[Editor's Note: This guest post is written by Douglas Segan, MD, JD. Dr. Segan has a special interest in medical-legal issues and physician wellness. He currently teaches at Zucker Medical School at Hofstra University in Long Island, NY. His “avuncular advice” should sound pretty familiar to most readers of this blog. We have no financial relationship.]
Avuncular Advice to the Newly Minted White Coat Investor
I recently attended the annual ACEP (American College of Emergency Physicians) meeting in Washington DC. Attendees can testify that this ingathering of emergency medicine folks is a delightful whirlwind of education, marketing, schmoozing, culinary overindulgence and commiserating.
The sobering low point of the conference for me was learning about the pervasive level of burnout in the house of medicine. The rates vary with different specialties, ranging from about 40 – 54%, with my fellow emergency physicians having one of the highest rates.
The highlight of attending this meeting was the White Coat Investor reception. Dr. Dahle delivered an erudite and entertaining talk to a medical audience that was eager to achieve financial serenity. While there were a few seasoned physicians (like me) at this soiree, most of the attendees were eagerly embarking on their professional career. I have a genuine concern for the welfare of the next generation of physicians. I am heartened by their optimism and compassion to their patients. They think they will change healthcare for the better and I have faith that they will. Their energy and drive give me hope for the future of humanity.
I am writing this guest blog because I believe that the med students that I work with in New York and the ones that I met at the WCI reception from all over the country deserve to be financially stable. I think that a financially secure physician is less likely to suffer burnout compared to a physician who is unable to get out of debt and is constantly worried about overdue bills. I believe that a financially secure physician is more likely to be able to focus on caring for their patients.
A guest blog that I wrote for Physician on Fire, From Hubris to Humility – Dr. Segan’s Top 17 Investing Mistakes, was my mea culpa for some of the many investing blunders that I have made. My hope is that others would learn from my errors and not squander their wealth by repeating my mistakes.
This guest blog has a positive spin in the hopes that new WCIs can also learn from a few of the financial steps that I did correctly. I have not earned the right to brag because most of the “smart” financial moves that I have made in my life were the result of serendipity, fortuitous timing, or the kindness of strangers.
Dr. Segan's Top 10 Investing (and Life) Tips
1) Practice in a Low Cost of Living Town
Decades ago when I was graduating medical school, there were very few emergency medicine residency programs. It is an odd quirk of medical education history, but the early EM programs were in smaller towns and not in big coastal cities. I deserve zero credit for this decision but it was a financial blessing for me. I ended up in Lansing, MI for my training and for several decades in practice. If there had been a residency in NYC when I graduated med school in 1978 I would have probably gone there and would probably still be paying for a much higher cost of living.
The current starting salaries in many medical specialties allow new attendings to pay off their debts, build a nice nest egg and live an upper-middle-class lifestyle if they live in a reasonably priced town. On the other hand, if you move to Manhattan or San Francisco you will have a much more challenging time becoming financially independent.
2) Live Modestly
Dr. Douglas Segan, MD JD
A corollary to living in a less expensive town it to live a modest lifestyle.
Thankfully, I don’t have the gene that many physicians have that directs them to drive the fanciest car, live in the biggest mansion and demand first-class accommodations at all times. Living below your means is not easy when you spend a decade in training and your first big paycheck as an attending arrives and you have that huge feeling of entitlement. But, living modestly is the path to financial independence for most docs.
3) Maximize Your Retirement Plans
At different stages of your career, review with your accountant which retirement plans you and your partner qualify for and then fully fund them. There are very few gifts from the federal government but this is a huge one for a myriad of reasons. It will force you to save a substantial portion of your income, your money will grow tax-free and, in most states, it will provide you with some serious asset protection.
4) Invest in Low-Cost Index Funds and Diversify Your Portfolio
I was late to this commandment of investing but I am a believer now. Very low-cost index funds should be the foundation of your investment portfolio. Have lots of exposure to the US stock market but also have some bond and international exposure.
5) Diversify Your Income
Practicing medicine will be your main income source but look for other avenues of income. For some, it is real estate. I could have done better in this area but I did do some medical – legal consulting and teaching.
6) Do Not Sell at the Bottom of a Bear Market
It is tough to explain to young investors who have never lived through an ugly bear market how stressful this can be and how tempting it can be to sell at the bottom. There were sickening days on Wall Street about a decade ago where I would lose a year of retirement savings at the market opening. It is very challenging to not panic sell at the bottom of a bear market when it feels like the economic sky is falling. No one can predict when the next bear will arrive but prepare for it now.
7) Get a Basic Education in Investing
Your financial security is one area of your life that you can not totally outsource. There are too many sharks out there committed to targeting you and your money. You have to know enough to even ask the right questions. Reading the WCI blog and books on the recommended reading list is a great way to get up to speed.
8) If You Get Divorced Don’t Fight and Do Not Have Serial Marriages and Divorces
I salute my colleagues who will be happily married to one spouse for their entire life. I am a little jealous of folks like this. After one marriage and one divorce, I realized that I am not excellent at this life skill.
Thankfully, I had a wise divorce lawyer who told my future ex-spouse and me that “someone will decide all these issues, so it might as well be you two.” An amicable divorce is no picnic, but at least we did not spend a fortune on legal fees. If you are not wired for marriage, then find out early on. If you end up getting divorced, save years of legal fees by not fighting.
Most readers of the WCI know that the mantra of “live like a resident” for 2- 5 years after your residency is critical to financial success. Do not overlook the fact that your significant other must be singing this mantra also.
9) When You Are Getting Burnt Out, Make a Change
Change is not easy but if you are not thriving in your current workplace take a leap and find something more suitable. I am a change-a-phobic and I worked in same ED for decades and knew it was time for me to move on, but moving seemed too tough. Thankfully for me, my group lost the contract that we had at our hospital for decades. Losing our hospital contract was a disaster for my partners, but a blessing for me.
After a failed two month taste of retirement. I became a locums ED doc and had a series of wonderful gigs in a variety of venues. Medicine became a fun, rewarding adventure again. So, if you are in the 40 – 50% of doctors that are experiencing burn out, take the leap and try something different. The abundance of locum jobs now makes it very easy to test out a new practice setting in a new town.
10) Take Better Care of Yourself
If our physicians are not mentally and physically healthy, the adverse consequences will go far beyond the physician and will impact their families, their co-workers, and their patients. Physician wellness is finally becoming a serious priority. Your most important financial asset is your ability to function well as a physician. Take good care of yourself and find out what that means for you.
I neglected exercising for over two decades because I thought I was too busy. Do not make my mistake and wait until your 50s to make exercise a priority.
Develop tools and habits and resources now that will increase the chance that you will thrive in your challenging medical careers.
What do you think about Dr. Segan's advise to those just beginning their professional and investing journeys? What advise would you add? Comment below!
This is a great post. Right up my alley. I love it.
I think learning “enough” about personal finance to do it yourself and invest in low cost index funds and bonds is spot on advice. And I like how you don’t leave out the other important aspects of life (marriage, exercise, mental health).
We really can miss the point while we are trying to “get to the finish line” in life. Before we know it, we look up, and life has passed us by. I think reminding people of burnout is important, because far too often it is happening and going unnoticed. The impact can be devestating.
I am learning and trying to teach my medical students about all ten of these points every day. Thanks for the solid reminder.
Thanks so much for your kind comments Physician Philosopher! Greatly appreciated!
Doug Segan
WOW, I AM GOING TO COPY THIS TO MY CHILDREN WHO ARE IN MED SCHOOL
Thanks so much Neeraj Vij!
Great post and good advice that’s not just for newbies.
Thanks so much Rando!
Great advice. It works. I did all of this (except the divorce. Thankfully I was able to stay married). I never saw a list like this but I figure it out through reading and luck I guess. At any rate, I reached FI through doing these things so I hope people take the plan seriously.
Thanks so much for your kind words WealthyDoc!
Wow, I attend Zucker! I wonder if Dr. Seagan would be willing to come talk to us about personal finance as a physician. We get woefully little guidance in that department.
Thanks so much ZuckerStudent! I would be more than happy to share my thoughts with you and your classmates. If you can avoid just one of the many investing mistakes that I have made over the years then it would greatly benefit you and I would do a happy dance.
Great post. I’d question point #5 for most people though. With a doctor’s income and a good savings rate, I’d argue that the passive income that one gets from index funds should be more than enough to provide for an abundant nest egg later in life. In the last couple of years, people seem to have completely forgotten about 2008 and everyone is jumping on real estate again like there’s nothing that could possibly go wrong. As a group, physicians are lucky enough to have an income potential from our normal day jobs where outside ventures can be entirely optional for someone who has no inherent passion for one of these side jobs.
Agreed, it’s optional. That said, I have some real estate investments and a side gig and it has certainly improved our financial situation.
I agree with both GK and WCI. I think I could have expressed Point 5 in a better way. Stuff happens that can derail a medical career. If you already making income in various ways it will be less painful if you have to leave or take a hiatus from your main medical career path.
No reason to venture outside the index fund world
Does not take much monthly contributions to your pension to create millions after 35-40yrs
LOVE COMPOUNDED INTEREST-8th wonder of the world
Thanks so much Ken!
Excellent!
Thanks Ben!
Dr. Segan,
Great post. Your humility in describing divorce and the effects it has on financial stability/wealth is outstanding.
As a whole I agree with almost everything you have described. I have one exception to this.
Number 1. Practice in a low cost of living town.
Theoretically and in practice this is partially true. However, the one thing that is rarely discussed is the economics in higher cost of living cities. Many times there are depressed area’s of the country where a discretionary income is less where-as a different location may be booming with discretionary income. This can make a big difference in certain specialties. A booming town with a booming patient base can significantly boost a physicians income to match a higher cost of living.
Obviously this analogy does not hold true for all specialties, but something to consider for young physicians…..try to predict whether your city/town will grow or shrink with time. Difficult to do in real life but always something to consider.
Thanks!
I’ve been surprised how often that DOES NOT hold true- not only is cost of living lower, but income is higher (because fewer docs want to live there.)
While true that the competition factor (or lack of competition factor) can make a difference, long term growth potential should be considered on a macro level. You are both probably correct for most specialties in most area’s. But I think there may be some fallacies in this statement when considered as a black and white distinction for all physicians.
Thanks!
I agree, it’s not black and white. But I can tell you that the vast majority of FI people I know don’t live in NYC or the Bay Area, hedge-fund traders and .com millionaires excluded.
Thanks so much for your thoughtful comments NapoleanDynamite and WCI!
Good advice, thanks for sharing. Somewhat related to “low cost index fund” investing, there is a local financial advisor firm in my town that has been recently putting a bunch of radio ads on that are promoting the fact that they are “commission based, not fee based advisors”! Their plug is that they come from blue collar beginnings and believe that when someone “does” something for someone else they deserve to get paid. This as opposed to fee based advisors that get paid even when they “do nothing”! I thought this was both hilarious and sad. They are trying to take a distasteful aspect of their job and promote it as a positive. They even advise people in the ad to be sure and ask their advisor if they are “commission based” or “fee based”, like you want to be sure to avoid the later. Ignorance is dangerous.
Remember fee-based is not fee-only. Fee based means fees and commissions.
I guess my ignorance is dangerous! I assumed the “fee based” was referring to a defined price to manage your accounts, but I guess that description could be referring a variety of ways to charge.
Thanks so much for your thoughtful insights on this K and WCI.
Sound advice all around, Dr. Segan. I can pretty much check those boxes now, but it took me a decade or so to figure it all out. At the moment, I’m not nailing #10, but it’s not my fault the Sheraton Four Points has free ribs and beer on Wednesday evenings.
Cheers!
-Pof
Thanks so much POF! Save some ribs and beer for me!
Dr. Segan,
Thank you for you sage advice. There are plenty of ways to fumble through your medical career. It is better to learn from others than make the same mistakes and live with regret.
As far as the burnout issue, I see a greater trend among gen X docs than baby boomers. In fact most baby boomers can’t get enough of clinical practice and actually continue to examine their patients. Where as there is a growing group of physicians who are called “paper docs” who don’t so much as lay a hand on their patients. Instead they type into there EMRs and order studies and consults on everyone. These are the ones that get fried and derive little meaning from their vocation. Based upon this I am not entirely certain money is the issue but I may be totally off. Either way taking on this career alone is a recipe for disaster. So for this I thank you and all the exceptional physicians like WCI who are willing to help and exchange ideas.
Thanks Again, Doc of all Tradez
Thanks so very much Doc of all Tradez for your insightful comments!
Sound financial advice for all stages of life. It’s following simple rules like this for decades that produces real wealth. Side hustles and second jobs are a great idea, but honestly I don’t believe most doctors will need one to reach financial independent. Consistent, low cost investing will get you there just fine. But having those other money making hobbies just adds more flavor to life.
Those burnout numbers are surprising. As an optometrist, burnout is not as huge of an issue. I know many OD’s working happily into their 70’s by their own choice. But it can still happen so my goal is to “retire” by the time I’m 55 and if I still like working after that it will be all gravy on top.
Thank so much for your insightful ( pun intended ) comments Broke Professional! Your thoughts are greatly appreciated!
Very interesting and appropriate list. I provide advice to physicians and have shared links to different articles from this site. Yours will be included in future distributions.
Regarding #3, why is it you suggest maximizing retirement plan contributions? I know you posted a link to another WCI article, which, makes assumptions about the tax advantages of retirement plans. Are you basing this statement on the tenants of the article?
I guess what I want to know is what is your familiarity with the opportunity cost of retirement plans and what is your familiarity with the concept of “float,” as used by Warren Buffett?
Trey