most) of those deductions are for retirement plans, health insurance, other benefits, and payroll taxes (which pay for their retirement and healthcare as well.) Plus most people have more withheld than they owe, that's why they get a tax refund.
Mitt Romney famously pointed out that 47% of Americans don't actually pay federal income taxes, and seven-figure earners are acutely aware of that fact and often resent it a bit. It isn't that we think low earners need to pay the same percentage of their income that we pay. We're perfectly fine with a progressive income tax code. It's just that we think everyone ought to pay SOMETHING toward the government functions that the income tax pays for- defense, national parks, roads etc.
There is this idea out there that high earners aren't paying their fair share because they know (or can afford to hire someone who knows) all the tax loopholes. The truth of the matter is that we're phased out of most of the loopholes. In fact, taxes get pretty simple at this level of income. If there is a phaseout of a deduction or a credit, we're phased out. There's no fussing around trying to stay out of the next bracket, because we're in the top bracket, and well into it. In Utah, our itemized deductions are completely phased out. That's right, our charitable contributions, state income tax bill, mortgage interest, and property taxes don't reduce our state tax bill at all. Now, are there some other “loopholes” that some of us can take advantage of? Sure. Things like carried interest and some of the real estate related tax breaks. But most of us aren't using those. And many lower earner (particularly business owners) can get the same advantages. The rules are what they are, and learning to use them to your best, legal advantage is a good thing. As Judge Learned Hand famously said,
“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes.”
If Congress doesn't want high earners to do the carried interest thing or use a Backdoor Roth IRA or be able to do 1031 exchanges, it has the power to change those laws. But you can't fault those who take advantage of the law as written.
In our case, we paid 32% of our gross income in federal income, payroll, and state income taxes for 2016. About 1/3. That is dramatically more (by both percentage and absolute amount) than we paid when we had a five-figure income. In fact, there was one year as an attending physician when that figure was as low as 4%. (Join the military and get deployed if you're interested in getting your effective tax rate that low.) But it was routinely in the 15% range. It is now more than double that.
Our marginal tax rate is 46% (should go down by 3-4% starting in 2018). If we earn one more dollar, 46% of it goes to taxes. Some reasonable questions to ask yourself when presented with that sort of data is, “How much is enough?” How much of the money I make by working should go to pay for functions that we all use? What is the highest an effective tax rate should be? What is the highest a marginal tax rate should be? Is 1/3 enough? Is 1/2 enough? What is the lowest an effective tax rate should be? What is the lowest a marginal tax rate should be? These are political questions (meaning ones that reasonable people can disagree on) not mathematical ones, but they are questions that seven-figure earners wish lower earners would at least consider a little more often because it really does have an effect on how much work we do, what kind of work we do, and as business owners, how many jobs we can and do create.
We recognize that we pay a huge percentage of the overall tax burden for the country. We're not necessarily looking for a tax cut, but an occasional “Thank You” for what we're paying (and the jobs and valuable products and services created by our businesses) and a little less vilification would go a long way. We recognize that our tax burden is a first world problem, and one that we're glad to have. We know that the only thing worse than paying taxes is not having to pay taxes.
We Could Spend a Lot, But Often Don't
You might assume that someone that makes a million bucks a year spends a majority of that. That's probably not true. A large chunk of it goes to taxes (32% in our case.) Another large chunk is saved if we're wise, since we're probably HENRYs trying to make hay while the sun shines. Typically someone making a million a year is going to be spending less than half of that. In our case, we spend about $150K a year, and that includes the years we buy a car, boat, or major home remodel. Surprised? You shouldn't be. It's more common than you realize. Don't get me wrong, $150K is a ton of money. It's nearly twice what WCI Network partner Physician on FIRE spends and 5 times as much as Mr. Money Mustache spends. Given that we don't have any debt payments, it really goes a long way. But it's an amount that could be spent by someone earning the average physician income. We live like doctors, not movie stars.
We Still Have Financial Concerns
We don't worry about many of the things that low earners worry about. Going to the hospital isn't going to bankrupt us. We're not worried about putting food on the table or clothes on the backs of our kids. But we do have plenty of financial worries. Many of those worries are the same ones lower earners have and the same ones we had before we had a seven-figure income.
College
Believe it or not, we worry about paying for college for our children. We know that the income tax code is not the only progressive aspect of our society. College is also quite progressive. Our children won't qualify for need-based loans, much less grants or need-based scholarships. Some of the best schools in the country are free to the children of lower earners, but we'll be expected to pay full freight. And that cost may be as much as 2 years of our net income if we have multiple children. College is all on us and our children. We either need to save the cost up in advance, or keep working to cash flow it until they're done.
Income Loss
We worry about income loss. We know that seven figure incomes are pretty precarious. If you lose a job that pays $30,000 a year, you can probably go out tomorrow and get a new one. But how many jobs are out there paying seven figures? Not very many. And how many more great business ideas do we have? Maybe none, much less the time to start over and grow them to seven figures. We know that sheer luck and privilege likely played some part (again reasonable people can disagree on the percentage) in growing our income this high. The business cycle is precarious, and even businesses that were once thought to be unassailable go bankrupt all the time. This is particularly an issue if we're a HENRY due to just recently acquiring this income or if we overspend and haven't built much wealth yet.
Our Children
Now, THIS is seven-figure entertainment.
We worry about spoiling our children. We didn't grow up with these kinds of resources available to us. Remember most millionaires are first-generation rich. We want to give them the opportunities that our parents couldn't give us, but it makes us sad (and mad) when they may not seem to appreciate it. We worry about what they are going to do with their lives, knowing the likelihood that their income will be anything like ours is fairly low. We worry about the consequences of leaving them a small (or no) inheritance. We worry about the consequences of leaving them a large one. We worry about whether we should have them in a private school. It wasn't even an option when we made less, but what if they're missing out on some advantage because of it? We want them to be in a safe neighborhood with good schools, but we also want them exposed to a broad, diverse portion of society. We struggle to find that balance.
Cash Flow
We worry about cash flow. Screwing up your monthly budget when you're making and spending $5K a month is relatively hard to do, and the consequences are relatively minor. But if we do a poor estimate of how much we're going to owe in taxes this year, we may be hit by an unexpected $200,000 bill next April, including tens of thousands in penalties and interest. Making sure the money is in the right place when it needs to be there is more than a trivial concern, and one we rarely had with a lower income. As a result, we tend to carry more of our money in cash. That might be just sitting in our checking account, savings account, or brokerage sweep account earning little and causing a drag on our investment returns. Managing money is work, and just like at most jobs your reward for doing it well is even more work. Investing gets a lot more complicated than just putting your 401(k) on auto-pilot. Budgeting on a highly variable income (as seven-figure incomes usually are) is tricky. Is it a great problem to have? Sure, and we're thankful to have it. But to pretend it doesn't create challenges is ignoring reality.
Giving Well
We worry about giving money. Just like not all lower earners are charitable, not all higher earners are charitable. But many are. The same qualities that led them to be successful in business, their profession, and their career lead them to want to help others. When you're only giving a few hundred bucks a year to charity, the consequences of doing a poor job aren't that big of a deal. When you are giving a few hundred thousand a year, they become much more acute. If you give in the wrong way, people can lose jobs or be incentivized to do things they shouldn't do. Picking the right causes to support and doing it in the right way really does matter. It turns out that just like earning, saving, and spending money is work, so is giving well. We're proud that 2017 was the first year we gave away more money than we spent and hope that trend will continue for many years to come. But we certainly want that money to do more good than harm!
Legacy
We worry about our legacy. If we are financially independent, what will we do with the rest of our lives that matters? Can we still muster the motivation to turn off Netflix, get off the couch, and go to work? What will happen to our business or farm or property when we go? Will the wealth we leave for heirs be squandered in one generation or three? Sure, it's not the same as worrying about how to pay for our prescriptions or our kids' piano lessons, but it is a worry nonetheless.
Liability
Mo' Money, Mo' Problems. This actually wasn't a big change for me. As a physician, everyone already assumed we had deep pockets long before we ever did. But the wealthy do have more to lose, especially since they're much more likely to have a significant portion of their assets in non-asset protected investment accounts.
What do you think? Did you find any of this surprising? Why do you think that is? Does your household have a seven-figure income? What do you do for a living? What does your lifestyle look like? What are your financial concerns? Comment below!
[Note: Given the sensitivity of this topic, for this particular post, we're going to have a stricter comment moderation policy than usual. Be extremely careful how you write your comment lest you find it has disappeared and your time and effort was wasted. Personal attacks and inflammatory comments won't be tolerated. If you don't have anything constructive to say, don't say anything at all.]
Thanks for those tax dollars!
You’re welcome. It’s a pleasure to serve.
I was lucky- I have two kids who ended up responsible and hard working, and I think a lot of that had to do with watching what their parents do as role models. In terms of public versus private schools, we moved specifically to an area with good public schools (Culver City, Ca.) but in some cities, such as Los Angeles city itself, there is no comparison between a good private school and almost any public school past elementary school.
On the other hand there is a saying I am paraphrasing and probably getting somewhat wrong that goes “My grandparents came to America and were laborers and tailors, so there kids could be teachers and store owners, so there kids could be doctors and lawyers, so their kids could be artists and musicians,” and there seems to be a lot of truth in this no matter how much you do or don’t do with and for your kids. I would add, partly jokingly, the next generation after artists and musicians, will be “videogame players and cell phone addicts.”
By the way I retired because I could afford to but also because, as you note, the aftertax income per time worked is so high, especially if one has a pension and is taking out pretax Keough money saved over the years.
I made a few mispellings on previous post so please substitute this one instead. Thanks
I was lucky- I have two kids who ended up responsible and hard working, and I think a lot of that had to do with watching what their parents do as role models. In terms of public versus private schools, we moved specifically to an area with good public schools (Culver City, Ca.) but in some cities, such as Los Angeles city itself, there is no comparison between a good private school and almost any public school past elementary school.
On the other hand there is a saying I am paraphrasing and probably getting somewhat wrong that goes “My grandparents came to America and were laborers and tailors, so their kids could be teachers and store owners, so their kids could be doctors and lawyers, so their kids could be artists and musicians,” and there seems to be a lot of truth in this no matter how much you do or don’t do with and for your kids. I would add, partly jokingly, the next generation after artists and musicians, will be “videogame players and cell phone addicts.”
By the way I retired because I could afford to but also because, as you note, the aftertax income per time worked is so high, especially if one has a pension and is taking out pretax Keough money saved over the years.
Isn’t it wonderful that someone can pursue their passion without regard to the financial consequences because of the hard work and good decisions of the generations before them? Of course, I also tell my niece who is into drama (like real drama, not just being dramatic) that a business minor would be a very good idea.
I am in a similar situation and honestly figuring out my financial plan going forward stresses me out.
Let me be clear- I am extremely blessed- and thank God daily for what he has provided me but with much is given much is expected.
I do feel called to give when needed.
I’m still trying to figure out how to not pay $740k last year in Taxes. (Fair share yes but not this much) I’m considering getting into real estate to offset some of my taxes. This would be a side business with hopes the depreciation will help.
Anyone have any suggestions? I am struggling with this and need direction.
There isn’t a lot you can do at that income/tax level. Max out tax-deferred accounts (make sure you’ve considered a cash balance plan), invest in a tax-efficient way (real estate, index funds, tax loss harvest etc), move to a tax-free state etc.
I would be new to real estate but just can’t get my head around how it will reduce my tax bill besides depreciation. But again I don’t want to be buying something for $100k (or more) to be able to depreciate $4k. Also, I’m not super excited about owning actual real estate- I don’t want another job and don’t live in an area where I want to own commercial or residential properties.
Real estate and oil/gas have so many tax advantages with the ability to roll profits into another investment.
The flip side of profits is losses. My accountant recently told me I can not deduct any losses due to tax bracket and not being a “real estate professional.”
I do have a cash balance in place and looking into conservation easements.
one of my partners told me about some conservation easement scheme he had the opportunity to be part of several years ago before I started at my current job. this partner doesn’t strike me as being especially financially savvy, but he was happy at the significant tax savings that resulted from this conservation easement (and he saved all this money, not me…) Anyway this was not a strategy with which I was familiar, but when I spent a little time reading about it seemed like the sort of conservation easement he described was often felt to be an abusive tax shelter even though his accountant and probably a tax lawyer signed off on it. He told me he would let me know if he heard about another “opportunity” like this , but this struck me as something that would definitely fall into a gray area at a minimum. Would be curious to hear what WCI thinks.
Might be worth a post. I think of it this way- there are dozens/hundreds of different types of investments. I don’t have to invest in all of them to be successful. Best to stick with the ones you know. But if you’re willing to really get into the nitty-gritty of conservation easements and they make sense for your situation, knock yourself out. I don’t think they’re an illegal scam or anything but I’ve never really dove in deep to learn about them.
Judge Learned Hand famously wrote: “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” True, but some tax schemes cross the line into tax evasion. The conservation easement scheme does in most cases, despite Congress’ failure to restrict the abuse.
You might consider syndicated real estate. But yes, it’s mostly just the depreciation, but if you can keep exchanging, that never gets recaptured.
I have limited knowledge of conservation easement investments but would be glad to share recent findings. I have an ultra conservative accountant (almost too much) and he doesn’t think it’s a good idea. I have several friends that have been using them for years- zero audits. I recently interviewed a large national accounting firm and they said it was a no brained as long as you are below a 5x multiple (where audits happen around 9x and people get greedy). I’m interviewing another company tomorrow. There are several more reputable national companies that sell the easements and have been doing it for years.
Would love to hear WCI thoughts for or against.
Thank you for sharing this!
On one of my favorite sports podcasts, the host told a story of his first job out of college. He was working in sports radio and went out to dinner with an Executive. He paid for the entire dinner even though everyone at the table knew he was a broke college kid. That caught the attention of the Executive, so the Executive became a mentor to him. The Executive told him how much $$$ he was making, and the success he was currently having. Then the Executive said something MAGICAL…
“Son, there are 2 types of people in this world, in regards to how they mentally process financial success. The first person responds to those with financial success as “You’re lying.” The second person asks “How did you do it?”
Stories like yours are 100% NEEDED for those striving for wealth. There are going to be those who simply get mad that you are writing about a seven figure salary , and they will automatically tune you out (like the 1st person in the above scenario). Then there will be those (like me) who appreciate you sharing your story because it provides valuable insights of financial success at that level.
The only limitations are the ones you set on yourself. That is even more true in the financial arena. You will only obtain the level of wealth that you mentally believe you can get. If you don’t believe you can obtain a net worth of over $1,000,000, then you never will.
Good for you and your family. I have been reading your posts for years and am a fan of your approach to personal finance. If you are earning that much, it generally means that you are working very hard. You will be set up nicely for retirement when you decide to cash in.
WOW, this article literally hits on just about every topic I’ve been known to share with close family and friends in similar economic situations. Well done!
I’m not an MD, but courtesy of stock options, I’ve been in the club for each of the last three years and might have one year of this level left before reverting back to my normal (salary+bonus) level, which is probably in the range of many docs. While I can probably hang it up today, I’m hopeful to have enough gas in the tank to grind it out for another 5 years, when my youngest will likely leave the home for college. As I get closer to this early retirement goal, I’ve taken steps (for the first time ever) to create a budget for my family as I would like us all to learn the importance of living with one, and to (hopefully) give myself more comfort when the time comes to actually call it quits. We don’t spend crazy money (less than the range you mention above), but as I feared, the budget process hasn’t been fully embraced by everyone under my roof. My wife and I have been together since we were teenagers, and like you, started with nothing. But like most, as the income grows, we have fought the temptation to grow spending with it. I’m a little more successful at this than she is! When I first floated the idea, the first question out of her mouth was “How much do we make per month?” I replied “That’s the not the point of this exercise!”
Thank you so much for this post. It’s comforting to see that others in my boat share similar concerns.
Thanks for posting. This was an interesting article. No hate from here. We are not where you and your family are, we are solidly middle class, but have some of the same issues you wrote about, just not on your scale. Agree with what you said about taxes and everyone should pay something. Our son, who is a poor graduate student, even pays something. We pay more now, but benefitted by some of the college credits when our kids were in school, and we are grateful for that.
We are in the 7 figure boat and have been for a few years. Husband is a high earning professional. Our initial worry was to be sure we are good stewards and giving enough. We have since had a child and now the worry is how to raise him to be a hard working, faith filled, empathetic adult. This seems to me an especially hard challenge if we FIRE during his formative years. We both grew up lower middle class with plenty of money struggles. So being in this position is not something we were prepared for by our own upbringings.
Thanks for the thoughtful article and explaining the taxation issues so well. It’s very hard to have reasonable conversations on that issue. People get so hyped up and stop listening.
This was a great read. Thanks for having the courage, interest, and time to share.
I’d love to hear more about how you try to solve for the ‘silver spoon’ problem.
Thanks for your kind words. I’m sure I’ll write more about it in the future. One thing we’re doing to solve it is basically living the same lifestyle we were living when we had 1/10th the income (which was plenty of income, don’t get me wrong. Nobody is suffering around here.) The rest, at least what doesn’t go to the tax man, is saved or given away.
> not mathematical ones, but they are questions that seven-figure earners wish lower earners would at least consider a little more often because it really does have an effect on how much work we do, what kind of work we do, and as business owners, how many jobs we can and do create.
I don’t mean to vilify you in any way, and from your writing there seems nothing to vilify, but I do believe there’s a mathematical aspect to this however. I’m in a relatively high tax bracket(not as high as yours mind you) but I feel proud to pay that, but perhaps that’s because I live in Japan where it is considered more of a civic duty.
Simply put, incomes don’t really increase linearly. If you got a 1000 dollar raise that’d be minor. If a guy in minimum wage did, it’d be massive. You working harder and a janitor working harder brings in a totally different amount of money looked as a flat amount, but generally a similar increase looked as a percentile. We look at the raises in percentages and those things feed themselves, growing exponentially. A progressive tax rate merely attenuates that exponential increase, it doesn’t stop it. If you make 20 times more than the average person, and can linearly increase that by working more, but getting 80% of that cut off, you’d still be getting 4 times more than an untaxed person working the same amount extra.
Higher tax rates might stop you working more(say that you could work an extra 10 hours but don’t because the extra benefit isn’t worth your time) but they really shouldn’t stop you hiring more so long as it’s profitable.
You’re clearly civic-minded as you’re putting a lot of your money into charity and that is great. One thing to consider though is the difference between charity and taxation. Charity is a judgement call made by givers of who is deserving. While taxation at least in principle is a neutral body(the government) that allocates funds fairly between various causes that should need it. I feel like taxation isn’t per se bad(in fact, I feel as I pointed out above I’m proud to pay a high tax. My charitable contributions only go outside the country) just the way it is spent is sometimes misguided(and a big political issue). Perhaps the difference between perceptions on tax are directly correlated with trust in ones government
Good points in the first few paragraphs. I’m surprised to see you argue that involuntarily paying taxes is more civic minded than voluntarily supporting charities though.
Lots of tax money goes outside the country as well and you’re always free to give to charities that use the money inside the country if you want. I agree that trust in government is a big factor here, and you clearly have more trust than I do! Probably a political thing.
Bill Bernstein considers taxes as paying dues to a club with a billion person waiting list.
Yes, there is an argument that paying taxes does stave off a revolution.
This is a great post. It is very apparent to me that you have earned the income and resulting wealth, mostly through a lot of hard work related to your business. I had some intention to do something similar in the quality management arena. Not only did I not get any traction, but the work required was way more than I would do. Keep doing what you do and even more success will come. Thanks for what you do.
Thanks for sharing this lengthy and enlightening peice. I’ve been a silent observant and fan of your blog. I really appreciate your honesty with telling us what the future looks like for wealthy people. I’m in the 6-figure earning, like most doctors. But we’re hoping to cross that barrier someday with the small business that we’re trying to grow.
“Mo’ money, mo’ problems,” you wrote. Even as a small business owner, I’m already seeing that life gets more complicated when you have more money. Now for me, It’s not a big deal to invest $5000 in stocks and see my investment fall by 10% and still not lose my sleep over the $500 loss of asset. For the wealthy, who invests $500,000 in the same stock or mutual fund, the same 10% drop in the market means a $50k lose, which can happen within a week! That’s why the millionaire investor worries more about the financial markets than the average Joe. The truth is that having more money means you need to learn how to manage your money better. The average fixed income 30K earner can afford not to have a monthly budget. The millionaire has to pay strict attention to his balance sheet and doesn’t have that freedom. ” To whom much is given, much is expected.”
Thanks for sharing your struggles & dilemma with your new found wealth.
First time reader. I’m a 7 figure earner myself and I thought your post was 100% spot on. I enjoyed reading it — a bit like therapy. I’m 53 so a bit further down the road but just hit this “status” about two years ago. I’m hoping I can keep it going til I’m 62. Thanks for sharing — if anything it was a very accurate representation of our situation.
Thank you for the perspective in this post.
I have stayed home full time for 25 years raising & home schooling our children, and our income is low 5 figures. My husband has eaten breakfast & dinner with our kids every day of their lives, even if it was just homemade bread and soup. I’m now returning to the work force part time as a professional educator, but $$$ are as squeaky tight as ever with a kid in college ( free tuition and $13,000 toward fees/room/board because of our low income!) and another headed there in 18 months.
But our level of insecurity isnt terribly different from yours, which is odd to me. I wonder if the one big family vaction we were able to manage (the pb&j “world” tour of ’10) will be enough to leave behind fun memories to augment camping and first snow donuts and the Time Change Bunny who filled sock drawers with candy & new socks twice a year. Will my kids stay upset that they couldn’t get driver’s licences until 18 because $900 for driver’s ed was more than a mortgage payment? That we couldn’t huy them a car? That we had them work retail jobs part time at 16 to start saving for college? Will they hate gardening for the rest of their lives? Will they one day laugh about the enormous basket of snack bars & gum we picked out of bins for 10¢/piece at the local discount food warehouse every month? Will we ever tell them that the health needs of 2 of our three would have bankrupted us if we hadn’t been on our state’s health insurance for children that was 100% coverage with no deductible?
Just reading through the demands of managing a seven figure income was perplexing–mo money, mo problems is no joke!
This is a great read even after 2 years of you writing it! Thanks for the insight, I found some of this reading Millionaire Next Door, but you had a great perspective to it. Thanks again.
Please fact check your articles before you post them. Contrary to your statements, any student, regardless of their parents’ financial assets, can choose to take out a student loan for college. Only need-based items, like most grants, are inaccessible to students coming from wealthy families. On top of this, academic scholarships typically go to students from more affluent backgrounds as they usually have a home environment that offers more academic support. After all, studying and homework can be near impossible to do when you’re hungry or homeless.
Thanks for the correction.
What an incredibly courageous and honest post.
Raising our children right and teaching them to appreciate what they have, while not ruining them is a constant challenge. I can only imagine it gets harder as we get more successful. Thank you for sharing , Dr. Dahle.
I just randomly came across this article and you sure hit every last nail on the head. I completely agree.
Glad you enjoyed it.