The White Coat Investor Network[Editor's Note: Today's WCI Network post is from Passive Income, MD, and describes a surprising number of doctors and one solution to their issue of living paycheck to paycheck.]

I was having a discussion with a colleague recently, and the conversation eventually turned toward finances. He informed me that if his home refinance didn’t go through, he would have difficulty in making his house payment next month. Needless to say, this was weighing heavily on his mind, and he was visibly stressed.

I sympathized with him.

It bothered me deeply that even after finishing his training and “making it” as an attending, he was still essentially living paycheck to paycheck. I thought about it for a good while, and realized I had to dig a little deeper.

After all, how is it possible that a physician making over $250,000 a year is barely scraping by, and living in fear of missing his next mortgage payment?



I decided to break it down on a spreadsheet and made a couple of safe assumptions for a physician working and living in Southern California. Here’s a quick key to what you’ll see:

  • Our example is a family of four with one working parent (the doctor).
  • Income Tax: I’ve assumed a 35% effective tax rate, but I’ll show what it would look like as a 30% or 40% effective tax rate.
  • Student loans: I used the current average loan of the typical graduating medical student ($183,000), consolidated at a 10-year term, at 2.95%.
  • Mortgage: I assumed a purchase price of $1.5 Million, which, unfortunately, is pretty average here in Southern California. I also assumed a 20% down payment and a standard interest rate of 4%.
  • Private school average tuition is $22,000 per year or $1833.33 per month, 2nd child is in preschool.
  • Food: According to the USDA, the average cost to feed a family of four is $1200/month. Living in California, the cost is easily almost double that.

I didn’t even include extra miscellaneous items such as home maintenance and upgrades, clothing, entertainment, etc.


The Spreadsheet

Here is the spreadsheet I designed to shed a little light on this predicament.


Living Paycheck to Paycheck

When it’s been broken down like this, it’s easy to see why the average doctor might be struggling to keep up, especially living in a place like Southern California. And how do most physicians make up the difference? They work harder and longer. Perhaps they pick up extra shifts. Unfortunately, this equates to simply working more just to support your current lifestyle, leaving precious little to be able to save or invest.

Surely, there must be a better way.

Well, I’ll come right out and say that a perfect solution doesn’t exist. However, it is my opinion that working harder or working more is not sustainable. This will only worsen the physician burnout epidemic.

I’ll never pretend to have all the answers. I just know that I am taking steps to avoid ending up in the same situation. Yes, one of the obvious answers is to reduce your expenses. That’s easy to suggest.

However, I want to focus just as much (if not more) on creating additional sources of passive income. The harsh reality is that we can only work so hard. Our time is both limited and precious, and it shouldn’t be spent working more, just to make ends meet.

If my colleague’s situation resonates with you for whatever reason, I encourage you to follow my journey. There’s always a better way. Let’s find it together.

[Editor's Note: There are two parts to the personal finance equation. The first is to boost income. The second is to cut expenses. It's usually best to work on both sides in order to maximize the chances of success. Even in a high cost of living area, you must pay attention to your expenses; you don't get a pass on math just because you're doctor who lives in CA, HI, NY, DC, etc. On a doctor income, you can usually do anything you want (nice house, fancy cars, private schools) but you can't do everything you want. On the income side, sometimes it makes sense to take steps to boost your primary income. I'm always amazed at the intraspecialty variation in pay and how much it dwarfs interspecialty variation. In the last month I've met a family doc making half a million dollars a year and a pediatrician making over a million. It is much easier to build wealth when you have that sort of an income. If you're interested, side gigs and investment income can also contribute or even replace your clinical income. It's hard to argue it is mandatory for someone with a doctor income to get “passive income”, but it certainly felt that way to many docs in 2020 when their income dropped off a cliff for a few months!]

What do you think about these expenses? Can you relate or not? Comment below!