Achieving financial success as a physician: Mastering 5 money activities

As a physician helping physicians with their finances, I have had a front row seat to the financial lives of doctors for more than two decades. I have been impressed that almost nobody is naturally good at all five of the lifetime money activities. These activities include:

1. Earning
2. Saving
3. Investing
4. Spending
5. Giving

The “natural” thing to do is to go on autopilot. We’re busy physicians who received little to no training in business, personal finance, or investing during the decade we spent in school. Unfortunately, a lack of intentionality when it comes to managing finances leads to the natural outcome. Doctors, like most people, simply allow their spending to grow into (or beyond) their substantial incomes, build little wealth, stress about money their entire careers, and often even unintentionally ruin the financial lives of their children. Being intentional about improving your ability to do each of the five activities leads to a more fulfilling, enjoyable, and successful life. We’re often naturally good at one or two of these five activities and decent at another one or two, but often terrible at one or more. Even natural savers, whether they call themselves frugal, thrifty, or cheapskates, often struggle to spend wisely on things that will actually bring them happiness and give money away properly. No matter which of these activities you are currently struggling with, here are some tips to help you improve your ability.

# 1 Earning

Half of physicians make below average pay for their specialty. A large number of them don’t even realize it. They have no idea what their skills, knowledge, and work are actually worth. The first step in earning well is to figure out what your work is actually worth by looking at comparative data. It is not nearly as difficult to obtain this data as most assume. Many public university hospital systems publish the salaries of all of their doctors online. Doximity and Medscape publish free salary surveys every year. A newer start-up, VC backed Marit, gives you access to a rapidly growing salary database if you will share your data with the database. Contract review companies, as part of their usual service or as a separate service will share relevant data with you from other contracts they have recently reviewed as well as Medical Group Management Association data, which is often used by hospital and practice administrators when making salary offers. Once you know what you’re worth, you can begin your negotiation strategy from a position of power. While the most powerful negotiating position is another job offer you’re willing to take, just using the available data and being willing to negotiate is often enough to get yourself a 10%, 20%, or larger raise for doing the work you’re already doing.

If you own your own practice as a sole practitioner or as a partner, negotiating wisely with payors and improving practice efficiency can achieve similar income increases. Most physicians have no idea just how broad the range of incomes is within their own specialty. Many primary care physicians are floored to discover that there are pediatrician and family medicine practice owners with seven figure incomes. Find out what you’re worth and ensure you’re being paid fairly.

# 2 Saving

Saving is simple, although not necessarily easy. But if you wish to build wealth, you’ll need something to build it with and that something is usually money you earn but do not spend. A general guideline for physicians is to save 20% of your gross income for retirement. The good news is that you can usually still have a pretty awesome financial life during your career on 80% of a physician salary, all while ensuring you can continue that great life into your retirement years. Why not calculate what your savings rate was last year to see how you stack up? If you’re nowhere near 20%, what you can change to increase it? What are you spending money on now that really isn’t bringing you any sort of additional happiness? Cut that out and put it away for retirement.

# 3 Investing

Most of us simply are not willing to save enough money (50%+) that we can just stuff it under a mattress and expect to have a nice retirement. We need our money to do some of the heavy lifting too. That means using retirement accounts to increase after-tax returns, diversifying and keeping costs low by using investments like index funds, and taking on a reasonable amount of risk with our investments. It’s okay to use an educated, fiduciary, fee-only advisor, but you do need to ensure you are paying a fair price for good advice and service. That fair price is typically between $5,000 and $15,000 per year. If you can learn to do this yourself, which is not that hard to do but perhaps not for everyone, managing your own money will become the highest paying hobby available to you.

# 4 Spending

At first glance you might think spending money is all too easy. That’s not the case for many people. In fact, it is so hard for lots of successful retirees that they routinely die with two, three, or five times as much money as they retired with. Transitioning from being a net saver to a net spender is not as easy as it looks. Even during your career, you want to make sure your money and your time are going toward what you value most. It takes effort to spend well. You have to search for the best deals available and continually assess the amount of value you are getting from a given product or service. A good spender is constantly weighing the value of a family vacation against the value of hiring a housekeeper against the value of upgrading the commuter car. Most physicians can have anything they want, but not everything they want. Put more effort into spending to wring maximal happiness out of your financial life.

# 5 Giving

You might also think that giving is easy, but not if you actually care about the organizations, causes, and people to whom you’re giving money. When giving to charity, you want your money to go toward the mission of the charity, not to fundraising or other administrative costs. An intentional approach to charitable giving ensures your money does as much good as possible. Most well-to-do parents will also discover that it really matters how, how much, when, and under what circumstances money is given to their children. You may not want them to have to donate plasma for grocery money like you did, but you also don’t want to sap their motivation to make a difference in the world and experience the joy of being self-sufficient.

There are five money activities to master in your life. Spend a little more time this year on the one or two you are not yet very good at yet and you will be glad you did.

James M. Dahle, MD, FACEP is a practicing emergency physician and the founder of The White Coat Investor. After multiple run-ins with unscrupulous financial professionals early in his career, he embarked on his own self-study process to become financially literate. After seeing the benefits of financial literacy in his own life, he was inspired to start The White Coat Investor in 2011 to assist his colleagues.