By Dr. Charles Patterson, WCI Columnist
The White Coat Investor’s mission is to help physicians and other high-income professionals get a fair shake on Wall Street. The primary audience is high-income professionals, a group that might be loosely defined as the top 25% of US earners, encapsulating many disparate professional groups and individuals. To be in the top quartile, a household would need to see an income in excess of $129,000 in 2022; the median household income in the US was around $70,000 in 2022, depending on several factors including where you live.
There is, perhaps, a general tendency to seek a measuring stick. We want to know where we rank, how well we are keeping up, and what our behaviors are yielding. Intuitively, we know that income is a poor reflection of financial (or life) success, but it would be naive to ignore the data for sensitivity's sake. The fact remains that what you do with your money is far more important than how much you are bringing in, a tenet that drives the WCI mission.
Within medicine, and within WCI, there are a group of folks whose income is well above the national average but perhaps well below the median income of the standard WCI reader. As of the 2023 WCI Survey, approximately 28% of readers polled had incomes less than $250,000 and nearly 10% made less than $100,000. Because it would be a bit of a stretch to refer to us as “low-income,” I propose that we refer to ourselves as “moderate-income physicians” (or professionals, if you like).
Moderate-income physicians are a diverse group, encompassing part-time clinicians, military docs, allied health professionals, paraprofessionals in fields outside of medicine, and retirees, to name just a few. Our circumstances may be substantially different, from practice type and net worth to income growth potential and career progression. But for each, the same rules of investing apply. And for this reason, each benefits from prudent goal setting, lifestyle management, and participation in the WCI community. The moderate-income physician is an essential member of this readership, and the answers to our specific questions are discoverable through The White Coat Investor.
The Same Rules Apply
Reading about the seven-figure incomes of our colleagues can evoke a titillating array of emotions: joy at the thought that this could be me (it probably won’t be), jealousy (until I realize the awfulness that accompanies boat ownership), even a certain repulse that accompanies the thought of trying to keep up. Frankly, there are a number of financial concepts often discussed on WCI that simply don’t apply to those with an income less than $250,000. You may not need to go through the rigamarole of the Backdoor Roth. You are less likely to be an accredited investor. And tax-loss harvesting is typically not a priority. While the capacity to make great financial strides quickly is limited relative to the cadre of ultra-high earners, investing, in general, is more straightforward for the moderate-income physician. This can be a great thing as long as one’s strategy is sound and your execution is disciplined.
There are some unique challenges posed to the moderate-income physician. A more modest income means that reasonable savings goals will also be more modest. Thanks to the miracle of compounding interest, 20% of a rheumatologist’s salary grown over 40 years might pale in comparison to their ophthalmologist colleague who saved the same fraction of their income. Without commenting on the value of the ANA-fighting efforts of rheumatologists when compared to other specialists, all can agree that expectations are paramount to finding contentment. A smaller paycheck also means a particular susceptibility to the pitfalls of physician financial illiteracy: inappropriate whole life insurance policies, massive mortgages, and lifestyle creep among many others. By sheer scale, one can arguably get into deeper water with a larger paycheck. As emergency medicine doc Bill Yount said: “More income means greater potential to make serious mistakes.” But while these mistakes can be overcome, it's harder to dig yourself out of a hole when you’re working with a hand shovel instead of an excavator.
In reality, the same rules apply no matter the number associated with your high income: you need to have a plan, live like a resident for as long as is tenable, and invest your savings wisely. Executing your plan early while avoiding costly mistakes is the gameplan for us all. Optimizing quality of life and time to financial independence are the critical tasks of the moderate-income physician.
More information here:
Defining ‘Enough'
Income need not be fixed in the working years. One has the option to seek outside gigs, go back into training, pursue entrepreneurial ventures, or engage in any number of alternatives to bolster income. You can enter contract negotiations or give locums a try. For the willing, geographic arbitrage can be high-yield. Universally, these strategies will take time, attention, and sacrifice of some sort (missed family time, sweat equity, perhaps even one’s own assets). There can be (a lot of) risk involved, though the return on that investment is enticing. One should first consider, however, exactly what that increased income will add to life satisfaction. While we know that money can be used for standard of living increases, financial security, and life-defining experiences, it's not a panacea for happiness.
Defining what constitutes “enough” is vital to conceptualizing the role money plays in your life. It's shocking how underappreciated this simple precept is among physicians, as this question lies at the heart of our saving and spending habits. A keen understanding of your goals, values, and sources of happiness presupposes any investment strategy. If you are taking the time to craft a written investment plan, it stands to reason that a thorough reflection of exactly what that money will do should guide the exercise.
I am a moderate-income physician. I may not be in the future (gee, wouldn’t it be swell if I could afford a Tesla?), but my happiness isn’t predicated on increased income. We have more than we need: my children are secure (and would be more so if I was pushed off a cliff), we are exceeding our savings goals, and we are active participants in our community. While more money might be nice and could help us achieve our long-term goals sooner, adding the time and attention to pursue it would detract from the precious seconds I have with my family. I paint a rosy picture, but this perspective wasn’t won—it was learned.
A while back, my wife left medicine. It was hard to experience financially, as it cut our household income by more than 30%. But interestingly, there wasn’t any lifestyle deflation, as her income always went to savings. On the contrary, our pace of living and family cohesiveness were exponentially improved. We found that we were happier despite not having the money that we weren’t spending. Though the dual income is lovely, neither of us wishes to live through the chaos of juggling two careers and a family. For other couples and families, the opposite is true: both partners may thrive in a busier home. My point is that fulfillment is found in the harmony of relationships, growth, and meaningful work. What that means to you is worth discovering, and is absolutely imperative in finding some semblance of wellness.
More information here:
How to Become a Wealthy Pediatrician
Investing in Collectibles: Is Investing in Jewelry, Coins, and Ferraris Worth It?
Moderate-Income Physicians Belong at WCI
Finally, a bit of humility. If you are a moderate-income physician, your ability to build wealth in the long term still far exceeds that of the average American. One might argue that certain specialties are undercompensated as compared to others—it's a matter capable of debate. Generally speaking, though, we work hard and are highly compensated, which seems fairer than working hard for little or no compensation.
Money challenges are specific to each of us. Whether your annual income is $1 million or $100,000, this community is here to help you plan, encourage you along your way, and celebrate your successes.
Are you a moderate-income physician? How does your lifestyle differ from those doctors who make seven figures? Are you satisfied with your salary and with your lifestyle? Comment below!
Maybe the tougher part about making in the $200k range rather than $500k + is being grouped in with the $500k +income range as being full self pay for colleges. A private college is a luxury, of course, but I had expected to be able to afford it on a physician income. $70-80k / year isn’t so easy to pay for. The majority of students don’t pay full price for those schools but making something like $200-$250k / year lumps you in with the rich and you are expected to pay full price.
That’s harder to face that not being able to buy a fancy wakeboat.
I’m sorry you have to deal with that. Hard to relate to in Utah where the premier schools (private and public) in the state charge tuition of $4-10K a year.
Reminds me of the phrase that you can have anything you want but not everything you want. If you’re making $200K, you can’t put the kids in private K-12, send them to expensive colleges, have a wakeboat, live in a fancy house, drive new Teslas, and retire at 52. You’re going to have to choose. You could probably do 1 or maybe 2 of those things, but that’s it.
Yes fortunately state school is doable, and I still have 6 years to go before college tuition starts so we’ll see how the luck of the market goes. In the meantime I’m focusing on increasing income. Things are much easier once income goes up.
529 my man, 529 🙂
Besides savings, there are other options. I mean, current cash flow, the kid’s contributions (scholarships, work), and just basic good school selection (don’t choose the one that costs $60K/year).
Greg-
Thanks for the input. Higher education costs have been and continue to be on my mind in the 7 years that we’ve had kids. While there are ways to mitigate costs (as discussed in responses), I think there’s also a philosophical decision to be had regarding your obligation (or lack thereof) to pay for college. Further, one wonders what the relative benefit of sharing that responsibility with our kids would be.
Certainly, Four Seasons Resort stays and wake boats tend not to be real concerns for most Moderate Income Physicians. There are real (though admittedly first world) obstacles to being barely in the highest tax bracket.
Also, in case not already, there should be a discussion about the value of private undergraduate education give current costs. As someone who went to an Ivy League
school, and is yet to turn 40, ive backtracked significantly about their value. I attended med school interviews right beside state schools. Similarly, law schools pull from state probably just as much from ivy. My hypothesis/take, unless my daughter wants to go into finance or politics (where it’s still very much an old boys club) private undergrad is not worth the money. So unless she can articulate why politics/finance at 18, it’s state school.
I refuse to pay that much for college. $20-30k/year max for total cost. I also refuse on principle to give my hard earned money to schools who think they have the right to redistribute a significant part of my income to allow others to attend for free or low cost. One of my children recently started college and was accepted to one of these Ivy schools and really wanted to go. We said no, and she chose a great state school at 1/5 the cost instead. You can achieve and do anything coming from a top notch state school.
Charles cool post man seems like the lessons in frugality are much more pertinent to the moderate-income physician. When you have less offense, defense becomes a priority. did you find that you had to work harder to apply frugality in your life as a moderate income physician family?
Rikki, Thanks much for the response!
I’ve never felt frugal, though I have always felt that our income was ordered: first to savings, then to fixed costs and giving, then to the ancillary priorities. Whatever was left was to be used for further savings, giving, and quality improvement (perhaps the most difficult, because we have to understand what makes us happier)
Our income has doubled, then doubled again, and with each increase we’ve seen increases in magnitude in our relative contributions. However, we’ve long since understood our pathway to happiness: time with each other.
“Harder to apply frugality” – he can’t really compare directly, unless he was once making a lot more money. I think though the much richer doctors can decide without as many budget concerns how much they will live up to family, societal, and local expectations of their spending. Whereas the bottom percentiles of Dr. income (first world problems) might have to say no to covering all the relatives’ meals out every time, plus “loaning” them money whenever asked, plus supporting their parents and needy siblings, plus new cars every 1-2 years, plus private school education from birth to 30 for their kids. Anyone (arguably)- though maybe us docs have to be stricter about it/ fight perceptions more than our CPA or engineer neighbors with sometimes similar incomes- can spend less than they make. We didn’t give a hoot what society and neighbors expected (and moved too much to start doing so), eventually taught relatives they would need to support themselves, passed those lessons on fairly successfully to the kids, and with luck and genetics (why I refused to agree with spouse that the kids “earned” their academic scholarships and should get to keep all the cash) plus the GI bill minimized college expenses. And so decided full time medicine and military weren’t worth the time and health costs once vested in pensions.
I really appreciate this post and resonate with so much of it. We were a moderate income dental family for 10+ years, making between $120,000 – $200,000 during my dental career. We are in a similar income range now after a career transition and in both situations we have found opportunities to be abundance minded and scarcity minded regarding our income.
Most of the scarcity thinking arises when we are social settings with those making 2-4x of what we make. Being invited to people’s luxurious mountain cabins, pulling up to their houseboat timeshare in their new wakeboard on Lake Powell, and looking at their instagram pictures the suite they booked to watch the Formula 1 race in Las Vegas can leave us feeling like “low earners”. It feels difficult sometimes when our kids are asking us “why can’t we have a boat, why can’t we stay at the hotel inside Disneyland, when are we going to get a Tesla”?
Most of our abundance thinking arises when we are “keeping away from the Joneses”. When we are in the national parks, on family hikes in the mountains nearby, or enjoying cheap Mexican takeout in our backyard….we feel overwhelmingly rich.
This is not to say we don’t enjoy and appreciate our friendships with those in decidedly different socio-economic brackets than us, just that we find value in being measured and intentional about in which contexts we opt into those social settings.
There is lots more I could say about this, maybe it’s a future post.
Thanks for the great article.
Hey Tyler, do those people that make 2 to 4X more than we do that you hang out with need more friends? I’m a pretty cool guy to hang out with! just forward their info to me 🙂
Just a personal insight, but I find that freeloading off the Joneses prevents me from keeping up with the Joneses! definitely wisdom when people say what’s better than having your own pool or boat is when your neighbor has a pool or boat! But at least the Joneses in my neighborhood, and I live in a rich neighborhood, are very happy to have you come over and eat their food, swim in their pool, be on their boat, because there is a psychological satisfaction in entertaining and giving. And I get to enjoy those finer things in life without actually having to pay for them!
Actually I do try not to freeload totally, but I do return the favor by inviting the Joneses over but the dinners will be more modest, I have no pool or boat but might pay for a dinner cruise and we all hang out together. I find that this can be a screen for if the Joneses are true friends they accept my offer of payback. Those Joneses that don’t take me up on my offer are usually ones I get a feeling they think I’m financially beneath them.
Great post. I asked Jimbo D about the foolishness of chasing more money, as he knows my point of view, and he relayed that several colleagues of his think 200-300 is the sweet. As a single person, I agree. I get major time off, little stress, have plenty of money, and am not running the rat race. I get write offs and QBI deduction. If I’m smart, I can use my time and money to arbitrage better cultures, locations, cost of living, and women/relationships around the world. No brainer.
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This was a really nice article. I enjoy your humbling attitude! A nice reality check to pull your head away from the jokes about “multi-million dollar mansions,” which start to feel less like a joke after hearing/making them so many times…. I especially like your point: “generally, we work hard and are well-compensated, and that’s better than hard work for little compensation.” Holy cow does that ring true! Medicine is not for the faint of heart or those who want cush office jobs, but it does pay the bills reliably. Period. And that’s worth being grateful for. (Flashback to when I was complaining to a friend about how as a resident I’ll “only” get paid $60K, before stopping in the middle of my sentence to remember she was a single mom of two toddlers who was struggling to make ends meet. I just support myself and my dog, and no kids or spouse. Sometimes you really put your foot in your mouth.)
This is just an appreciation email. I really enjoy your posts. I’ve been reading now for ~2 years and feel like I have learned a lot! I will be able to handle myself financially as I enter residency, am comfortable with my current financial state, and am not worried about my ability to pay off my loans. It never ceases to amaze me, however, how many of my classmates cannot say the same thing. Not because they aren’t in the same place—who knows where they are. They are simply oblivious as to where they stand financially. Many live in denial as they spend yet even more money. “I’ll pay it off later, don’t think about it, it’s fine.” Many of my classmates can’t even carry a conversation about loan repayment, budgets, or basic financial planning with a resident salary for 5 minutes. Thank you for offering this much needed resource for those who are savvy enough to seek it out and commit to reading occasional articles! Please keep doing what you’re doing.
Really appreciate this post.
I’m a newly-minted attending in a sub-specialty of psychiatry.
Thought I was in the gravy-situation because my spouse and I were able to pay our way through med school, pay off undergrad during residency, and start bulking up our savings during residency + fellowship. We had an advantageous sell of a house before we moved for our first attending job, and are now sitting at ~$650k toward FI-re goals. Some of that may go towards a house down-payment.
We’re pretty frugal at baseline, but really value our kids’s education, and are currently planning to pay about $35k yearly to their K-8 private education before they do public high school. 529s are in the early stages, but I’m not over-thinking it / worrying about it at this point.
Turns out that the green-eyed-monster is now a bit more present than usual. Previously I ran in circles of non-physicians, and now I am around high earners or surgical specialty physicians, or my previous med school classmates are looking at jobs paying 1.5 – 3x of what I’ll be making.
On the one hand I’m proud that I took at 0.8FTE job, 4 days per week, to spend more time with my kids and spouse. On the other hand I feel like I’ll be drudging through the first decade of my medical career, making pennies compared to the dollars of my colleagues.
Did any of you go through jealousy issues related to the Jones’s? Did any of you ‘moderate income’ earners find ways of thinking around these difficulties, or developing a healthier mindset with respect to this?
I know I should be grateful to be in the top quartile of earners, but the social pressures and things I cannot afford right now are more present to mind.
Thanks in advance.
Wow. How many kids at $35K year? That would eat up the entire income of many moderate income physicians. Have you considered buying a home in a better school district?
I think this is the classic “You can have anything you want but not everything” situation. You’ve just got to decide what you value most. But you can’t work part-time, send kids to private school, live in a fancy house, vacation in Paris, drive a Tesla, get a boat, AND retire early. You’re going to have to choose.
3 kids in private school. Current plan is to have them there K-8.
School districts are good, but I’d say this sort of education is a personal value of ours, so it fits into one of the few categories that we are less cost sensitive about. For reference, we got financial aid to send the kids to these schools when we were in training… it’s been important to us.
I think you’re right about having just a few wants. Teslas, many expensive vacations (maybe one every two years?), fancy houses, boats, etc.. are not a high priority. We’re interested in getting to coast FI fairly quickly (maybe 6 years?), but beyond that we’re not trying to be retired in 2 years or anything. So I’d say we’re doing ok with not going overboard on the lifestyle creep.
I guess I’m just more surprised at myself. I’ve never been much for thinking about people’s income, so it was kind of a whiplash experience to suddenly be an attending myself and to be thinking about these things more. Hopefully this will become either background to my thoughts, or even better I’ll forget about it entirely. Here’s hoping!
Another important point, not mentioned, is you don’t have to stay a moderate income range. Even if you’re not in a traditionally high paid speciality, look at opportunities to make more money by moving to a better paid or more tax favorable state, look around for a better job, or look for opportunities to pick up extra shifts / locums in your current area. There was a prior article on here about how variable pay was within the same specialty, sometimes 2-3x difference.
Reducing expenses and smart investing only does so much. Improved income helps a lot. Improving income isn’t focused on enough on financial sites, and easier for physicians to do than other fields. If you want to work part time in a high cost state in a low paying field that’s a choice but your same supposedly low paying skill set can make you more if desired.
It’s a good point. I’ve read several places that intra-specialty pay differences can be much more significant than between specialties themselves.
I know that that might satisfy some of the feeling of ‘being able to keep up with the Jonses,’ but I honestly don’t think that’s a personal value of mine. Certainly I could be working full time instead of 0.8FTE and “easily” turn up the income stream. I also fear burnout though.
But I tell myself that later in life I may have less family responsibilities, and if I want to work more / make more then, it would be an easier feat.
But again – I don’t think I’m really griping about ‘not making enough,’ as much as being surprised by the feeling of wanting more than I already have.
I think it happens to most. Funny how your “number” goes up when it can. Even the POF built a lakehouse and bought a boat…because he could without having to do anything he didn’t want to.